The property tax figure on a Lafayette listing is one year's bill, figured under one year's rules, for one owner's situation. Since Indiana passed Senate Enrolled Act 1 in 2025, those rules change on a set schedule every year through 2031. The changes also favor some price points more than others. Two homes that show similar tax lines today can drift apart over the next few years, and the direction of the drift depends mostly on what each home is worth.
Part of the local tax picture has also left the property bill altogether. Starting in January, Tippecanoe County residents will owe a new local income tax that no listing sheet will show.
The bill on the listing was built under last year's rules
Indiana taxes run a year behind. A bill payable in 2026 is based on the 2025 assessment, and the law sets different deduction amounts for each payable year. According to the Indiana Department of Local Government Finance's June 2025 guidance memo, bills payable in 2026 still use a $48,000 standard homestead deduction. The cut to $40,000 applies to the 2026 assessment date, so it first shows up on bills payable in 2027.
So a tax figure on a listing this fall is very likely the 2026 bill. The deduction schedule behind it has already changed for next year. The bill also reflects the current owner's homestead status and any credits they qualified for. One example is the over-65 circuit-breaker credit. SEA 1 raised that credit's income limits to $60,000 for single filers and $70,000 for joint filers and dropped the old $240,000 assessed-value cutoff. Eligibility for a credit like that depends on who owns the home, not on the house itself.
Two deductions moving in opposite directions
SEA 1 changes two homestead deductions at the same time, and they pull against each other.
The standard deduction is a flat dollar amount. It drops from $48,000 to $40,000 next year and phases out completely by 2031. The supplemental deduction is a percentage. It's 40% for 2026 bills, then 46% in 2027, 52% in 2028, 57% in 2029, 62% in 2030, and 66.7% from 2031 on.
A flat deduction counts for more on a modest home. A percentage deduction is worth more in dollars on an expensive one. As the law shifts weight from the first to the second, the benefit moves up the price ladder.
The table below runs just those two deductions on three hypothetical assessed values, comparing 2026-payable rules with 2027-payable rules. It's simplified arithmetic, not a tax estimate. It leaves out the separate deduction for circuit-breaker-category property, the new credit, the caps, and local tax rates, and assessed value isn't the same as sale price.
| Hypothetical assessed value | Taxable value after both deductions, pay-2026 rules | Taxable value after both deductions, pay-2027 rules | Change |
|---|---|---|---|
| $90,000 | $25,200 | $27,000 | up $1,800 |
| $150,000 | $61,200 | $59,400 | down $1,800 |
| $350,000 | $181,200 | $167,400 | down $13,800 |
In this simple version, the home with the lowest value is the only one whose taxable value goes up. The $350,000 home's taxable value falls about seven times as much as the $150,000 home's.
Where the breakeven sits, according to a Purdue economist
Larry DeBoer, an emeritus agricultural economics professor at Purdue University, modeled this tradeoff statewide and presented his results in November 2025. He put the breakeven, the home value where the old and new deductions produce the same taxable value, at $102,740. His estimate of the statewide average home value was $234,500.
He put it plainly in comments reported by the Indiana Capital Chronicle:
"If you've got a half-million-dollar house — you got a million-dollar house — $48,000 is nothing. If you've got an $80,000 house, $48,000 is very significant."
His analysis found that pricier homes were expected to see smaller increases or even slight drops. Low-value homes could see double-digit percentage increases. He also projected that if levies keep rising while assessed-value growth is restrained, tax rates will climb and many homes will reach the 1% homestead cap by 2031. For those homes, bills would be higher than today but lower than they would have been without the law. He summed up the public reaction he expects this way: it "really is a tax reduction … for the average homeowner, but the average homeowner is not going to believe it!"
These are statewide projections from 2025. They aren't a measured result for any Lafayette address. They do explain the pattern in the table above.
The new credit has a ceiling, too
Starting with 2026 bills, every eligible homestead gets an automatic credit of 10% of its tax bill or $300, whichever is less. The county auditor applies it without an application. It's figured after the property tax cap credits, and voter-approved referendum taxes aren't counted in the calculation.
The cap works the opposite way from the supplemental deduction. When the tax counted in the calculation, after the caps and without any referendum taxes, comes to $3,000 or more, the credit maxes out at $300. Below that, it's exactly 10%. The credit takes the same share off every qualifying amount up to $3,000 and then levels off. It doesn't make up for the shrinking flat deduction at the lower end.
SEA 1 also adds a separate assessed-value deduction for property in the 2% circuit-breaker category, which by statute covers residential, long-term-care, and agricultural property. It's 6% for 2026 bills and rises to 33.4% from 2031. It shapes the bill on residential rentals, which matters to investors comparing a homestead with a rental.
Some of the bill moved to the paycheck
Lower property tax collections leave local governments short of revenue. In April 2025, Based in Lafayette reported the bill's fiscal analysis, which projected three-year revenue losses compared with prior law. The projections were $1.1 million to $1.9 million for the City of Lafayette and $2.4 million to $4.1 million for Tippecanoe County. They were $2.7 million to $3.1 million for Tippecanoe School Corp. and $424,670 to $829,580 for Lafayette School Corp. These were projections made before the law took effect, not actual collections.
On September 8, 2026, the Tippecanoe County Council voted 6-0 for a new 0.1% local income tax for correctional facilities. As Based in Lafayette reported, it adds $1 for every $1,000 a resident earns starting January 1, 2027, and is expected to raise $6.3 million. County officials said the specific spending hadn't been decided. Council president Jody Hamilton said a juvenile detention center is one possible use but hasn't been approved.
The vote wasn't framed as a replacement for property tax revenue, and nothing in the reporting ties the two directly. For a household comparing costs, though, the effect is the same. Starting in 2027, part of what living in Tippecanoe County costs will depend on income, and the listing for a house can't show that.
The state's larger move toward local income taxes has been delayed. House Enrolled Act 1210, signed March 12, 2026, pushed SEA 1's planned local-income-tax changes from 2028 to 2029. It also set up county and municipal task forces to negotiate how local revenue is shared. The Indiana Capital Chronicle reported that this sets up more legislative debate next year, so the 2029 framework is still open. The reviewed summary of HB 1210 doesn't show any change to the homestead deduction amounts or the 10%/$300 credit.
Questions that make a Lafayette tax line readable
When two homes at different price points are on the shortlist, a few questions turn the tax figure from a snapshot into something you can compare:
- Which payable year is this bill? If it's 2026, it was figured with the $48,000 standard deduction and the 40% supplemental. The 2027 bill uses $40,000 and 46%.
- Does the current owner have the homestead deduction or any owner-specific credits? The over-65 circuit breaker depends on the owner's income, so it says nothing about the house.
- Is the bill, leaving out any referendum taxes, above or below $3,000? That shows roughly whether the new credit hits the $300 maximum or works out to 10%.
- Where does the assessed value fall compared with DeBoer's $102,740 breakeven? Homes near or below it are where his model shows bills rising fastest.
- What will next year look like in the city or county where you live and work? The county income tax starts January 1, 2027, whatever house you buy.
None of these questions tells you what a particular bill will be. They show how much of the number on the listing is likely to carry over.
Frequently asked questions
Did SEA 1 lower property taxes in Lafayette in 2026? The law added an automatic credit of up to $300 for 2026 bills and started phasing in larger percentage deductions. There's no published figure yet for the average 2026 change on a Lafayette homestead bill. DeBoer's statewide projections suggest results will vary by home value.
Is the new county income tax tied to property tax relief? The county approved it specifically for correctional facilities costs, and reporting on the vote doesn't describe it as making up SEA 1 losses. It starts January 1, 2027.
Will these rules change again? HB 1210 already delayed the state's local-income-tax overhaul to 2029, and more debate is expected in the next session. The homestead deduction schedule in SEA 1 stays in place unless lawmakers change it.
Comparing homes across Lafayette price points means thinking about the next several tax bills, not just the one on the listing. The O'Shea Team can walk you through how a specific property's tax history lines up with the 2027 changes, and start with a free home valuation if you're on the selling side of that math.
This article is general information, not legal, tax or financial advice. Consult a qualified professional about your situation.
