Indiana’s Supreme Court opted not to side with Lake County taxpayers in a case that could have reformed the state’s property tax system and shrunk a major revenue stream for municipalities.
At stake was how much land fell under a 1% tax cap for homesteads, limiting the amount of property taxes local units could collect. Currently, homeowners can only claim one acre of land under the 1% cap — Lake County taxpayers Tulsi and Kaaini Sawlani own 3.9 acres of land and sought to claim all of it under the homestead exemption.
But Indiana’s five supreme court justices unanimously ruled against the Sawlanis, finding that they “failed to prove they use more than one acre of their property as curtilage.” Curtilage doesn’t have a definition in state statute, but is the land or buildings immediately surrounding a home.
A lower-level court had sided with the Sawlanis, finding the one-acre limitation unconstitutional.
“Because the Taxpayers failed to prove the Homestead Statute is unconstitutional as applied to them, we reverse the Tax Court’s decision,” said the opinion, which was authored by Justice Christopher Goff.
A ruling in favor of the Sawlanis would have been advantageous for homeowners, but would add to the administrative burden of county assessors, who would have to review properties on a case-by-case basis. It would also mean less tax revenue for local government.
Hoosier voters approved property tax limits in 2010 capping bills at 1% of the property’s assessed value for homesteads; 2% for other residential property and farmland; 3% for business. Increases from separately approved referendums are outside those limits.
More about the ruling
Having just one acre of their property, rather than the full 3.9 acres, as a homestead cost the Salwanis roughly $1,000 annually, their attorney estimated. A Lake County assessor classified the remaining land as non-residential property, which puts it under the 3% cap.
But Goff wrote that the justices “hold that, even if a person’s curtilage could extend beyond one acre for tax purposes, the taxpayers here failed to show their excess property is curtilage…”
In doing so, the court opted not to wade into the greater definition of curtilage, limiting their ruling to just the case of the two Lake County taxpayers.
The ruling parses through various definitions of curtilage, including court cases from other states. A 1987 U.S. Supreme Court case held that curtilage is protected against warrantless searches, establishing a four-factor test including: the proximity of the area to the home, whether it falls within an enclosure, the nature of the uses to which the area is put and steps taken by the resident to protect the area from observation by passersby.
But the ruling concludes that the Salwanis didn’t meet that criteria.
“The Taxpayers say they desire privacy, but there is no fence on the property, the trees do not form a distinguishable boundary around the lot, and the Taxpayers presented no evidence to the (Tax) Board that they use the entire plot in such a way that it should be treated as the home itself,” it said. “And the fact that the Taxpayers’ home is in a gated community with a security guard does not itself establish that the entire plot of land is curtilage.”
In the last legislative session, lawmakers advanced a law that applied credits to homeowners but didn’t revisit property tax caps. However, some of that revenue could be replaced with income taxes — an issue some legislators said needed to be addressed in the 2026 session.
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