The Indiana commercial property tax cap limits your annual property tax on commercial and industrial real estate to 3% of the property’s gross assessed value. Business personal property, including machinery and equipment, gets its own separate 3% ceiling. The limit is written into Article 10, Section 1 of the Indiana Constitution and is enforced through an automatic credit on your tax bill. Voter-approved referendum levies are the main way a total bill can climb above 3%.1FindLaw. Constitution of the State of Indiana Art. 10, Section 1
What the 3% Cap Covers
The constitution places every taxable parcel into one of three tiers. Homesteads sit at 1%. Other residential property and agricultural land sit at 2%. Everything else — the tier the constitution calls “other real property” — sits at 3%. That third tier is a catch-all that sweeps in office buildings, retail stores, warehouses, manufacturing plants, and distribution centers. If a property doesn’t qualify as a homestead, other residential, or agricultural, it lands at 3% by default.1FindLaw. Constitution of the State of Indiana Art. 10, Section 1
Business personal property gets a parallel 3% cap of its own. The constitution treats personal property as a separate category under Article 10, Section 1(f)(5), so the ceiling on your equipment, furniture, computers, and tools is calculated independently from the ceiling on your building and land. For manufacturers with substantial production equipment, that separation matters: the two categories don’t share one cap, they each get one.
How the Circuit Breaker Credit Actually Applies
The cap doesn’t lower your tax rate. It generates a credit whenever the calculated bill would exceed the ceiling. The mechanism sits at IC 6-1.1-20.6-7.5, and Indiana calls it the circuit breaker credit.2Indiana General Assembly. Indiana Code Title 6 Taxation 6-1.1-20.6-7.5
The county auditor runs two calculations. First, your full liability, produced by applying every local taxing district’s rate to your net assessed value. Second, your cap, produced by multiplying your gross assessed value by 3%. If the full liability is higher, the difference becomes a credit on your bill, and you pay the capped amount. No taxing unit can collect the difference. You don’t apply for the credit — the auditor applies it automatically.
An example. An industrial plant carries a gross assessed value of $1,000,000. The 3% cap works out to $30,000. If the combined local rates would otherwise produce a $35,000 bill, a $5,000 circuit breaker credit appears on your statement and you pay $30,000.
One quirk in the arithmetic surprises people. The cap uses gross assessed value, but the tax rate applies to net assessed value after deductions. Deductions shrink the taxable base, so many commercial properties never actually hit the cap. The credit does its heaviest work in taxing districts with unusually high combined rates or on properties with few deductions.3Department of Local Government Finance. Tax Bill 101
What Can Push Your Bill Above 3%
Referendum-approved property taxes sit outside the circuit breaker calculation. When voters approve a school bond, an operating referendum, or a local government bond issue, the resulting levy is added on top of your capped amount. A commercial property owner already at the 3% ceiling on base taxes can still see a total bill above 3% once those levies are layered in. Referendum charges appear as separate line items on your tax statement.2Indiana General Assembly. Indiana Code Title 6 Taxation 6-1.1-20.6-7.5
Common examples include school construction bonds, public safety facility bonds, and school operating referendums.3Department of Local Government Finance. Tax Bill 101
A narrower exception applies in certain counties where the caps were projected in 2008 to reduce aggregate property tax revenue by at least 20%. In those counties, debt service on bonds issued before July 1, 2008, and lease payments tied to those bonds sit outside the cap as well. This legacy debt provision reaches only the specific counties the General Assembly identified at the time.2Indiana General Assembly. Indiana Code Title 6 Taxation 6-1.1-20.6-7.5
The $2 Million Personal Property Exemption
Smaller operations may not owe personal property tax at all. Under IC 6-1.1-3-7.2, if your total acquisition cost for all business personal property in a county is less than $2,000,000, that property is exempt. You file a return the first year you claim the exemption; after that, no annual return is required as long as you continue to qualify. Once you cross the $2 million threshold, tax applies to the full value of your personal property, not just the amount above $2 million.4Department of Local Government Finance. 103-Short Personal Property Return 2026
Personal property returns (Form 103) are due May 15, 2026, filed with the township or county assessor. A written extension of up to 30 days is available on request. Manufacturers, processors, and any business with personal property assessments of $150,000 or more must use Form 103-Long rather than the short form.4Department of Local Government Finance. 103-Short Personal Property Return 2026
How Abatements Interact With the Cap
Owners who receive a tax abatement sometimes assume it eats into their circuit breaker credit. It doesn’t. The abatement reduces the value used to calculate your liability, and the circuit breaker credit is a separate calculation applied afterward. The Indiana Department of Local Government Finance treats them as independent adjustments, so an abatement and a circuit breaker credit can both appear on the same bill.5Department of Local Government Finance. The Tax Abatement Process
Practically, during an abatement your assessed value is already reduced, which makes hitting the 3% cap less likely. When the abatement burns off and full value is restored, the cap becomes your backstop.
Lowering the Cap by Appealing the Assessment
Because the cap is 3% of gross assessed value, the assessment itself sets your ceiling. An inflated assessment means an inflated cap, and you can end up paying more than necessary even with the circuit breaker credit in place. Challenging the assessment is often the most direct way to lower a commercial tax bill.
The appeal starts with Form 130 (Taxpayer’s Notice to Initiate an Appeal), filed with your local assessing official. You can dispute the current year’s valuation based on comparable sales, an income approach, or factual errors in the property record. If the informal conference with the assessor doesn’t resolve it, the appeal moves to the county Property Tax Assessment Board of Appeals, then to the Indiana Board of Tax Review, and ultimately to the Indiana Tax Court.6Department of Local Government Finance. Appeals Property Tax
A separate “objective” appeal category covers factual mistakes: a garage listed that doesn’t exist, an incorrect property description, a missing deduction or credit, or a mathematical error. Objective claims can reach back up to three years of assessments, which makes them valuable when you find a longstanding error in your record. If you’re owed a refund, file Form 17T with the appeal.
If You Lease Rather Than Own
The cap attaches to the property, not the payer. Under a triple net lease you’re contractually on the hook for property taxes, so cap savings and referendum overages both flow to you. Lease language controls how the pass-through works: some leases pass through gross tax before credits, others pass through the net amount after the circuit breaker credit is applied. On a high-value commercial property that difference can run into thousands of dollars a year, and it’s worth reading before signing or renewing.