Three States. One House. Very Different Bills.
To illustrate the difference in property taxes in Indiana, Illinois, and Michigan, we'll use a $1,000,000 home as our example — not because every home in the dunes costs $1M, but because it's a clean number that scales easily in either direction. And because, as you'll see, Indiana's new tax structure has no upper limit on its generosity.
At $1M, here's what annual property taxes look like across the three states that share Lake Michigan's southern shore. Just understand that property tax calculations are a complex matter and subject to the caveats I've included at the end of this post:
| Effective Rate | Annual Tax | Monthly Tax | |
| Illinois / Lake County | 2.43% | $24,300 | $2,025 |
| Illinois / Cook County | 1.95% | $19,500 | $1,625 |
| Michigan / Harbor Country | 1.15% | $11,500 | $958 |
| Indiana / Porter County | 0.87% | $8,700 | $725 |
The Indiana advantage versus a Cook County property is $10,800 per year — $900 per month. Against Lake County, it's $15,600 per year — $1,300 per month.
That's not a rounding error. That's a car payment. A college fund contribution. A home equity gain. Every month, indefinitely.
The "Zillow Trap": Why Michigan’s Numbers Can Be Deceptive
When you browse listings in Michigan’s Harbor Country, the property tax amount you see is often based on the current owner’s "capped" value. Michigan law limits how much an assessment can rise each year for an existing owner—but that protection vanishes the moment the keys change hands.
This is called "Uncapping." If the current owners have lived in that lakeside cottage for 15 years, their tax bill might look incredibly low. But the year after you buy it, the state "resets" the taxable value to current market rates. Your actual bill could be double what the listing showed.
In Indiana, we don't have an "Uncapping" event. While we use annual trending to keep assessments near market value, there is no sudden "reset" triggered by a sale. This gives Indiana buyers a level of long-term predictability that is physically impossible in the Michigan system.
Why Indiana's Advantage Is Structural
This isn't a temporary market condition or a political preference. It's written into Indiana's constitution.
Indiana imposes a hard cap on property taxes: a primary residence can never be taxed at more than 1% of gross assessed value. Second homes and vacation properties are capped at 2%. These aren't rate targets — they're constitutional ceilings that cannot be exceeded regardless of what local taxing bodies may want to collect.
Illinois has no equivalent protection. Cook County's effective residential rate of approximately 1.95% reflects overlapping taxing bodies — municipal, county, school, transit, park, library — with no hard ceiling on the total. At 2.43%, Lake County Illinois sits even higher. Both have trended upward over time.
Michigan's Harbor Country falls in between — Berrien County's effective rate of approximately 1.15% is meaningfully lower than Illinois but materially higher than Indiana. The gap is compounded by the fact that comparable shoreline properties in Michigan have appreciated sharply in recent years. Indiana buyers frequently get more home for less money before the tax comparison even begins.
Something Few Buyers Know: It's Getting Better
Indiana is currently in the middle of a historic property tax overhaul—Senate Enrolled Act 1 (SEA 1). Signed in 2025, this reform is specifically designed to slash the "Net Assessed Value" (NAV) of your home through 2031.
The "Net" Secret: In Indiana, you aren't taxed on your purchase price. You are taxed on your Net Assessed Value. This is the amount left over after the state applies its "Standard" and "Supplemental" deductions. The lower the NAV, the lower your bill.
The Old Math (Pre-2026)
Previously, the deduction was a two-step process: a flat $48,000 "Standard" deduction, followed by a "Supplemental" deduction (35% of the first $600k). On a $1,000,000 primary residence, your taxable base was roughly $654,000.
The New SEA 1 "Glidepath" (2026-2031)
SEA 1 replaces that clunky two-tiered system with a single, massive deduction that scales with your home's value. Over the next five years, the flat deduction phases out, while the supplemental deduction phases up to a staggering 66.7%.
On that same $1,000,000 home, look at how your taxable base (NAV) evaporates:
| Tax Year | Standard Ded. | Supplemental % | Taxable Base (NAV) |
| 2025 (Old) | $48,000 | 35% | $654,000 |
| 2027 (Pay '28) | $32,000 | 48% | $503,360 |
| 2029 (Pay '30) | $16,000 | 58% | $413,280 |
| 2031 (Final) | $0 | 66.7% | $333,000 |
By 2031, your taxable base is cut nearly in half compared to the old system. While other states are looking for ways to increase revenue, Indiana has structurally hard-coded a path to lower your taxable floor every year for the next five years.
New Relief for Vacation & Second Homes
Prior to SEA 1, non-homestead residential properties — meaning homes not used as a primary residence — received no NAV deduction whatsoever.
SEA 1 changes that. Beginning in 2026, non-homestead residential properties receive a new deduction starting at 6% of assessed value — the first deduction this category has ever received in Indiana — rising to 33.4% by 2031.
For a $1,000,000 vacation property, a 33.4% NAV reduction by 2031 translates to roughly $250/month in additional tax savings compared to what these buyers paid before SEA 1. Entirely new relief.
What This Means in Practice
For a buyer with a fixed monthly budget, the tax differential doesn't just save money — it probably changes what you can afford to pay for a new home.
The $900 per month you save on property taxes versus a Cook County buyer at the same $1,000,000 price point is $900 that can go toward principal and interest instead. At current rates, $900/month in additional mortgage capacity supports roughly $130,000 in additional purchasing power.
Put another way: an Illinois buyer and an Indiana buyer with identical monthly budgets are not shopping in the same market. The Indiana buyer can afford a meaningfully better property — or the same property with significantly less financial strain.
By 2031, as SEA 1's phase-in completes, that combined advantage — rate differential plus the improving deduction structure — grows further still.
Your Mileage May Vary
These figures are illustrative. A few honest and important caveats:
Assessed value vs. purchase price. Indiana's system assesses at market value, but individual county assessments vary. Your actual tax bill is based on the assessor's professional opinion of your specific property.
Rate drift. As SEA 1 reduces Net Assessed Value across the tax base, local taxing bodies (cities, schools, townships, etc.) may adjust rates upward to maintain services. The constitutional caps provide a hard ceiling, but rates can move below that ceiling. The modeling we drew on for this piece accounts for this dynamic — and the net homeowner benefit remains substantially even with rate adjustment. But it's a variable worth understanding.
Primary vs. second home. The 1% cap and full homestead deduction benefits apply only to your primary residence. Vacation property buyers are working with the 2% cap and the new non-homestead deduction — still a significant Indiana advantage, but a different calculation. Note: If you move to Indiana full time and purchase your home from a part-timer, you'll need to contact the County to apply for the homestead deduction. It doesn't apply automatically and many a transplant has discovered too late that they missed out on big savings.
This is not tax advice. Discuss property tax implications with your accountant, financial advisor, or lender. We work with knowledgeable partners who understand the Indiana Dunes market and can provide guidance to suit your situation.
All information provided on this website is believed to be reliable but is not guaranteed and should be independently verified. Nothing on this site constitutes legal, financial, or tax advice—visitors should consult the appropriate professionals for guidance specific to their situation. Bonnie Hawksworth, the Dunelife Team, @properties | Christie's International Real Estate and their affiliates, and website owner make no representations or warranties, express or implied, regarding the accuracy, completeness, or suitability of any content for any purpose and shall not be liable for any loss arising from reliance on the information provided. This website and its owners comply with all Fair Housing Act and Equal Opportunity provisions. Equal Housing Opportunity. Bonnie Hawksworth, REALTOR® License # RB24000153