According to the Indiana Department of Local Government Finance, when you're comparing houses in New Albany, the property tax figure on a listing is the seller's bill. Indiana collects property taxes in arrears, so the payments made this year mostly cover last year, in two installments due May 10 and November 10. That bill was figured using the seller's deductions, at the seller's assessed value, under a deduction schedule the state is now changing every year.
For homes inside New Albany city limits, there's a second, bigger issue. The posted rate barely tells you what the bill will be. For a typical owner-occupied home in the city, Indiana's 1% property tax cap sets the number. Once you see that, the comparison between the city and the rest of Floyd County works differently than most tax explainers describe.
The Number on the Listing Belongs to the Seller
Indiana's state homestead form says that if you move after the assessment date, you keep the deduction on your first home for that tax cycle. The deduction comes off for the next assessment date. So a bill that arrives after closing can still show the seller's homestead deduction. Buyers need to file for their own.
Most buyers file at the closing table. The state Sales Disclosure Form, State Form 46021, has a buyer section that asks whether the home will be your primary residence. It includes a Homestead checkbox for that purpose. The state homestead form sets the deadline as January 15 of the year the taxes first come due. The Department of Local Government Finance also says you should reapply whenever a property sells or the title changes.
The tax split at closing runs off that same seller-era bill. According to Hawkins Elder Law, in a typical Indiana closing, the title company estimates the seller's share of accrued taxes from the latest bill and credits it to the buyer. The buyer then pays the bills that come due after closing. If you're also comparing transaction costs across the river, our breakdown of Kentucky vs. Indiana closing costs covers the rest of the list.
At $2.7474, the Cap Does the Math
The Department of Local Government Finance certified Floyd County's rates for taxes payable in 2026 on January 15, 2026. Here's how the districts compare, per $100 of assessed value:
| Taxing district | 2026 rate | 2025 rate |
|---|---|---|
| New Albany City | 2.7474 | 2.8094 |
| New Albany Township | 1.7936 | 1.6058 |
| Georgetown Township | 1.7772 | 1.6140 |
| Lafayette Township | 1.7046 | 1.6648 |
| Greenville Township | 1.6829 | 1.6459 |
The city rate went down from 2025 to 2026 while every listed township rate went up. Even so, the city rate is still about a full dollar higher than the township rates, and that gap runs straight into Indiana's caps. According to the Indiana Department of Local Government Finance, a homestead's tax bill can't exceed 1% of gross assessed value. Other residential property, rentals included, is capped at 2%. If the bill after credits is over the cap, the state applies a credit to bring it down to the cap.
Here's an illustration for a homestead with a $250,000 gross assessed value on the 2026 bill:
- The Indiana Department of Local Government Finance lists the standard homestead deduction for this bill as $48,000, leaving $202,000.
- The supplemental homestead deduction takes 40% of what's left for taxes payable in 2026, which is $80,800. That leaves a net assessed value of $121,200.
- At the New Albany City rate, that works out to about $3,330 before credits.
- The 1% cap on $250,000 is $2,500, so the cap credit cuts the capped portion down to that amount.
One piece of the rate sits outside the cap. New Albany-Floyd County Schools' referendum debt fund carries a certified rate of $0.1155 for 2026. According to the Indiana Department of Local Government Finance, voter-approved referendum taxes are exempt from the caps and can push a bill above the listed percentage. On our example home, that adds roughly $140 on top of the capped $2,500.
The new supplemental homestead credit comes next. The Indiana Department of Local Government Finance says the credit is 10% of the tax liability, up to $300, and it doesn't count taxes approved by referendum. County auditors apply it automatically. In the state's order of operations, the credit is applied after the property tax caps. Inside the city, that means 10% of the capped $2,500, or $250, which puts the example near $2,390 once the referendum tax is added back.
Run the same home in Lafayette Township, the Floyds Knobs-area district, and the math gives about $2,066 before credits. That's already under the cap. The credit takes about $193 off the non-referendum portion, bringing the example close to $1,870. These are illustrations, not tax estimates for any real property, but they show how the system works. In the township, the rate sets the bill. In the city, the cap does.
Why the New Law Moves Township Bills More
Senate Enrolled Act 1 of 2025 changes the homestead deductions every year. The standard deduction drops to $40,000 for the 2026 assessment, $30,000 for 2027, $20,000 for 2028, $10,000 for 2029 and zero from 2030 on. Meanwhile the supplemental deduction rises from 40% to 46% for taxes payable in 2027 and keeps climbing to 66.7% for bills payable in 2031 and after.
Take the same $250,000 home into the 2027 bill and hold the value and 2026 rates constant, which won't actually happen. The net assessed value drops to $113,400.
| Same $250,000 homestead | 2026 bill | 2027 bill, rates held |
|---|---|---|
| Lafayette Township, after the supplemental homestead credit | about $1,870 | about $1,750 |
| New Albany City, cap, credit and referendum | about $2,390 | about $2,380 |
In the township, the bigger deduction shows up on the bill right away. In the city, most of the deduction gets used up lowering a pre-cap figure that's still well over $2,500. The cap is 1% of gross assessed value, and deductions don't change gross value, so the bill hardly moves. If you're weighing a city bungalow against a house out toward Floyds Knobs, the tax gap between them depends more on assessed value and the cap than on the rate table.
The Rental-Side Version of the Same Math
Investors deal with a 2% ceiling instead of 1%. SEA 1 also added a deduction for residential rentals and other 2%-cap property. It's 6% of assessed value for 2025 pay 2026 and rises to 12% for 2026 pay 2027, 19% the year after, and 33.4% from 2030 pay 2031 on. Auditors apply it without an application.
Take a $250,000 rental inside New Albany city on the 2026 bill. The 6% deduction leaves $235,000. The non-referendum portion of the rate produces about $6,185, which the 2% cap cuts to $5,000. Add about $270 in referendum tax and the total is near $5,270. The same house in Lafayette Township comes to about $4,006 and never reaches the cap. So in the city, an investor's carrying cost tracks gross value multiplied by 2%. That makes the assessed value the number to check before you make an offer. Our look at whether Clarksville works for rental investors covers the cross-county side of that decision.
Where the Capped Dollars Go
Every dollar the cap credit removes from a bill is a dollar the taxing units don't collect. In the state's 2026 circuit breaker report for Floyd County, the New Albany Civil City shows $3,087,036 in total credits against a $22.4 million certified levy. That includes $2,169,621 from the 1%, 2% and 3% caps. Countywide, credits total $10,444,104, and $4,802,167 of that is the new supplemental homestead credit. The certified budget order attaches a short note to the city's general fund: "Budget has been decreased because projected revenues are insufficient to fund the adopted budget."
The schools see the same pressure. During the 2026 budget hearing, New Albany-Floyd County Schools CFO Chris Street said the operations fund would lose more than $2 million more to circuit breakers. That brings the total loss to about $4 million. "So we're basically doubling that loss based on the legislation," he said.
County government is in the same spot. At a July 14, 2026 Floyd County Council meeting, a Baker Tilly fiscal presentation put the county's credits at $530,000 in 2025 and $1.2 million in certified 2026 figures, with about $1.4 million projected for 2027. The presenter said the state lets the maximum levy grow 6% in 2027, but collections would likely rise only about 4.9% because of those credits. A 2026 law also says local units generally can't raise their levies to make up for those credit losses, except for school referenda.
What Changes Next
The county council has scheduled its 2027 budget adoption for October 13, 2026. Statewide, the 2026 legislative session pushed SEA 1's local income tax redesign back from 2028 to 2029. Lawmakers are expected to take it up again in 2027. Any district rate can change when a new budget order comes out, so the illustrations above hold only for the 2026 pay year.
A Few Quick Questions
Does the referendum portion ever get capped? No. Taxes approved by referendum are outside the caps, so a city homestead can pay slightly more than 1% of gross assessed value.
Can I compare a New Albany bill with a Louisville bill right now? Not precisely. Louisville Metro says Jefferson County's 2026 bills won't go out until November, payable November 1, 2026 through April 15, 2027. Our guide to choosing between Louisville and Southern Indiana covers the other factors in the meantime.
Who confirms the numbers on a specific property? The state says new deduction and credit applications go to the county auditor. The Floyd County Auditor's office points property owners to the state's deduction forms. Nothing here is tax advice. For a specific property, the auditor's figures are the ones to use.
Thinking about buying or selling in New Albany and want to know what the tax line will really look like? Weston Faulkner can pull the assessed value, check which district a property is in and walk you through the cap math before you sign anything. If you own in the city now, start with a free home valuation and we'll put that number next to your tax bill.
