Model & Spec Home Deductions
Background
Following the financial crisis of 2007-2008, IBA’s Board of Directors passed a motion to pursue legislation in Indiana allowing builders to reduce the property taxes paid on model or spec homes. The Indiana General Assembly enacted the Model Residence Deduction in 2008 (for the assessment date in 2009) and the Residence in Inventory Deduction in 2011. These deductions are beneficial not only to the home builders of Indiana but also to suppliers whose livelihood depends on the residential construction industry and to every buyer of a new home.
Provisions
The statutes provide a 50 percent property tax deduction on the structure of a model or speculative home built in Indiana. The deduction is allowed for an assessment date for which the residence is partially assessed and for the first three years for which the residence is fully assessed as long as the structure has never been used as a principal residence or used as the owner’s principal office space. Property, such as garages, used to store or display promotional material or used to meet with prospective clients qualifies for the deduction; however, land does not. The statute provides that not more than three model residences in Indiana owned by the same owner or an affiliated group of owners may qualify for the deduction for an assessment date. After one residence becomes ineligible for the deduction, another model or speculative home initially assessed at a later date may take advantage of the deduction. The deduction ends after the earlier of three years or the home is sold or occupied.
Claiming the Deductions
Applications must be filed annually, by mail or in person, with the County Auditor of the county where the property is located. Applications must be completed and signed by December 31 and postmarked or filed by the following January 5.
Applications for both deductions are available here. Select State Form 53812 for the model residence deduction. Select State Form 54861 for the residence in inventory deduction.