Cost Segregation in Indianapolis, IN

The Crossroads of America — Indianapolis combines Eli Lilly and healthcare employment, a booming logistics sector, and full bonus depreciation conformity with entry prices under $300K for maximum cost seg ROI.

Population
2.1M
Median Home
$275K
Rent (3BR)
$1,700
Property Tax
0.98%
Annual Job Growth
20K+
Ranking
#1 in Indiana
Overview

Value Props for Investors

PHARMA BOOM
Eli Lilly: $8B+ Expansion Underway

Eli Lilly is investing $8B+ in new manufacturing facilities in central Indiana. This is one of the largest pharma investments in U.S. history, creating thousands of high-paying jobs and driving housing demand across the metro.

LOGISTICS HUB
Crossroads of America: #1 U.S. Logistics Center

Six interstate highways converge in Indianapolis. FedEx, Amazon, and hundreds of logistics companies create 100K+ distribution jobs. The Indianapolis International Airport cargo hub processes billions in goods annually.

FULL CONFORMITY
Full Bonus Dep + 3.05% Flat Tax = Maximum Savings

Indiana's full IRC conformity and ultra-low 3.05% flat tax rate means both federal and state cost seg benefits hit in Year 1. No addback rules, no deferred deductions — just clean, immediate tax savings.

Tax Strategy

Cost Segregation & Tax Rules in Indianapolis, IN

Understanding how federal and Indiana state tax rules interact is critical to maximizing your cost segregation benefits in Indianapolis.

Cost Seg Overview
State vs. Federal Rules
Tax Landscape
Typical Purchase
$275,000
Building Value
80%
20% land / 80% building
Cost Seg Range
25-38%
of building reclassified
Home Age
30 yrs
Built ~1994
What Gets Reclassified

A cost segregation study identifies building components that can be depreciated over 5, 7, or 15 years instead of the standard 27.5 or 39 years. In Indianapolis, typical reclassification rates are 25-38% of building value.

Purchase Price Breakdown
Building 80%$220,000
Land 20%$55,000
Building Value Reallocation (with Cost Seg)
5-Year Property18%
$39,600
15-Year Property12%
$26,400
27.5 / 39-Year (Remaining)70%
$154,000

5 & 15-year components ($66,000 = 30% of building) are eligible for bonus depreciation in Year 1.

Overline Study Cost & ROI
Overline Study Cost
$499 - $2,000
Avg. ROI
10-40x

The math: A $275,000 property with 80% building value and 30% reclassification yields ~$24,420 in Year 1 federal tax savings at the 37% bracket — significantly more ROI than traditional studies costing $5,000-$10,000+.

Housing Stock Advantage

With a median build year of 1994, Indianapolis's housing stock has identifiable components (HVAC, electrical, plumbing, landscaping) that are strong candidates for accelerated depreciation.

Full Conformity
Indiana Bonus Depreciation Conformity

Indiana fully conforms to IRC Section 168(k) bonus depreciation. At just 3.05%, IN has one of the nation's lowest flat income tax rates, but full conformity means every dollar of accelerated depreciation flows through to both your federal and state returns in Year 1.

What This Means for Indianapolis Investors: Full conformity means cost seg benefits are maximized in Indiana. Federal AND state deductions apply in Year 1. Combined with Indiana's ultra-affordable property prices, the ROI per dollar invested is among the highest in the country.

Federal vs. IN Depreciation Timeline
PeriodFederal TreatmentIN State Treatment
Year 1100% bonus depreciation100% bonus depreciation (full conformity)
Years 2+Standard MACRS schedulesSame as federal
Section 179 Expensing
State ConformityConforms

Indiana conforms to federal Section 179 limits. Combined with the state's constitutional property tax caps, Section 179 adds another layer of tax efficiency for IN rental property investors.

Key Takeaway

A $240K property with a $197K depreciable basis and 30% cost seg reclassification yields ~$21,845 in federal tax savings PLUS ~$1,801 in IN state tax savings in Year 1 — a total of ~$23,646 on a very affordable property.

Bottom Line

Indiana is a full-conformity state. Every dollar of federal bonus depreciation flows through to your IN state return with no addback or modification. The flat 3.05% state rate adds a clean, predictable state-level benefit on top of federal savings.

Local Property Tax
0.98%
Indianapolis effective rate
Transfer Tax
No transfer tax
State Income Tax
3.05%
Flat
Property Tax Details

Marion County effective rate of ~0.98% with Indiana's 2% constitutional cap for rental properties provides predictability. Assessments are at 100% of market value.

Assessment Methodology
MethodMarket value-in-use with trending factors
Reassessment CycleAnnually (with trending adjustments)
Assessment BodyCounty Assessor
Appeal WindowJune 15 or 45 days after notice (whichever is later)
Appeal Success Likelihood
Moderate
LowModerateGoodVery High

Indiana's 1% property tax cap for homesteads and 2% cap for rental properties provides built-in protection. The trending factor system can create discrepancies in volatile markets. Appeals go through the County Property Tax Assessment Board of Appeals (PTABOA).

Work with Overline — Our team helps Indianapolis investors identify over-assessed properties and file tax appeals. A successful appeal can save thousands annually and compounds your cost seg savings.

Illustrative Example

Cost Seg Example for Indianapolis, IN

This example assumes a purchase eligible for 100% bonus depreciation. All factors below are based on averages from our historical cost segregation studies for IN properties. To see your exact savings, run a property-specific cost seg analysis below.

Typical Indianapolis, IN Property Details
$
50%95%
5%35%
2%25%
Total Reclassified30% of building
10%37%
Estimated Year 1 Tax Savings
Building Value$220,000
$275,000 x 80%
Normal Annual Depreciation$8,000
$220,000 ÷ 27.5 yr (residential)
5-Year Reclassified$39,600
15-Year Reclassified$26,400
Total Accelerated$66,000
30% of $220,000 building value
Federal Tax Savings (Year 1)$24,420
$66,000 x 37% bracket
IN State Tax Savings (Year 1)$2,013
Total Year 1 Tax Savings$26,433
8.3x normal annual deduction captured in Year 1

IN State Tax: IN has full bonus depreciation conformity — both federal and state savings hit your pocket in Year 1.

Insurance & Risk

Insurance Landscape in Indianapolis

Insurance costs directly impact your cash flow. Understanding Indianapolis's risk profile helps you budget accurately and avoid coverage gaps.

Avg. Annual Premium
$1,500
Indianapolis average
State Average
$1,500
35% below average
National Average
$2,300
for comparison
Key Risk Drivers
1
Severe thunderstorms and hail
2
Tornado risk
3
Winter ice storms
Coverage Recommendations
Standard homeowner's policy with replacement cost coverage
Wind/hail deductible awareness (typically 1-2% of dwelling coverage)
Sewer/drain backup coverage recommended for older urban homes
Umbrella liability ($1M+) for rental properties
Cost Seg + Insurance Connection

Indiana's low insurance costs are a major cash flow advantage. A cost seg study documents component values that support accurate replacement cost estimates — particularly valuable for Indiana's older renovated housing stock where original construction records may be limited.

Revenue Comparison

STR vs. Long-Term Rental in Indianapolis

Compare short-term (Airbnb) and long-term rental income for a typical Indianapolis investment property.

Long-Term Rental
Monthly Rent (3BR)$1,700
Annual Gross$20,400
Vacancy Rate4.5%
Net Annual$19,482
Tenant StabilityHigh — healthcare, pharma, and logistics workers provide stable long-term demand
Depreciation Schedule27.5 years
Residential rental property
Tax TreatmentPassive Only
Losses can only offset passive income unless you qualify as a Real Estate Professional (750+ hrs/yr)
Short-Term Rental
Avg. Nightly Rate$145
Occupancy Rate70%
Annual Gross Revenue$37,060
Net Annual (after expenses)$25,942
Management20-25%
Depreciation Schedule39 years
Classified as commercial / transient use property
Tax TreatmentActive Income Eligible
Losses can offset W-2 / active income if you document 100+ hrs of material participation and meet IRS criteria
Cost Seg + STR Loophole

Indianapolis has a unique STR advantage: the Indianapolis 500, NCAA headquarters, and convention center drive strong seasonal demand. Combined with $26K+ in Year 1 cost seg savings, investors can capture both premium STR revenue and immediate tax benefits.

Market Fundamentals

Economy & Housing Demand in Indianapolis

Strong economic engines create stable rental demand. Here is what drives Indianapolis's economy and housing market.

Median Income
$58,000
Rent-to-Income
26%
Healthy ratio
Vacancy Rate
4.5%
Pop. Growth
+1.0% annually
Major Employers
1
IU Health (35K+)
2
Eli Lilly (12K+)
3
Anthem/Elevance Health HQ (8K+)
4
Salesforce (5K+)
5
FedEx Hub (5K+)
6
Rolls-Royce (4K+)
Top Industries
Healthcare
Pharmaceuticals
Logistics & Distribution
Technology
Insurance & Finance
Landlord & STR Rules
Landlord Friendliness
Very Friendly
Eviction Timeline
30-45 days
STR Regulation
Permitted with registration

Indianapolis requires STR registration with the city and collection of a 9% innkeeper's tax. Most residential zones allow STRs. Strong demand from Indianapolis 500, conventions, and sports events (Colts, Pacers).

Why Invest Here

Indianapolis is the Midwest's most undervalued market. Eli Lilly's $8B+ expansion, Salesforce's growing tech presence, and America's #1 logistics hub create diverse employment. Sub-$300K entry prices with full bonus depreciation conformity deliver $26K+ in Year 1 tax savings — one of the highest ROI per dollar invested in the country.

Where to Invest

Top Neighborhoods in Indianapolis

#1
Broad Ripple
Trendy arts and dining district with walkable village atmosphere
Price
$310K
Rent
$1,850
Yield
7.2%
Indianapolis's most walkable neighborhood. Strong renter demand from young professionals. Mix of older bungalows and new construction offers diverse cost seg opportunities.
$310K$1,8507.2%
Indianapolis's most walkable neighborhood. Strong renter demand from young professionals. Mix of older bungalows and new construction offers diverse cost seg opportunities.
Indianapolis's most walkable neighborhood. Strong renter demand from young professionals. Mix of older bungalows and new construction offers diverse cost seg opportunities.
#2
Fountain Square
Revitalized arts district with brewery scene and vintage character
Price
$260K
Rent
$1,650
Yield
7.6%
Rapid gentrification with strong appreciation upside. Older housing stock (1920s-1950s) with renovated systems yields above-average cost seg reclassification.
$260K$1,6507.6%
Rapid gentrification with strong appreciation upside. Older housing stock (1920s-1950s) with renovated systems yields above-average cost seg reclassification.
Rapid gentrification with strong appreciation upside. Older housing stock (1920s-1950s) with renovated systems yields above-average cost seg reclassification.
#3
Irvington
Historic neighborhood with strong community identity
Price
$240K
Rent
$1,550
Yield
7.8%
Affordable entry with growing demand. Historic homes create additional cost seg opportunities from distinct architectural components and renovation history.
$240K$1,5507.8%
Affordable entry with growing demand. Historic homes create additional cost seg opportunities from distinct architectural components and renovation history.
Affordable entry with growing demand. Historic homes create additional cost seg opportunities from distinct architectural components and renovation history.
#4
Fishers (Hamilton County)
Top-rated suburb with corporate campuses and excellent schools
Price
$380K
Rent
$2,100
Yield
6.6%
Hamilton County is Indiana's wealthiest. Eli Lilly and Salesforce employees drive premium rental demand. Newer construction (2000s+) has abundant depreciable components.
$380K$2,1006.6%
Hamilton County is Indiana's wealthiest. Eli Lilly and Salesforce employees drive premium rental demand. Newer construction (2000s+) has abundant depreciable components.
Hamilton County is Indiana's wealthiest. Eli Lilly and Salesforce employees drive premium rental demand. Newer construction (2000s+) has abundant depreciable components.
#5
Speedway / West Side
Affordable working-class area near Indianapolis Motor Speedway
Price
$190K
Rent
$1,350
Yield
8.5%
Best cash flow in the metro. STR demand spikes during Indy 500 and Brickyard events. Low entry prices maximize cost seg ROI.
$190K$1,3508.5%
Best cash flow in the metro. STR demand spikes during Indy 500 and Brickyard events. Low entry prices maximize cost seg ROI.
Best cash flow in the metro. STR demand spikes during Indy 500 and Brickyard events. Low entry prices maximize cost seg ROI.
Local Partners

Investor-Friendly Partners in Indianapolis, IN

We are building a curated directory of top investor-friendly brokers, property management companies, and service providers in Indianapolis, IN.

Investor-Friendly Brokers

Top real estate agents who specialize in investment properties and understand cost segregation, 1031 exchanges, and cash-flow analysis.

Coming Soon
Property Management

Vetted property managers who handle tenant screening, maintenance, and rent collection for both long-term and short-term rentals.

Coming Soon
Insurance Agents

Independent insurance agents who specialize in rental property coverage and can leverage cost seg data for accurate replacement cost estimates.

Coming Soon

Are you a broker, property manager, or insurance agent serving investors in Indianapolis, IN?

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Frequently Asked Questions

Cost Segregation FAQ — Indianapolis, IN

How much can I save with cost segregation in Indianapolis, IN?

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On a typical $275K property in Indianapolis, cost segregation can yield approximately $26,433 in Year 1 combined federal and state tax savings at the 37% bracket, with a study ROI of 587%. Overline studies cost $499-$2,000.

What is the property tax rate in Indianapolis?

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The effective property tax rate in Indianapolis is approximately 0.98%. Marion County effective rate of ~0.98% with Indiana's 2% constitutional cap for rental properties provides predictability. Assessments are at 100% of market value.

Is Indianapolis a good market for real estate investing?

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Indianapolis is the Midwest's most undervalued market. Eli Lilly's $8B+ expansion, Salesforce's growing tech presence, and America's #1 logistics hub create diverse employment. Sub-$300K entry prices with full bonus depreciation conformity deliver $26K+ in Year 1 tax savings — one of the highest ROI per dollar invested in the country.

What is the average insurance cost for rental properties in Indianapolis?

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The average annual homeowner insurance premium in Indianapolis is approximately $1,500. Indianapolis enjoys insurance costs 35% below the national average. The primary risks are spring/summer severe storms and occasional tornado activity. Standard policies cover most risks without expensive riders.

What are the STR and landlord rules in Indianapolis?

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Indianapolis is rated "Very Friendly" for landlords. STR regulation: Permitted with registration. Eviction timeline: 30-45 days. Indianapolis requires STR registration with the city and collection of a 9% innkeeper's tax. Most residential zones allow STRs. Strong demand from Indianapolis 500, conventions, and sports events (Colts, Pacers).

Who are the major employers in Indianapolis?

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Major employers in Indianapolis include IU Health (35K+), Eli Lilly (12K+), Anthem/Elevance Health HQ (8K+), Salesforce (5K+), FedEx Hub (5K+). Top industries: Healthcare, Pharmaceuticals, Logistics & Distribution, Technology, Insurance & Finance.

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