Residential Real Estate and Real Estate & Retail

Homeowners need to re-file for Homestead tax break

April 27, 2010

A new state law aimed at preventing tax fraud requires homeowners who want to claim the Indiana Homestead Deduction to file for the tax break, even if they have done so in the past.

The law, passed in 2009, says homeowners will lose their deduction beginning in 2013 if they don't complete and return a homestead verification form by Jan. 1, 2013.

Beginning this spring, tax bills will begin including the verification form. Homeowners are allowed to file for the deduction on their primary residence only.

The aim, according to the legislation’s author, is to reduce tax fraud by Hoosiers who file for the deduction on more than one residence.

“There are a lot of people who have duplicate home deductions,” said Rep. Cherrish Pryor, D-Indianapolis. “With the property-tax cap coming into play, I thought it was important to get the database cleaned up.”

The Indiana Department of Local Government Finance maintains the state database of homestead deduction information provided by county auditors. But more data required on the new form should help to cut down on tax fraud, Pryor said.

The form requires homeowners to include the last five digits of their Social Security number and the last five digits of their driver’s license number—information that previously was not required.

The database currently contains a homeowner’s name and address. But if the same name is listed five times, there is no way of determining if it's five different people with the same name or one person claiming the deduction on multiple properties, Pryor said.

The additional information will also prevent people from claiming multiple deductions under different names. Homeowner Robert Smith, for instance, also might be filing for the deduction on a rental unit under the name Bob Smith.

Indiana County Auditors’ Association President Bill Borne, who serves as Adams County auditor, thinks the new system will be successful.

“If the DLGF sends me an e-mail [of a homeowner] who has [a house] in Marshall County and one in Adams County, and he has the same Social Security number, am I going to check that out?” he said. “Absolutely.”

State law requires the form to be mailed with all property tax statements through 2012. The form, however, must only be completed once by Jan. 1, 2013.

Lawmakers provided homeowners a three-year window to give them an opportunity to correct any wrongdoing, and to alert them of the fines and penalties involved, Pryor said.

Anyone caught breaking the new law will have to pay back taxes, in addition to a fine of 10 percent of the amount owed.

Average homeowners who fail to re-file for the tax break risk losing hundreds of dollars in tax credits.

Additional information about the homestead verification form is available online.
 

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