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In the world of circuit breakers, more counties turning to local income tax

Local Income Tax (LIT) is a resource that communities are increasingly relying on as pressures build on property tax revenues. With the greater flexibility now allowed since CAGIT, CEDIT and COIT were consolidated into a single LIT, you may wonder what options you have with the various rate components and how your county’s total rate stacks up to your peers.

Current LIT statute allows for a Property Tax Relief rate up to a maximum of 1.25% and a total Expenditure rate (which can be allocated between Certified Shares, Public Safety and/or Economic Development components) up to a maximum of 2.50%, for a maximum total rate of 3.75%. The 3.75% limit is prior to any additional county-specific Special Purpose rate approved through legislation.

In 2017, 22 of Indiana’s 92 counties adjusted their LIT rate. Only one county reduced its total rate, through the expiration of a Special Purpose component. Three counties maintained the same total rate, while reallocating amongst the various components. The remaining eighteen counties increased their total rate, with increases ranging from 0.10% to 1.30%. For fiscal year 2018, Indiana counties maintain rates ranging from 0.35% to 3.38%, with a state-wide average of 1.67% and mean of 1.73% for the 92 counties.

2018 LIT Rates for Indiana’s 92 Counties

Total local income tax rates

If your community is struggling with the constant challenge of doing more with less, remember that Local Income Tax is a resource available to provide important dollars for the essential services that your constituents expect. Your Baker Tilly team will provide an analysis of your options and the impact of any action, and we are ready to assist if an adjustment to your county’s rate makes sense.

For more information on this topic, or to learn how Baker Tilly municipal specialists can help, contact our team.

Baker Tilly Municipal Advisors, LLC is a registered municipal advisor and wholly-owned subsidiary of Baker Tilly Virchow Krause, LLP, an accounting firm.

The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax advice, if any, contained in this communication was not intended or written to be used by any taxpayer for the purpose of avoiding penalties.

Jason G. Semler
Partner, CPA
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