Buried in SEA 1's local income tax provisions is a tool most Indiana homeowners have never heard of: a county local income tax rate of up to 0.3% that can be used for exactly one purpose — reducing homestead property tax bills. As enacted in 2025, the authority would have ended on December 31, 2027. HEA 1210-2026 (P.L.157-2026) moved that to December 31, 2028: under IC 6-3.6-6-3.1(i), the rate may be imposed on income before January 1, 2029, and not after December 31, 2028.
This post explains what the homestead-relief LIT is, how it differs from the other LIT rates counties already levy, what it would do to a homestead bill, and where adoption stands.
What SEA 1 Actually Created
Three independent analyses, all written before the 2026 session, agree on the shape of the provision. Barnes & Thornburg's alert on SEA 1's LIT changes states that a county fiscal body "may adopt a local income tax to reduce the property tax liability for homesteads," and that the authority terminates on December 31, 2027. Porter County's SEA 1 briefing describes it as "a Homestead property tax relief LIT of up to 0.3%," available to implement "in 2026 and 2027 (expires 12/31/2027)." Baker Tilly's analysis of SEA 1's LIT restructuring covers the same provision within the broader overhaul. The 2027 end date in these sources is now out of date. The 2026 text of IC 6-3.6-6-3.1, as amended by P.L.157-2026, SEC.126, ends the rate after December 31, 2028, and the section itself expires January 1, 2029.
The essentials:
- Who adopts it: the county fiscal body — county council, or the City-County Council in Marion County.
- Rate ceiling: up to 0.3% on local income, set in increments of 0.01% (IC 6-3.6-6-3.1(c)).
- Use of proceeds: credits for homesteads in the county that qualify for the 1% circuit-breaker cap. Taxes approved by referendum are not eligible for the credit, and the credits must apply uniformly to homesteads in the county (IC 6-3.6-6-3.1(b), (f)). Unlike the expenditure rate, this money does not fund government operations. It goes back out as credits against homestead bills.
- Window: the rate may be imposed only on income before January 1, 2029. It terminates after December 31, 2028 (IC 6-3.6-6-3.1(i)).
How It Differs From the Other LIT Rates
No "replacement LIT" of up to 1.2% has been available to counties since July 1, 2025. SEA 1's 1.2% rates belong to the new structure, which does not start until 2029. Until then, counties work under existing law. The DLGF's July 17, 2026 memo on HEA 1210 confirms that current LIT ordinances now run until January 1, 2029. That leaves three kinds of county rate that matter for homeowners today:
| Expenditure rate (IC 6-3.6-6-2) | Property tax relief rate (IC 6-3.6-5-6) | Homestead-relief LIT (IC 6-3.6-6-3.1) | |
|---|---|---|---|
| Ceiling | 2.5% (2.75% in Marion County) | 1.25% | 0.3% |
| Purpose | Funds county, city, town, and other local operations | Funds a percentage credit against property tax bills in the county, split among categories the ordinance sets | Funds credits for homesteads that qualify for the 1% cap |
| Effect on your property tax bill | None directly | Lowers it if your property falls in a category the ordinance funds | Lowers it |
| Effect on your income tax | Increase | Increase | Increase |
| Status after 2028 | Replaced January 1, 2029 by the new component structure; a county's rate continues only if it adopts a renewal ordinance by October 1, 2028 (IC 6-3.6-3-4(c)) | Expires December 31, 2028 (IC 6-3.6-1-3(b); IC 6-3.6-5-7) | Terminates after December 31, 2028 |
The homestead-relief LIT does not carry into SEA 1's new structure. That structure starts January 1, 2029 and caps the county expenditure rate at 2.9%: up to 1.2% for county services, 0.4% for fire and EMS, and 0.2% for nonmunicipal units such as townships (those three together at no more than 1.7%), plus up to 1.2% for municipal services. Cities and towns of 3,500 or more get their own rate of up to 1.2% beginning after December 31, 2028 (IC 6-3.6-6-22). Both the homestead-relief LIT and the property tax relief rate end the day before. Our explainer on the delayed overhaul has the full timeline.
It Is Not the $300 Credit, Either
One more disambiguation. Every Indiana homestead already receives SEA 1's supplemental homestead credit — 10% of the tax bill, capped at $300 — automatically, statewide, with no county action required. Our credit walkthrough covers those mechanics. The homestead-relief LIT is a county-optional layer on top of that: a county that adopts it funds additional relief for its own homesteads, financed from its own residents' income rather than from the state.
What It Would Do to a Homestead Bill
The mechanics are a swap, not a giveaway. The county collects up to 0.3% on local income, and the statute turns that revenue into credits on homestead bills. Under IC 6-3.6-6-3.1(e), the credit applies to the net tax due after every other IC 6-1.1 credit, including the circuit-breaker caps. The county auditor then allocates the credited amounts to the taxing units whose taxes were reduced (IC 6-3.6-6-3.1(g)), and the DLGF must help counties calculate credit percentages and amounts (IC 6-3.6-6-3.1(h)). How large the credit is for a given home depends on how much the county's income base raises relative to its eligible homestead taxes. We are not going to publish invented dollar examples: until a county adopts a rate and certifies a distribution, no honest per-household figure exists.
The distributional logic, though, is knowable. Relief flows only to homesteads, while the LIT falls on income earners broadly — so the design favors owner-occupants (especially retirees with modest incomes and paid-off homes) and asks renters and high-income households to fund relief they do not directly receive. Any LIT increase that funds operations raises the same question, pointed the other way. See our Marion County LIT coverage for how one county has handled its rate.
Who Has Adopted It?
We could not verify any Indiana county that has adopted the homestead-relief rate. The State Budget Agency's estimated 2027 certified distributions, certified October 1, 2026, list each county's rates under certified shares, public safety, economic development, correctional facilities, property tax relief, special purpose, EMS, and judicial costs. The certification has no column for a rate under IC 6-3.6-6-3.1. The other check is the Department of Revenue's county income tax rate listing (Departmental Notice #1), which lists every county's current LIT rate, together with the DLGF's certified local income tax reports posted on its county-specific information pages.
Note
County LIT decisions cluster around the fall budget season. If your county council takes this up, expect the debate in the same August–October budget hearings that decide levies and LIT rates. The rate cannot be imposed after December 31, 2028. Our guide to the fall 2026 budget hearings covers how to follow and testify.
The Window Is Short — and Closing
The design is explicitly temporary. The authority terminates after December 31, 2028, so it can only bridge the years when SEA 1's homestead deduction phase-in is still ramping up. What we could not verify, and therefore will not assert: whether relief funded by a late-window adoption continues onto later bills, or exactly when a given county's credits would first print. Those turn on adoption timing and DLGF certification — questions for your county auditor once an ordinance actually passes.
For homeowners, the practical posture is simple. You cannot adopt this tax; your county council can. If your bills are painful and your county has LIT headroom, this is the one SEA 1 lever built purely for homestead relief, and after 2028 it is gone.
Verify What Your County Has Done
Before you assume relief is or is not coming, check the facts for your own parcel and county. Verify your homestead deduction status, assessed value, and current bill composition with our Property Lookup, and confirm your county's LIT rate in the DOR's Departmental Notice #1 — if a homestead-relief credit ever appears on your bill, you will want to know it was applied correctly.
Related Reading
- Indiana local income tax scoreboard: what counties have actually done
- Indiana's LIT overhaul delayed to 2029: the new deadlines
- Marion County's local income tax rate
- The hidden cost of property tax relief: SB 1's LIT restructuring
- How Indiana's $300 homestead credit works
- Indiana's homestead deduction, 2026–2031: the full schedule