Indiana bill caps local income tax at 3.75% adds credits

Various tax matters.

Introduced· 2025-12-08

Who's it for

Who's it for: Everyday People

What it means for you

4/10Mixed

Mixed: some good, some bad ·

Cost shift

Draft summary, still being checked against the official bill text. Read the source to confirm.

If passed, the bill would keep local income tax at 3.75% starting 2028 and give tax credits to seniors, veterans, renters, low‑income families, and first‑time home buyers.

Our take

What we think, in plain words.

The bill would keep local income tax at 3.75% instead of dropping to 2.9%, so many households may pay more. At the same time, it adds tax credits and larger deductions for seniors, veterans, renters, low‑income families and first‑time home buyers. Voters should consider whether the extra relief offsets the higher tax rate.

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The facts

What the bill actually says, no spin.

Caps overall local income tax (LIT) rate at 3.75% beginning 2028.
Current plan would lower LIT to 2.9% in 2028; bill stops that cut.
Adds a $3,000 tax credit for first‑time home buyers (one‑year use only).
Adds a $3,000 tax credit for households at or below 200% of poverty line (one‑year use only).
Increases renter’s deduction for state income tax from $3,000 to $6,000 per year.
Provides a property tax credit to freeze liability for low‑income seniors.
Provides a property tax deduction for permanently disabled veterans.
Repeals requirement for counties to readopt LIT rates each year after 2031.
Removes a separate public hearing requirement before increasing a tax levy.