Your Property Tax Credit Has an Expiration Date

In 2028, a South Bend homeowner opens the property tax assessment, expecting the familiar credit that has softened the sting of their annual bill for years. Instead, the line item about relief funding provided by the Local Income Tax (LIT) has vanished. It is not a typo or a glitch; it is the scheduled expiration of a mechanism created by Senate Enrolled Act 1 (SEA 1), a 2025 tax overhaul that shifts the responsibility for balancing local budgets from the statehouse to local city councils.

While the law promised property tax stability, it simultaneously stripped away the revenue-sharing safety net that cities rely on and also forced local leaders to choose between raising new local taxes and cutting essential services.

SEA 1, signed into law by Gov. Mike Braun on April 15, 2025, does considerably more than merely reduce property taxes. Although it’s been framed and heralded as primarily a property-tax-cut bill, it completely alters how cities and counties in Indiana collect and distribute LIT. In other words, the state’s second-largest source of local tax revenue is getting a major overhaul thanks to SEA 1.

Property tax savings are only one side of the equation, and hardly anyone is talking about the downside implications and what it really means for Hoosiers. The underlying design of SEA 1 substantially favors business property owners while simultaneously slashing the revenue base available to local governments. That means the onus of making up for lost tax income falls on Indiana cities, towns and counties, rather than the state government.

For St. Joseph County homeowners, renters, business owners and workers, a more important question looms just beneath the surface of how most people frame the bill: Who will pay for the revenue that the local government will lose under SEA 1?

The answer could have significant financial implications for Indiana households.

Indiana SEA 1: What Is It and What Does It Do?

Let’s start with what lawmakers originally promised in 2024, per Braun’s 2024 campaign pledge.

SEA 1 creates a new property tax credit for homeowners equal to 10% of the property tax bill, capped at $300. This bill takes effect in 2026 and affects property taxes across the state. The bill also provides additional exemptions for veterans, certain elderly individuals, citizens with disabilities and homesteads. Additionally, the bill alters how some property tax deductions and credits are calculated.

Braun described the legislation as “historic property tax relief” for Indiana households. “Nearly every Hoosier, homeowner, farmer and business owner will benefit from tax cuts, reforms and stronger taxpayer protections,” Braun posted on X.

While that description is technically accurate, it excludes information crucial to the whole story.

SEA 1 also makes significant changes to the tax base that supports local government. One of the most notable is the drastic expansion of Indiana’s business personal property tax exemption. Under the final, enacted version of the bill, businesses with less than $2 million in business personal property will generally be exempt from the business personal property tax beginning with the 2026 assessment date.

That change creates a dramatically different benefit for qualifying businesses than for the average homeowner.

According to Ball State University economist Michael Hicks, a family with a $400,000 home could receive a maximum annual property tax reduction of $300. On the other hand, a business with $400,000 in personal property assets could receive $12,000 in tax reduction.

The significant gap between these two reductions is a 40-to-1 ratio.

Naturally, that doesn’t automatically mean every business receives a $12,000 tax reduction or every homeowner receives a $300 reduction in property taxes. Tangible savings will depend on property value, additional deductions, tax rates and individual circumstances that affect taxability.

The Tax That Isn’t Getting Attention

This is where the Local Income Tax will make a big difference.

Indiana collects the LIT alongside state income tax, providing roughly $4 billion annually to local governments across the state. In 2025, LIT rates ranged from 0.5% to 3% in addition to the state’s income tax, according to Purdue Extension economist Larry DeBoer.

SEA 1 alters that system in three primary ways. First, it eliminates the distribution of countywide LIT revenue to most cities and towns. This means larger municipalities can adopt their own LIT, specific to the local government, applying it to income earned by people within their jurisdiction. Second, the bill eliminates the LIT mechanism used specifically for property tax relief beginning in 2028. Finally, beginning in 2031, counties and cities must reauthorize LIT rates each year.

Together, these three changes restructure Indiana’s local government financing system, overhauling how counties and cities receive funding.

Rather than benefiting from a share of countywide local income tax revenue, cities and towns will now have to raise it themselves.

As DeBoer explains it, the old system allowed countywide LIT revenue to be distributed among multiple local governments and municipalities. However, the new system makes the taxing decision more closely aligned with the government and the voters it affects. That could make local tax decisions more transparent. On the other hand, it could make them more politically difficult, particularly in rural counties.

A real-world consequence of this legislation is that county councils wishing to raise LIT revenue will now be forced to defend that decision to voters. The same goes for city councils.

In essence, the Indiana Legislature has effectively moved part of the political fight over taxes from Indianapolis to local government and city council meetings.

The Numbers Aren’t Adding Up

The Purdue Extension analysis of the Legislative Services Agency fiscal note indicates an estimated $22 million in tax cuts in 2028 alongside $686 million in local revenue losses.

While that may sound contradictory, the fog begins to clear when you understand what happens to LIT-funded property tax relief.

Indiana currently allows counties to impose LITs specifically to provide property tax relief. According to Purdue Extension, 58 counties have such tax structures in place, which collectively reduce property taxes by more than half a billion dollars.

However, SEA 1 eliminates that property tax relief LIT beginning in 2028.

That means those 58 counties will lose LIT revenue that currently offsets property taxes. Their LIT collections will decline, but their property taxes can increase as that relief disappears.

This is the critical point most reporters sweep under the rug when describing SEA 1 as simply a property tax cut.

It’s so much more than that.

As economists at Purdue Extension note, a reduction in one tax stream does not automatically equate to lower total costs for households. When the LIT-funded property tax relief mechanism expires in 2028, the resulting local budget gaps may lead to property tax increases, effectively neutralizing the initial savings.

St. Joseph County Has Millions in LIT Revenue

According to the Indiana Department of Local Government Finance’s LIT report, St. Joseph County has approximately:

• $34.3 million in certified-shares revenue
• $37.2 million for public safety
• $38.2 million for economic development
• $57.3 million generated through LIT property tax relief

That’s about $167 million across those four categories.

The property relief figure represents revenue currently being generated through LIT to reduce property tax burdens. However, under SEA 1, that mechanism will no longer be active starting in 2028.

The 2026 LIT data estimate places St. Joseph County’s property tax relief rate at 0.6004% and its certified-shares rate at 0.3596%. Together with its public-safety and economic-development rates, St. Joseph County’s total LIT rate is 1.75%.

So, St. Joseph County residents already have a significant amount of income tax revenue directly related to the property tax system.

Given the disappearance of the LIT mechanism for property tax relief and the pressure on local city and county councils to reauthorize rates, the 2028 transition will significantly change figures.

Beginning in 2028, St. Joseph County residents will notice two key shifts:

• The Case of the Disappearing Credit: Currently, St. Joseph County generates approximately $57.3 million through a LIT that is specifically designed to subsidize and reduce tax burdens for constituents. Under SEA 1, that dedicated property tax relief mechanism expires, so homeowners will no longer see that credit on their tax bills.
• Local Governments Facing Tough Budget Choices: With that nearly $60 million gone, local city and county councils will face a difficult decision. To maintain current service levels without that relief mechanism, councils may need to raise property taxes directly or find other ways to offset the deficit. In effect, this tax relief conversation is going to move from the state Legislature to local city hall meetings, where residents will now be voting on the very tax hikes needed to fill the budget holes left by the expiration of SEA 1’s relief.

Why This Matters

The bottom line is that SEA 1 significantly alters business taxation; homeowner tax credits and deductions; and how cities and counties use LIT.

Although it’s been framed that way, the legislation goes far beyond a property tax cut. For St. Joseph County residents, the issue isn’t whether they pay lower property taxes; it’s whether those savings last once the local government funding changes are fully underway.

Sources Used and Linked

• Purdue Extension, “The Big Property Tax Bill Also Reforms the Local Income Tax,” the primary source for the LIT mechanics, the 2028 property-tax-relief change, and the $22 million/$686 million fiscal-note figures.
• Indiana Capital Chronicle, “Indiana’s property tax cut will shrink local government, and economic growth,” the source for the $300 homeowner/$12,000 business comparison and the competing economic-growth argument.
• Indiana Coalition for Public Education, 2025 SEA 1 Property Tax Cuts, relevant to the potential effects on schools and local-government revenue.
• Indiana DLGF, 2026 St. Joseph County LIT report, the hyperlocal revenue figures.
• Indiana DLGF, Legislation Affecting Assessment Matters, the business personal property exemption details.
• Indiana Public Media, Braun signs SEA 1, contemporary reporting on the bill’s passage, homeowner credit and criticism of the LIT provisions.
• Gov. Mike Braun, April 9, 2025 SB 1 statement, the governor’s own description of the legislation as “historic property tax relief.”
• Indiana Chamber of Commerce, April 15, 2025 statement, business-side arguments for the legislation.