State has mortgage deduction changes now in effect

Changes have been made to the state’s mortgage deductions and homestead deductions by state legislators.

Indiana Gov. Eric Holcomb signed legislation into law that repeals the state’s $3,000 mortgage deduction in its entirety.

At the same time, the homestead deduction was increased from $45,000 to $48,000. No change was made in the supplemental homestead credit.

What does this mean for Bartholomew County homeowners? While the mortgage deduction typically lowers the assessed value of a property by $3,000, the homestead deduction has been increased from $45,000 to $48,000 starting with taxes payable this year.

Essentially, the change gives homeowners that have paid off their mortgage the same benefit previously available only to those with mortgage debt, Bartholomew County Auditor Pia O’Connor said.

“I have always thought that the mortgage deduction should be eliminated,” O’Connor said.

Indiana Department of Local Government Finance Commissioner Wes Bennett said the homestead deduction will be the lesser of 60% of the assessed value of the real property or $48,000. Mobile and manufactured homes are not assessed as real property, he added.

While the change was effective in January 2023, property taxes levied for one year are not collected until the following year. So the property taxes due this year are the first tax bills that reflect the change, the county auditor said.

In addition, the 2022 bill streamlines the property tax deductions for most homeowners, making it no longer necessary to re-file deductions after refinancing, O’Connor said.

The former mortgage deduction was an administrative burden in the offices of county auditors throughout Indiana’s 92 counties. Due partially to this change, O’Connor said she was able to eliminate a position in her office.

There are a number of other deductions and credits available to reduce a taxpayer’s property tax liability. Additional information on deductions can be obtained through the Bartholomew County Auditor’s website at or by calling 812-379-1510.