Impacts to Local Revenue from the 2025 Indiana Legislative Session

By Pam Williams, originally posted to Substack

What comes next for our tax dollars?

In the 2025 session, the Indiana Legislature passed a bill called SB1, which Governor Braun signed into law almost immediately.

While the bill touts savings on property taxes, most homeowners are expected to save only around $300 per year. To deliver these savings, the bill eliminates local funding previously collected through property taxes. The full impact on local governments is still being studied to determine exactly how much revenue each group will lose.

SB1 Impact to Hamilton County Schools

One positive note: Hamilton County schools are not expected to lose funding as a result of the bill. Here is the expected impact (original story linked HERE).

SB1 Impact to County Income Taxes

SB1 raised the maximum income tax that a county can charge from 2.5% to 2.9%. The income tax rate that you pay depends on which county you work in on Jan 1. For Hamilton County, the current tax rate is 1.1%. If you work in Marion County, the current tax rate is 2.02%

While we don’t know how much income will be lost from property taxes, the counties will be able to recoup some of income by raising their income tax rate.

Using the average household income of $118,000 for Hamilton County, here are the best and worse case scenarios for households that work in Marion or Hamilton County.

As you can see, the potential income tax impact for households who work in Hamilton County could be over $2100.

SB1 Impact to Local Income Taxes

The other big change from SB1 is that towns and cities can impose an income tax. The maximum that could be imposed is 1.2%. Given this, the average income tax bill for a Hamilton County household could increase by $1400 depending on what their town adopts.

HB1461 Impact to Wheel Taxes

HB1461 added a requirement for wheel taxes as part of the Community Crossing Grant (CCMG) funding application process. The CCMG provides funding to cities, towns, and counties across Indiana for improvements to local roads and bridges. If a town fails to adopt a wheel tax, its funding will be cut in half. This change will be noticeable during your annual vehicle registration.

If both your county and town adopt a wheel tax, you will only be charged one tax rate. The total cost is still unknown and will depend on how local governments implement the tax. What is known is that your auto registration fees will increase.