5 New Indiana State Laws Taking Effect on January 1st

Here are the five most significant new laws and updates taking effect in Indiana this New Year.

1. The 2.95% Income Tax Cut

For the second consecutive year, Indiana is lowering its individual income tax rate as part of a multi-year plan to reach one of the lowest rates in the nation.

• The Change: On January 1, the state income tax rate officially drops from 3.0% to 2.95%.
• The Goal: This is part of a staggered tax-cut strategy passed in 2023. By 2027, the rate is scheduled to reach 2.9%, making Indiana highly competitive with neighboring states.
• County Tax Note: While the state rate is dropping, residents should check their local filings, as six counties (Carroll, Grant, Greene, Howard, Shelby, and Union) are implementing slight increases to their specific county-level income taxes on the same day.

2. The Indiana Consumer Data Protection Act (ICDPA)

Indiana officially joins the growing list of states with comprehensive data privacy protections on January 1. This law gives Hoosiers unprecedented control over their digital footprint.

• New Rights: Residents now have the legal right to access, correct, and delete the personal data that companies collect about them.
• The "Opt-Out": For the first time, Indiana consumers can officially opt out of the sale of their personal data or its use for targeted advertising.
• Business Requirements: Companies that process the data of at least 100,000 Indiana residents must now conduct regular data protection assessments and respond to consumer privacy requests within 45 days.

3. "Smart SNAP" Healthy Eating Mandate

In a significant shift for public assistance, Indiana is launching "Smart SNAP" to promote better nutrition among the more than 570,000 residents who rely on the program.

• The Restriction: Starting January 1, SNAP benefits cannot be used to purchase candy or sugary beverages (such as soda, sweet tea, and energy drinks).
• What's Still Allowed: Standard groceries, including meat, dairy, produce, and even items like chips or ice cream, remain eligible. The ban targets "empty calorie" items such as chocolate bars, marshmallows, and sweetened soft drinks.
• Implementation: Retailers across the state have updated their point-of-sale systems to flag and block these items in EBT transactions automatically.

4. Business Transparency & Fraud Prevention (HEA 1593)

New rules governing how businesses interact with the Secretary of State take effect this January, aimed at reducing fraud and modernizing corporate filings.

• Remote Work Friendly: Recognizing the rise of remote businesses, the law now allows companies that do not maintain a physical office to list a "contact address" instead of a traditional residential or commercial office address on state filings.
• Identity Verification: Any third party filing a report on behalf of a business (such as an accountant or filing service) must now take reasonable steps to verify the identity of the person they are representing.
• Mail Agencies: Commercial mail-receiving agencies are now required to register with the state, adding a layer of oversight to prevent "shell companies" from using these services to hide illegal activity.

5. Homestead Property Tax Credit

To offset rising property values, Indiana is introducing a new annual property tax credit that will appear on bills issued for the 2026 cycle.

• The Benefit: Most owner-occupied homes (homesteads) will receive an automatic 10% credit on their property tax bill.
• The Cap: Savings are capped at $300 per year.
• Phase-In: This credit is part of a broader property tax overhaul that also includes a phase-in for larger deductions, ensuring that the tax burden on homeowners remains manageable even as local home prices fluctuate.

These updates reflect Indiana's ongoing effort to modernize its regulatory framework while providing direct financial relief to its citizens. If you are a business owner, you should review your data collection policies to ensure compliance with the new Privacy Act. If you are a resident, keep an eye on your January paychecks to confirm the new, lower state withholding rate has been applied.