More than house and garage eligible for Indiana's 1% tax cap

Indiana rules other structures on homestead properties can qualify for 1% tax cap

Contributed By: The 411 News

After Michael Schiffler purchased his home in Indianapolis in 2019, he was appealing his property tax assessment in 2020. Following 2 years of appeals, Schiffler received a ruling in his favor that could impact tens of thousands of Indiana property owners using the homestead deduction with a property tax capped at 1% of the assessed value.

Schiffler's property is a little over 2 acres. It includes the main house with an attached garage, a carriage house, and a detached second garage.

At his hearing before the Marion County Property Tax Assessment Board of Appeals (PTABOA), in February 2020, Schiffler asked the county assessor to include the carriage house and the 2nd detached garage as part of his homestead and tax all the buildings at 1%, as was applied to the main house and attached garage. Marion County had taxed the carriage house at 2% of assessed value and the detached garage at 3%.

The Marion County PTABOA denied the request.

The assessor contended that Ind. Code § 6-1.1-12- 37 specifically prohibited the inclusion of a detached garage and a detached carriage house as part of the homestead and the office was following Department of Local Government Finance guidelines that were based on the statute.

Schiffler argued that Article X of the Indiana Constitution limited property tax on property included in the homestead to 1% of its assessed value, and that the legislature had exceeded its authority.

In November 2020, Schiffler appealed to the Indiana Board of Tax Review. IBTR issued a decision in February 2021 in favor of the Marion County Assessor.

The next month, in March 2021, Schiffler appealed to the Indiana Tax Court. The Court heard the parties’ oral arguments on September 9, 2021. On February 23, 2022, the Tax Court ruled in favor of Schiffler, reversing the IBTR decision. The Marion County Assessor appealed.

On Friday, September 23, 2022, the Indiana Supreme Court denied the transfer of the Marion County Assessor’s petition, requesting that the Court hear their appeal.

The Tax Court ruled that the legislature did exceed its authority by misapplying "principal place of residence" language contained in the Indiana Constitution and in Indiana Code. The court wrote, "A homestead is an individual’s principal place of residence in Indiana and consists of a dwelling and the real estate, not exceeding one acre, that immediately surrounds that dwelling.”

Contrary to the IBTR's opinion that a homestead is one dwelling with an attached garage and the acre of land surrounding it, the court wrote Indiana's Constitution does not set a limit on the number of buildings on a homestead. The tax court found that the assessor should have included Schiffler's carriage house and detached second garage in the homestead; qualifying them for the 1% property tax cap.

All buildings sit within the one acre.

Barry Wood, Assessment Division Director for the Indiana Department of Local Government Finance (DLGF) issued an advisory memo on October 28 to Indiana assessors to prepare for appeals from property owners using the homestead deduction.

The advisory memo stated, "When a homeowner meets the requirements for a homestead, other property that may previously have been considered ineligible should be classified as part of the homestead when those improvements are used as an extension of the home. Owners with additional buildings on the one-acre homestead that are used as an extension of the individual’s dwelling, such as carriage houses, detached garages, barns, and similar "structures, should be included as property under the 1% property tax cap."

Story Posted:11/23/2022