In an Indiana divorce, the homestead deduction stays with the house and the spouse who owns and lives in it. While you are married, including during a legal separation, the two of you can claim only one Indiana homestead. After the dissolution decree, each former spouse can claim their own. The spouse who keeps the house files paperwork after the quitclaim. The spouse who leaves has a 60-day duty to report it and can claim a new home through the sales disclosure form.
The decree decides which of you pays the tax bill, but the county does not go by the decree. It bills the owner of record and holds a lien on the parcel.
The One-Homestead Rule for Married and Separated Spouses
Under IC 6-1.1-12-37(i), the auditor may not grant "an individual or a married couple" a deduction claimed for different properties on two or more applications in the same year. The application asks for your spouse's name and the last five digits of their Social Security number (subsection (e)), and the state homestead database checks those numbers (subsection (j)).
The only exception for spouses who live apart, subsection (l), applies when the other spouse's home is outside Indiana, and requires an affidavit under penalty of perjury that you keep separate residences and neither owns an interest in the other's home. If both homes are in Indiana, there is no exception.
So legal separation does not help. A separation decree under IC 31-15-3-9 lasts no more than one year and requires a finding that the marriage is worth preserving. You are still married, so with two Indiana homes you get one deduction until a dissolution decree is entered.
Warning
If you become ineligible, including because you already receive the deduction as an individual or spouse, you must notify the county auditor within 60 days (IC 6-1.1-12-37(g)). Skip the notice and you owe the taxes the deduction saved plus a 10% civil penalty. The deduction audit guide explains how auditors find these cases.
The Spouse Who Moves Out and Buys a New Home
Once you move out, the marital home is no longer your principal residence, so file the 60-day notice. For a home you buy after the divorce, the sales disclosure form counts as your homestead application if it is approved by the assessor and filed with the auditor by January 15 of the year the taxes are first due (IC 6-1.1-12-44). Subsection 37(i) keeps the move from counting as a double claim just because you lived at the old home on that year's assessment date.
The deduction steps down each year after that; see the phase-down schedule and the homestead guide.
Quitclaim Deeds and the Spouse Who Keeps the House
When one spouse deeds the house to the other, a sales disclosure form is required. IC 6-1.1-5.5-2(a)(2) includes "compulsory transactions as a result of... divorce" in its list of conveyance documents. The usual $20 filing fee is waived for those transfers (IC 6-1.1-5.5-4(b)).
Don't assume the deduction moves over on its own. IC 6-1.1-12-17.8(d) excuses a joint owner from reapplying only when the other owner has died; divorce is not on that list. File the sales disclosure on the divorce deed by January 15 so it serves as your application, or file the certified statement under subsection 37(e). IC 6-1.1-12-45 carries the deduction for one year after a conveyance, and no longer.
Who Pays the Installments, and Who Gets Refunds
Indiana bills a year behind. The owner on the assessment date is liable for that year's taxes (IC 6-1.1-2-4), and the treasurer mails the bill to the person liable on the tax duplicate (IC 6-1.1-22-8.1). The state's lien attaches on the assessment date and survives any transfer (IC 6-1.1-22-13). A decree ordering your ex-spouse to pay the November installment binds the two of you, not the county. If it goes unpaid, the parcel takes the penalty: 5% if paid within 30 days with no prior delinquency, 10% otherwise (IC 6-1.1-37-10). Your remedy is enforcing the decree.
Installments are due May 10 and November 10 (IC 6-1.1-22-9; see the fall installment guide). If you sell the house as part of the settlement, the proration guide explains how arrears billing is split at closing.
Refund claims belong to the person who paid, or their heirs or successors, within three years of payment or the final appeal decision, whichever is later (IC 6-1.1-26-1.1). A refund can also arrive as a credit on a later bill for the parcel, which lands with whoever owns it then. If a Form 130 appeal is pending, the decree should say who continues it and who keeps any refund, the same problem covered in selling a home with an appeal pending and the refund-after-appeal guide.
Credits: Over-65, Circuit Breaker, and the $300 Credit
- Over-65 credit, $150 (IC 6-1.1-51.3-1) requires one year of ownership before claiming, so a spouse who buys a new home waits a year. Co-owners get one credit, reduced proportionally if not all are 65 or older.
- Over-65 circuit breaker (IC 6-1.1-20.6-8.5) requires the standard deduction on the same homestead in the prior year, so it does not follow you to a new house in year one.
- Supplemental homestead credit: 10% of the bill, capped at $300, applied automatically with the standard deduction (IC 6-1.1-20.6-7.7). See how it works and the senior and disabled credits guide.
Tip
The over-65 credit tests income from two years before the taxes are due: $70,000 combined for a joint return, $60,000 single. Ask which return the auditor will use for your post-divorce claim.
Checklist for Divorcing Homeowners
- Look up the parcel to see whose name the deduction is in and which credits are on file. Use property lookup.
- Leaving the house? Notify the auditor within 60 days.
- Keeping it? File the sales disclosure on the divorce deed. The $20 fee is waived for divorce transfers.
- Buying a new home? Make sure that closing's sales disclosure reaches the auditor by January 15.
- Write the unpaid installments, any pending appeal, and any refund into the decree. The county goes by the owner of record, not the decree.
- Re-file for the over-65 credit once you qualify on your own. If the assessment looks high, start an appeal.