diff --git a/client/constants.js b/client/constants.js
index 0a817cd6..00480bcd 100644
--- a/client/constants.js
+++ b/client/constants.js
@@ -12,6 +12,8 @@ export const UPDATE_FONTSIZE = 'UPDATE_FONTSIZE';
 export const INCREASE_INDENTATION = 'INCREASE_INDENTATION';
 export const DECREASE_INDENTATION = 'DECREASE_INDENTATION';
 export const UPDATE_INDENTATION = 'UPDATE_INDENTATION';
+export const INDENT_WITH_SPACE = 'INDENT_WITH_SPACE';
+export const INDENT_WITH_TAB = 'INDENT_WITH_TAB';
 
 export const AUTH_USER = 'AUTH_USER';
 export const UNAUTH_USER = 'UNAUTH_USER';
diff --git a/client/modules/IDE/actions/preferences.js b/client/modules/IDE/actions/preferences.js
index 331e33b6..4a3d0c9c 100644
--- a/client/modules/IDE/actions/preferences.js
+++ b/client/modules/IDE/actions/preferences.js
@@ -51,3 +51,15 @@ export function updateIndentation() {
     value
   };
 }
+
+export function indentWithTab() {
+  return {
+    type: ActionTypes.INDENT_WITH_TAB
+  };
+}
+
+export function indentWithSpace() {
+  return {
+    type: ActionTypes.INDENT_WITH_SPACE
+  };
+}
diff --git a/client/modules/IDE/components/Editor.js b/client/modules/IDE/components/Editor.js
index e1b2be63..d750180a 100644
--- a/client/modules/IDE/components/Editor.js
+++ b/client/modules/IDE/components/Editor.js
@@ -17,7 +17,10 @@ class Editor extends React.Component {
       this.props.updateFile('sketch.js', this._cm.getValue());
     });
     this._cm.getWrapperElement().style['font-size'] = `${this.props.fontSize}px`;
+
+    this._cm.setOption('indentWithTabs', this.props.indentWithTab);
     this._cm.setOption('tabSize', this.props.indentationAmount);
+    this._cm.setOption('indentUnit', this.props.indentationAmount);
   }
 
   componentDidUpdate(prevProps) {
@@ -48,7 +51,8 @@ Editor.propTypes = {
   content: PropTypes.string.isRequired,
   updateFile: PropTypes.func.isRequired,
   fontSize: PropTypes.number.isRequired,
-  indentationAmount: PropTypes.number.isRequired
+  indentationAmount: PropTypes.number.isRequired,
+  isTabIndent: PropTypes.bool.isRequired
 };
 
 export default Editor;
diff --git a/client/modules/IDE/components/Preferences.js b/client/modules/IDE/components/Preferences.js
index 17137554..e0fd2d2b 100644
--- a/client/modules/IDE/components/Preferences.js
+++ b/client/modules/IDE/components/Preferences.js
@@ -11,6 +11,14 @@ function Preferences(props) {
     preferences: true,
     'preferences--selected': props.isVisible
   });
+  let preferencesTabOptionClass = classNames({
+    preference__option: true,
+    'preference__option--selected': props.isTabIndent
+  });
+  let preferencesSpaceOptionClass = classNames({
+    preference__option: true,
+    'preference__option--selected': !props.isTabIndent
+  });
   return (
     <div className={preferencesContainerClass} tabIndex="0">
       <div className="preferences__heading">
@@ -24,22 +32,33 @@ function Preferences(props) {
         <h4 className="preference__title">Text Size</h4>
         <button className="preference__plus-button" onClick={props.decreaseFont}>
           <Isvg src={minusUrl} alt="Decrease Font Size" />
+          <h6 className="preference__label">Decrease</h6>
         </button>
-        <input className="preference__value" defaultValue={props.fontSize} value={props.fontSize} onChange={props.updateFont}></input>
+
+        <input className="preference__value" value={props.fontSize} onChange={props.updateFont}></input>
         <button className="preference__minus-button" onClick={props.increaseFont}>
           <Isvg src={plusUrl} alt="Increase Font Size" />
+          <h6 className="preference__label">Increase</h6>
         </button>
+
+
       </div>
 
       <div className="preference">
         <h4 className="preference__title">Indentation Amount</h4>
         <button className="preference__plus-button" onClick={props.decreaseIndentation}>
           <Isvg src={minusUrl} alt="DecreaseIndentation Amount" />
+          <h6 className="preference__label">Decrease</h6>
         </button>
-        <input className="preference__value" defaultValue={props.indentationAmount} value={props.indentationAmount} onChange={props.updateIndentation}></input>
+        <input className="preference__value" value={props.indentationAmount} onChange={props.updateIndentation}></input>
         <button className="preference__minus-button" onClick={props.increaseIndentation}>
           <Isvg src={plusUrl} alt="IncreaseIndentation Amount" />
+          <h6 className="preference__label">Increase</h6>
         </button>
+        <ul>
+          <li className={preferencesSpaceOptionClass} onClick={props.indentWithSpace}>Spaces</li>
+          <li className={preferencesTabOptionClass} onClick={props.indentWithTab}>Tabs</li>
+        </ul>
       </div>
 
     </div>
@@ -56,7 +75,10 @@ Preferences.propTypes = {
   indentationAmount: PropTypes.number.isRequired,
   decreaseIndentation: PropTypes.func.isRequired,
   increaseIndentation: PropTypes.func.isRequired,
-  updateIndentation: PropTypes.func.isRequired
+  updateIndentation: PropTypes.func.isRequired,
+  indentWithSpace: PropTypes.func.isRequired,
+  indentWithTab: PropTypes.func.isRequired,
+  isTabIndent: PropTypes.bool.isRequired
 };
 
 export default Preferences;
diff --git a/client/modules/IDE/pages/IDEView.js b/client/modules/IDE/pages/IDEView.js
index bc98f378..2eead4f9 100644
--- a/client/modules/IDE/pages/IDEView.js
+++ b/client/modules/IDE/pages/IDEView.js
@@ -48,12 +48,16 @@ class IDEView extends React.Component {
           decreaseIndentation={this.props.decreaseIndentation}
           updateIndentation={this.props.updateIndentation}
           indentationAmount={this.props.preferences.indentationAmount}
+          isTabIndent={this.props.preferences.isTabIndent}
+          indentWithSpace={this.props.indentWithSpace}
+          indentWithTab={this.props.indentWithTab}
         />
         <Editor
           content={this.props.file.content}
           updateFile={this.props.updateFile}
           fontSize={this.props.preferences.fontSize}
           indentationAmount={this.props.preferences.indentationAmount}
+          isTabIndent={this.props.preferences.isTabIndent}
         />
         <PreviewFrame
           content={this.props.file.content}
@@ -88,7 +92,8 @@ IDEView.propTypes = {
   preferences: PropTypes.shape({
     isVisible: PropTypes.bool.isRequired,
     fontSize: PropTypes.number.isRequired,
-    indentationAmount: PropTypes.number.isRequired
+    indentationAmount: PropTypes.number.isRequired,
+    isTabIndent: PropTypes.bool.isRequired
   }).isRequired,
   closePreferences: PropTypes.func.isRequired,
   increaseFont: PropTypes.func.isRequired,
@@ -97,6 +102,8 @@ IDEView.propTypes = {
   increaseIndentation: PropTypes.func.isRequired,
   decreaseIndentation: PropTypes.func.isRequired,
   updateIndentation: PropTypes.func.isRequired,
+  indentWithSpace: PropTypes.func.isRequired,
+  indentWithTab: PropTypes.func.isRequired,
   file: PropTypes.shape({
     content: PropTypes.string.isRequired
   }).isRequired,
diff --git a/client/modules/IDE/reducers/preferences.js b/client/modules/IDE/reducers/preferences.js
index 7ebd4a87..0fb4c13b 100644
--- a/client/modules/IDE/reducers/preferences.js
+++ b/client/modules/IDE/reducers/preferences.js
@@ -3,7 +3,8 @@ import * as ActionTypes from '../../../constants';
 const initialState = {
   isVisible: false,
   fontSize: 18,
-  indentationAmount: 4
+  indentationAmount: 4,
+  isTabIndent: true
 };
 
 const preferences = (state = initialState, action) => {
@@ -40,6 +41,14 @@ const preferences = (state = initialState, action) => {
       return Object.assign({}, state, {
         indentationAmount: action.value
       });
+    case ActionTypes.INDENT_WITH_TAB:
+      return Object.assign({}, state, {
+        isTabIndent: true
+      });
+    case ActionTypes.INDENT_WITH_SPACE:
+      return Object.assign({}, state, {
+        isTabIndent: false
+      });
     default:
       return state;
   }
diff --git a/client/styles/abstracts/_placeholders.scss b/client/styles/abstracts/_placeholders.scss
index 021d3a3f..c622a0db 100644
--- a/client/styles/abstracts/_placeholders.scss
+++ b/client/styles/abstracts/_placeholders.scss
@@ -69,6 +69,7 @@
 	@extend %toolbar-button;
 	color: $light-primary-text-color;
 	background-color: $light-modal-button-background-color;
+	padding: 0;
 	& g {
 		fill: $light-primary-text-color;
 	}
@@ -88,3 +89,17 @@
 		color: $light-primary-text-color;
 	}
 }
+
+%preference-option {
+	color: $light-secondary-text-color;
+	font-size: #{14 / $base-font-size}rem;
+	cursor: pointer;
+	text-align: left;
+	margin-bottom: #{5 / $base-font-size}rem;
+	&:hover {
+		color: $light-primary-text-color;
+	}
+	&--selected {
+    color: $light-primary-text-color;
+  }
+}
diff --git a/client/styles/base/_base.scss b/client/styles/base/_base.scss
index 61030f10..5f451ca7 100644
--- a/client/styles/base/_base.scss
+++ b/client/styles/base/_base.scss
@@ -50,3 +50,7 @@ h3 {
 h4 {
 	font-weight: normal;
 }
+
+h6 {
+	font-weight: normal;
+}
diff --git a/client/styles/components/_preferences.scss b/client/styles/components/_preferences.scss
index e8aeca3a..1e9c84ae 100644
--- a/client/styles/components/_preferences.scss
+++ b/client/styles/components/_preferences.scss
@@ -2,7 +2,7 @@
 	position: absolute;
 	top: #{66 / $base-font-size}rem;
 	right: #{40 / $base-font-size}rem;
-	width: #{276 / $base-font-size}rem;
+	width: #{300 / $base-font-size}rem;
 	background-color: $light-button-background-color;
 	display: none;
 	padding: #{16 / $base-font-size}rem #{26 / $base-font-size}rem;
@@ -35,8 +35,7 @@
 .preference {
 	display: flex;
 	flex-wrap: wrap;
-	justify-content: space-between;
-	padding-bottom: #{20 / $base-font-size}rem;
+	padding-bottom: #{40 / $base-font-size}rem;
 	border-bottom: 2px dashed $light-button-border-color;
 }
 
@@ -49,5 +48,25 @@
 	border: 1px solid $light-button-border-color;
 	text-align: center;
 	width: #{48 / $base-font-size}rem;
+	height: #{48 / $base-font-size}rem;
+	margin: 0 #{20 / $base-font-size}rem;
 	background-color: $light-button-background-color;
 }
+
+.preference__label {
+	margin: 0;
+	line-height: #{20 / $base-font-size}rem;
+	color: $light-button-border-color;
+	&:hover {
+		color: $light-button-border-color;
+	}
+}
+
+.preference__option {
+	@extend %preference-option;
+	list-style-type: none;
+	padding-left: #{12 / $base-font-size}rem;
+	&--selected {
+		@extend %preference-option--selected;
+	}
+}