Who pays transfer taxes? | When are transfer taxes paid? | Methodology
Tennessee's current transfer tax rate is $0.37 per $100. So, for a house worth $311,531 — the median home price in the state — the transfer tax due will be Typically paid by buyer.
Transfer taxes in Tennessee are known as recordation tax. The specifics on who pays the tax in Tennessee are sometimes up for negotiation, but usually the buyer is responsible.
Clever Real Estate can help you save on your cost to sell. Our concierge team will partner you with an experienced agent who can help you negotiate a good deal with your buyer on transfer taxes. Not to mention, you'll save big by paying only 1.5% in commission.
You can't change transfer tax rates. But, an experienced Clever Real Estate agent can help you win the negotiation battle so you aren't stuck paying all of the transfer taxes on your own.
When you choose Clever, you'll work with a full-service realtor with transfer tax expertise in your local market.
Clever's service is totally free, with zero obligation — you can walk away at any time.
What taxes will you have to pay on your real estate transaction in the Volunteer State? Let's take a closer look at how Tennessee real estate transfer taxes work and how much you can expect to pay.
What Are Real Estate Transfer Taxes?
Transfer taxes are taxes charged for transferring the title of a property to another owner. This tax rate is charged on the sale price of your home. Your state, county, and even district can all charge you transfer taxes.
Keep in mind that transfer tax rates vary on a state, regional, and local basis. Home buyers and sellers alike should consider consulting a local real estate agent to learn and understand their real estate transfer tax liability when selling or buying their property.
Who pays transfer taxes in Tennessee: The buyer or the seller?
In Tennessee, usually, the buyer is responsible for paying the transfer tax.
If you're a home seller and the buyer is asking you to pay the transfer taxes, you should consider negotiating with the other party. A realtor can help you get an arrangement with the buyer about the payment of the deed transfer taxes from your transaction. The other party may be open to accepting you pay only a portion, offer a discount on the sale price, or even cover the taxes themselves.
How Much Are Transfer Taxes in Tennessee?
In Tennessee, the state charges a transfer tax rate of $0.37 for every $100 of the property sale price. Transfer taxes on a real estate transaction may not exceed $100,000. When a home valued at $300,000 is transferred, the buyer or seller will pay the state about $1,100 in deed transfer taxes.
In order to complete the transfer, the property deed must include an oath from the buyer noting the value of the property. The assessor will use it for the real estate tax assessment. If the tax assessor determines the value is inaccurate, the party under oath could be charged for perjury.
When do you pay transfer taxes in Tennessee?
Deed transfer taxes are paid at the time of recording the property deed with the local register of deeds office.
Can You Deduct Transfer Taxes?
As a general rule, you can't deduct transfer taxes from your federal tax return. Yet, home sellers may use it to lower their capital gains tax liability.
When you sell a home, you may be eligible for a capital gains tax exemption of $250,000 or $500,000 (when filing jointly) if you meet the criteria. All home selling profits over that range will be subject to a 25% capital gains tax.
Most real estate investors don't meet the exemption criteria so they're on the hook for the capital gain liability on their home selling profits. Even though you can't deduct your deed transfer taxes, you may add it as part of your property cost basis.
So let's say that you bought a home for $250,000 and paid $925 in transfer taxes. Your home selling profits will be $290,000 if you sold it for $540,000.
As a single filer who meets the exemption criteria, you would have to pay $10,000 in capital gains liability. If you deduct the transfer taxes, you would only pay $9,075.
Real estate investors may also look into deducting their transfer taxes as a work expense, most of all if the property generates rental income. We recommend you consult a tax professional to learn more about your eligibility to deduct your transfer taxes.
Other Considerations
Besides transfer taxes, you must take into consideration other local tax liabilities you may need to cover as a home buyer or seller. If you are buying a property, you should look into Tennessee's mortgage transfer taxes. The mortgage tax rate in this state is $0.115 for every $100 of the property sale price.
You may be eligible for a $2,000 exemption of your property value. Home buyers and sellers will receive a statement detailing the closing fees and taxes due. Before closing your sale, you should verify the fees included in your closing statement.
Make sure you're being charged the fees and taxes in accordance with any buyer and seller agreements. If you received a home buyer rebate, you should check that it was applied to your closing costs or as mortgage points depending on your choice.
Clever will partner you with a local real estate agent who knows how to deal with the state’s tax and helps negotiate a deal in your favor. What’s more, our agents charge only a 1.5% listing fee compared to the state average of 2.77%! The money you'll save can more than offset the cost of the transfer taxes.
» SAVE: Learn more about how a Clever agent can help you navigate Tennessee transfer taxes
Methodology
- Transfer tax amounts are based on government website information as of February 2024.
- We gathered our listing commission rate data from a December 2023 survey of 630 of our partner agents.
- Home values, list prices, and sale prices are based on Zillow data as of February 2024.
