Indiana businesses, including those in Terre Haute and Vigo County, are bracing for significant increases in their real property assessed values for 2026. Statewide, commercial property values are projected to rise by 15.0% compared to 2025, while industrial property assessments, particularly concerning to the Indiana Manufacturers Association, are set to climb by 25.8%. These figures represent the largest one-year jump in assessed values for businesses in years, according to state data, and outpace the 7.3% increase seen in residential property values, which constitute just over half of Indiana's total assessed value.
Two primary factors are driving these dramatic increases: manufacturing growth and inflation. The state has observed factories expanding and large projects, such as data centers in some counties, contributing to the overall assessment numbers, partly through the reclassification of agricultural land to commercial or industrial use.
Inflation has significantly impacted the state's assessment system. It had been four years since the state last updated the data used by counties to measure the cost of construction, which forms the basis for industrial assessments. During this period, the costs of labor and materials increased substantially. Additionally, the state adjusted how it measures costs in Indiana compared to other states, further contributing to the increased values.
While assessments establish a property's value, they are only the initial step in determining a property taxpayer's overall bill. Local governments and schools are responsible for setting their spending levels and the corresponding tax rates applied to local property owners. Both homeowners and businesses are eligible for various tax benefits that can alter their final tax liability.
State leaders have consistently sought to mitigate the impact of rising assessed values and property tax increases on homeowners. Recent legislation passed in 2025 aimed to provide significant cuts for homeowners, with most of these benefits phasing in over the next couple of years. This legislation also included tax breaks for agricultural land and business equipment, allowing greater depreciation for older equipment, also phased in over coming years.
Of the more than $1.5 billion in property tax cuts resulting from the 2025 legislation, intended for the 2026-2028 period, over 80% is earmarked for homeowners. This allocation highlights a potential shift in the tax burden. As homeowners pay less and if local units maintain their current spending, other property taxpayers—namely businesses—may need to cover the difference.
This scenario from 2025 illustrates how further homeowner tax relief can indirectly increase the burden on business taxpayers. With the current high growth in business assessed values, there is an even greater risk of additional property tax increases for Indiana's employers. Simply put, the combination of rising business values and existing homeowner tax cuts, along with any potential future legislative changes, could lead to substantial property tax increases for businesses, especially industrial property owners like manufacturers.
Manufacturers and other businesses have already been contending with escalating costs for labor, parts, raw materials, transportation, insurance, and most other business expenses in recent years. Now, inflation is severely impacting business property assessments, and a further shift of the property tax burden could exacerbate these financial pressures. Indiana's leadership is urged to consider the potential economic impact on the state if the tax burden is further shifted onto the business community.
