Two new property tax breaks are now in effect and are impacting assessments as of March 1, 2006. These tax breaks apply to new investments in real and personal property. However, taxpayers can only claim one of the deductions.

The first deduction, also know as an “automatic abatement”, is a three year deduction that applies to the development, redevelopment or rehabilitation of real property and to newly purchased personal property which results in the creation or retention of employment. 

The deduction applies to investments made between March 2, 2005 and March 2, 2009. In general, taxpayers get a 75% deduction on the new investment in year one, a 50% deduction in year 2, and a 25% deduction in year three. The deduction is capped annually at $2 million per county.

There are several limitations to this new deduction: 1) it does not apply to property located in an allocation area; 2) it does not apply to certain facilities, which includes most residences, golf courses, liquor stores and property used in a retail food and beverage service. 

Forms to claim this deduction can be found at the county assessor’s office and must be filed by May 10 of each year. Eligible personal property investments must be shown on Schedule PPID-1 and filed with their personal property tax returns.

The second deduction offers the greatest tax advantage but is only available for businesses making “qualified investments” within an enterprise zone. You can find maps of your city’s enterprise zones on the Indiana Department of Revenue website (http://www.in.gov/dor/reference/ez/ezmaplist.html). A “Qualified Investment” includes purchase of a building or new manufacturing equipment, expenditures to repair or modernize an existing building or to retool existing machinery, onsite infrastructure improvements and construction of a new building. 

The amount of the enterprise zone deduction is 100% of the increase in assessed value resulting from the qualified investment, and may be claimed for up to 10 years. The deduction is first available assessment year 2006 payable 2007. To claim the deduction, taxpayers must file a certified application with the county auditor where the property is located by May 10 of each year.

Tax Credit for Indiana Residents

Effective January 1, 2007, Indiana taxpayers making contributions to CollegeChoice are eligible to receive a 20% state tax credit, up to a maximum of $1,000, on their contributions. For example, if you’re an Indiana taxpayer, and you make an annual contribution of $5,000 to your CollegeChoice account, you will receive the maximum annual tax credit of $1,000. It is important to note that this is a tax credit; not a tax deduction offered by most 529 plans. Contributions above $5,000 are allowed, but the tax credit only applies to the first $5,000 you contribute. In addition, the tax credit is available to taxpayers that made contributions including any rollover contributions from another Code Sec. 529 plan, to an account with a CollegeChoice 529 Investment Plan for taxable years beginning after December 31, 2006. The credit is available for more than one household contributing to same CollegeChoice 529 Investment Plan account, provided that they otherwise qualify as a taxpayer who is eligible to claim the credit. For example, grandparents and parents contributing to the same account are eligible for the credit. To receive the 20% tax credit on CollegeChoice contributions, you must claim the credit on your annual Indiana state tax return.