Tax Court reverses for property owner in homestead deduction, tax cap dispute

An Indianapolis homeowner’s carriage house and detached garage are eligible for the standard homestead deduction and a 1% property tax cap, the Indiana Tax Court ruled in a Wednesday reversal, despite the Indiana Board of Tax Review’s decision to the contrary.

Matthew A. Schiffler’s residential real property on West 44th Street in Indianapolis includes a house with an attached garage, a detached carriage house and a detached two-car garage. The buildings sit on 2.56 acres.

For the 2019 tax year, Schiffler’s property tax liability was computed differently for each building. A 1% property tax cap was applied to the assessed value of the house with the attached garage, a 2% property tax cap was applied to the assessed value of the detached carriage house and a 3% property tax cap was applied to the assessed value of the detached garage.

Schiffler appealed to both the Marion County Property Tax Assessment Board of Appeals and to the Indiana Board of Tax Review, arguing before the latter that the assessed value of both the carriage house and the detached garage should have also received the benefit of the 1% property tax cap. He argued those two improvements qualified for the 1% property tax cap because they were “curtilage” under the Indiana Constitution that constituted part of his “homestead” eligible for the standard homestead deduction under Indiana Code § 6-1.1-12-37.

The Indiana board denied his request in its final determination, concluding the Legislature did not define “attached.”

“We are not persuaded that any structure, so long as it shares a driveway or utilities, is ‘attached.’ Rather, it seems far more likely that the legislature intended the homestead to only apply to buildings that were structurally attached via a shared roof or wall,” the board wrote. “Because neither [the carriage house nor the detached garage] is connected in such a way, they fall outside the bounds of the homestead deduction and thus the 1% tax cap.”

Finding that determination contrary to law, the Indiana Tax Court reversed and remanded in Matthew A. Schiffler v. Marion County Assessor, 21T-TA-14.

The Tax Court noted that the term “dwelling” is not defined as “just one” house and garage, and that the statute places no limitations on the number of improvements that can qualify as a “dwelling.” Rather, the Tax Court said the statute hinges an improvement’s eligibility for the standard homestead deduction as a “dwelling” based on how the individual uses it.

“Because the Indiana Board determined that Schiffler’s carriage house and detached garage were used as extensions of his home, those improvements necessarily constituted part of Schiffler’s ‘dwelling’ and were therefore eligible for the standard homestead deduction and the 1% property tax cap,” Judge Martha Blood Wentworth wrote.

“For purposes of Indiana Code § 6-1.1-12-37, this Court has repeatedly explained that one’s ‘principal place of residence’ is simply his ‘true, fixed, permanent home to which [he] has the intention of returning after an absence,’” Wentworth continued. “… The thrust of this definition is the permanency of one’s ‘home,’ not how many improvements comprise it.”