Can I Take an Indiana Homestead Exemption on Rental Property?

by Kerry Zias ; Updated July 27, 2017
A homestead exemption can lower your property tax bill.

The state of Indiana allows a partial exemption on the assessed value of a home that qualifies as a homestead property. Both the property owner and the property itself must meet certain criteria to qualify. State law allows only one such homestead for a person at a time and imposes penalties for wrongfully taking the exemption.

Eligibility Of Person

A person eligible to take the homestead exemption must be the legal owner of the real property or the legal tenant-stockholder of a residential unit in a cooperative housing corporation. The law requires that the property be the principal place of residence of the person. This is defined as the home the person regularly returns to after periods of absence. This makes a rental property not eligible for the homestead exemption, except for a temporary period in a particular circumstance.

Eligibility Of Property

Property eligible for a homestead exemption is a residential property, including the dwelling and any garage and any land up to one acre that is under and immediately surrounding the dwelling. Land on which a mobile home sits is eligible for the homestead exemption. A co-op apartment that is owner-occupied is also eligible. Any portion of the residence that is income producing, such as a shop in the garage or a rented out basement, is excluded from the homestead.

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Change Of Eligibility

An eligible homestead maintains its exemption for the whole year based on the status of the property when assessed on March 1. However, if the owner establishes another homestead in that same year, then the original homestead is void. For example, if the owner occupies the homestead property on March 1 and then rents it out on April 1, the homestead exemption stays until Dec. 31, provided he establishes no other homestead that same year.

Status Change Notification

The law requires that a homestead property owner notify the government of any change of use of the property, such as renting it out or opening a business on it. This notification must be filed within 60 days of the change with the county in which the property is located. Failure to do so makes the owner liable to pay the taxes on the exempted amount plus a 10 percent penalty and any applicable interest.

About the Author

Kerry Zias has been a strategic business consultant and college instructor of business administration courses since 1990. He has taught courses and performed professional consulting work in the areas of marketing, management, business start-ups, entrepreneurship, real estate, sales psychology and performance, business communications, business law and political/governmental relations. Zias holds a Master of Business Administration in marketing from National University.

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