1031 Exchanges in Indiana: Rules, Taxes, Insurance, and the Long Arc

A Shop 1031 research page. Reviewed 2026-06-03. Every claim sourced; sources collected at the foot of the page.

Indiana is a flat-tax conforming state with constitutional property-tax caps, not an unstructured Midwestern jurisdiction. The distinction matters because Indiana’s constitutional 1-2-3 percent property-tax cap (often called the “circuit breaker”) materially constrains the property-tax burden on Indiana commercial property and is one of the most exchanger-favorable mechanics in the country. Indiana conforms to federal §1031 through Indiana Code Title 6, taxes recognized boot at the flat 3.0 percent state rate, and imposes no state-level real estate transfer tax.

§1. 1031 mechanics in Indiana

The federal floor applies under 26 U.S.C. §1031 and 26 C.F.R. §1.1031(k)-1. ^{1 2}

Indiana conforms to federal §1031 under Indiana Code Title 6, Article 3 (Income Taxation). Recognized boot is taxed at the Indiana flat individual income tax rate, currently 3.0 percent. There is no separate Indiana capital gains rate. County income taxes apply separately at varying rates. ³

Indiana imposes no state-level real estate transfer tax. Recording fees and the Indiana Sales Disclosure Form (filed with the deed) are nominal. ⁴

Indiana imposes no state-level registration or bonding regime on Qualified Intermediaries. Federal §1031 rules apply.

Indiana is an attorney-state for real estate closings in most counties, though title-and-escrow operations function in commercial transactions.

§2. Property tax in Indiana

Indiana has an effective property tax rate of approximately 0.82 percent of owner-occupied housing value, below the 1.02 percent national median. The Indiana Constitution Article 10 §1 establishes the property-tax cap system commonly called the circuit breaker: residential homestead property is capped at 1 percent of gross assessed value, non-homestead residential and agricultural property at 2 percent, and non-residential (commercial and industrial) property at 3 percent. The caps are constitutional, not statutory, and apply across all taxing units. The structural mechanics are governed by Indiana Code Title 6, Article 1.1. ^{5 6}

For an exchanger acquiring Indiana commercial property, the 3 percent cap on non-residential property is the structural ceiling, regardless of the local tax-rate stack. The cap is calculated as 3 percent of the gross assessed value (not the net assessed value after deductions). Year-one property tax on a $5,000,000 Indiana commercial acquisition can run up to roughly $150,000 at the cap, with the actual figure typically lower where the local levy does not reach the cap.

Harlow’s note on unit economics. The 3 percent cap on commercial property is materially favorable on long-hold periods relative to states without caps. Build the hold-period line from the gross assessed value (typically near fair market value) capped at 3 percent, with the local levy producing the actual figure below the cap in most jurisdictions.

§3. Property insurance in Indiana

Indiana property insurance is dominated by severe-thunderstorm, tornado, and hail exposure across the state. There is no Indiana residual market. The Indiana Department of Insurance regulates carrier conduct. ⁷

Harlow’s note on unit economics. For a $5,000,000 Indiana commercial property, expect property-insurance expense in the range of 0.4 to 0.8 percent of insured value, with hail deductibles a structural underwriting variable.

§4. Demographic trends

Indiana’s population stood at approximately 6.9 million as of 2025 Census estimates, with modest positive net migration concentrated in the Indianapolis metropolitan area. The state’s overall growth is positive but moderate. ^{8 9}

Median household income in Indiana was approximately $70,000 in 2024, slightly below the national median. ^{10 11}

The major Indiana markets are Indianapolis-Carmel-Anderson (approximately 2.1 million population), Fort Wayne (approximately 425,000), Evansville (approximately 320,000), South Bend-Mishawaka (approximately 320,000), and the Northwest Indiana corridor (approximately 700,000, anchored by the Chicago suburbs). Indianapolis concentrates the deepest commercial market across asset classes; Fort Wayne and the Lafayette-West Lafayette corridor are the strongest secondary industrial markets; Northwest Indiana benefits from Chicago spillover.

§5. Unique legal and financial considerations

The first is the circuit breaker cap, addressed in §2. The 3 percent commercial cap is one of the most structurally favorable property-tax mechanics in the country for long-hold commercial real estate.

The second is the Indiana Sales Disclosure Form (Form 46021), filed with every deed and disclosing the consideration. The disclosure is public.

The third is the county income tax overlay. Indiana counties impose local income taxes at varying rates that apply to Indiana residents. The rate stack should be considered for resident exchangers.

The fourth is the agricultural land assessment. Indiana assesses agricultural land at productive value rather than market value, which can produce favorable property-tax outcomes on qualifying acquisitions.

§6. Closing summary and the work ahead

The Indiana 1031 exchanger is operating in a market with a clear set of distinguishing features. The federal floor applies; Indiana fully conforms at the flat 3.0 percent rate; there is no state transfer tax; the constitutional 3 percent property-tax cap on commercial property is structurally favorable; insurance exposure is dominated by severe weather; demographic growth is modest with Indianapolis as the dominant corridor; the Sales Disclosure Form makes consideration public; county income taxes apply to residents. None of these is a reason to avoid an Indiana exchange. Each is a reason to underwrite one carefully. The jurisdiction-specific factors above are starting-point context. A state-experienced CRE professional will translate them into deal-specific judgment.

This is the question Shop 1031 was built to compress. Every Indiana offering memorandum on the platform is normalized to a single schema, underwritten at re-let to the buyer’s specific equity, debt, and DSCR floor, and ranked by Dark Shell Score. For a market with Indiana’s specific overlay, that compression is decisive because the variables that move outcomes (circuit breaker cap calculation, county income tax overlay, agricultural productive-value assessment, public Sales Disclosure Form) are knowable in advance and frequently missed in conventional buy-side workflows.

This page is the working map. The actual exchange is run by people. An Indiana-licensed real estate attorney, a Indiana-licensed CPA familiar with §1031, a Qualified Intermediary, and a CRE professional who knows this market and these properties. Shop 1031 is the analytics layer that triages which deals deserve your time. The professionals do the work.

See underwritten Indiana deals that fit your exchange →

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Shop 1031 is an independent analytics platform. We are not a brokerage, a law firm, a tax advisor, a lender, or a Qualified Intermediary. Every 1031 exchange should be reviewed by a state-licensed real estate attorney, a CPA familiar with IRC §1031, and a QI. Brokerage and advisory services, when used, are provided by independently licensed third parties under separate engagement. This page is research, not advice. The Indiana-specific surfaces discussed (constitutional 3 percent circuit breaker cap on commercial property, county income tax overlay for residents, Indiana Sales Disclosure Form public-record consideration filing, agricultural productive-value assessment) each carry material risk if mishandled and should be addressed with an Indiana-licensed attorney, an Indiana-licensed CPA, and a Qualified Intermediary before identification, not after.

Federal authority: 26 U.S.C. §1031; 26 C.F.R. §1.1031(k)-1.

Indiana authority: Ind. Const. Art. 10 §1; Ind. Code Title 6 Art. 1.1 (property tax), Art. 3 (income tax).

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