How are Property Taxes Calculated in Indiana? 🤷🏻

So how do property taxes work in Indiana? I'm sure you've been dying to know so I am bringing it to you in 60 seconds or less!

One of the most common questions I get is: How do property taxes work when you’re buying or selling a house?

Here in Indiana, we like to do things a little backwards—we pay our property taxes in arrears. That means when you buy a home, the seller is typically the one who gives you a credit for the upcoming tax bill, since they technically “owe” for that period of ownership. As a buyer, that credit can help cover some of your closing costs, which is a nice perk.

But when you’re the seller, you’ll be the one giving that credit to the buyer at closing. It’s not an extra fee—it’s just money that covers your share of the property taxes through the end of the tax period. Most sellers end up paying close to one year’s worth of taxes at closing.

If you have a mortgage on the home, don’t stress—your lender has likely been collecting funds through your escrow account. Once your mortgage is paid off after closing, you’ll usually get most of that escrow money refunded to you within 30 days.

How Are Property Taxes Calculated?

You’d think that if two homes are side-by-side in the same neighborhood, their taxes would be the same. But that’s not how it works. Property taxes in Indiana are based on the assessed value of the property and how the property is used.

Here’s the breakdown:

• If you live in the home and claim the homestead exemption, your property taxes are roughly 1% of the assessed value.

  
  

  So, if your home is assessed at $100,000, your annual property taxes would be around $1,000.

• If the home is an investment property (not your primary residence), taxes are closer to 2% of the assessed value.

  
  

  This often surprises investors who assume the rates are the same. Be sure to double-check this when running your numbers.

• For commercial properties, the tax rate is generally 3% of the assessed value.

After You Close

Once you purchase a home and claim the homestead exemption, there’s not much you need to do. If you have a mortgage, your lender will typically pay your taxes for you through your escrow account. You’ll just want to keep an eye on your assessed value each year. If you feel it’s off, you always have the option to appeal it.

I know property taxes aren’t the most exciting topic—but understanding how they work can save you money and help avoid surprises at the closing table.

If you’ve got questions about your specific situation, I’m always happy to help.

Feel free to shoot me an email at Paul@SoldByPaulLinn.com or call/text me at 317-629-0070.