The Ultimate Guide to Tennessee Real Estate Taxes

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By Clever Real Estate Updated February 23, 2023


Are you buying or selling a home in Tennessee this year and have questions about the tax implications? Learn more about the taxes both buyers and sellers are required to pay, who pays real estate transfer taxes, how to calculate property taxes, and the tax break options available in Tennessee.

The Ultimate Guide to Tennessee Real Estate Taxes

No one likes thinking about property taxes but they’re important to understand when you’re a homeowner. Property taxes impact both buyers and sellers and the rules for these taxes vary across states.

To help you better understand property tax laws in Tennessee, we’ve created a guide to help you understand the taxes sellers pay, real estate transfer taxes, how to calculate property taxes, and the different tax breaks available for homeowners.

Will You Have to Pay Taxes When You Sell Your Home in Tennessee?

Most sellers can breathe easy when selling their home. That’s because the Federal Government does not require sellers to pay taxes on profits of $250,000 or less. This profit doubles to $500,000 if you’re married and selling the home jointly.

What’s great about this tax exclusion is that you can use it every time you sell a primary residence, as long as you’ve lived there for two years and have not used this tax exclusion on another house within the last two years.

While no federal tax is owed, some states require sellers to pay state taxes on home sales. Luckily, in Tennessee there is no income tax nor capital gains tax, so your sale will be free of state taxes.

How Much Are Real Estate Transfer Taxes in Tennessee (and Who Pays Them)?

A transfer tax is the tax charged by the state, city, or county when real estate changes ownership. This tax is equal to a specific percentage of either the sales price or appraised home value. Transfer taxes can be paid by the buyer or seller, depending on the specific location of the property.

In Tennessee, paying the transfer tax is typically the responsibility of the buyer, though it can be handled by the seller depending on the specific contract created. Transfer tax varies depending on the county of the house being transferred. The typical rate is $0.37 per every $100 dollars of the sales price, but this calculator can help you determine the exact transfer price and calculate any other additional local fees owed.

A local real estate agent can also help you calculate specific transfer tax rates for your property.

How to Calculate Property Taxes in Tennessee

Understanding and calculating property taxes can be confusing for many homeowners. Calculations often vary from county to county, but generally follow the same guidelines. Property taxes are calculated based on your home’s value and are used to fund local services (fire departments, public schools, libraries, etc).

In Tennessee, home values are assessed every four to six years and taxes are paid on the assessed value, rather than the market value. Your tax rate will vary based on the county you reside in.

For instance, a home assessed at $250,000 in Nashville, Davidson County would have a 1% rate, costing $2,500. In Memphis, Shelby County, Tennessee, the same home assessment would have a tax rate of 1.513%, costing $3,783. Alternatively, the same valued home in Knoxville, Knox County, has a property tax rate of .715% and would only cost $1,788 annually.

When searching for a new home in Tennessee, it’s best to ask your real estate agent to help you determine local property tax rates, so you’re prepared for what you’ll be expected to pay come tax season.

Tax Breaks for Tennessee Home Buyers & Sellers

Although paying taxes is never any fun, there are several tax breaks and deductions both buyers and sellers should be aware of. Researching all possible tax deductions can help you

Tax Breaks and Credits for Buyers

There are many ways to save money on property taxes when purchasing a new home. Here are some of the top tax breaks to consider, once you become a homeowner.

First-Time Home Buyer Tax Credits

Tennessee first-time home buyers are eligible for a Mortgage Credit Certificate (MCC) program, which is a federal level income tax credit available through the Tennessee Housing Development Agency (THDA). This credit is different for every city in Tennessee, but the amount is typically $2,000.

This tax credit lasts for the duration of your loan, until it’s repaid, refinanced, or the home is resold. There are some income and home value requirements, which vary depending on your home’s location. In addition, to qualify, borrowers must partner with a THDA approved lender and complete a homeowner education course.

You can find out if you qualify for an MCC, by reaching out to your real estate agent or mortgage lender.

Mortgage Interest Deductions

Tennessee homeowners can also deduct some of the money they spent on their mortgage payment come tax season. If you owe less than $750,000 on your mortgage, you can deduct the interest paid each year.

In order to do this, you’ll need to itemize your deductions, ensure you paid mortgage interest within the past year, and only deduct the interest paid on your primary residence and one other qualified residential property.

Private Mortgage Insurance Deductions

If you paid less than 20% on your home’s down payment, you were likely required to purchase private mortgage insurance (PMI). If you qualify for mortgage interest deductions, then you meet the criteria for claiming private mortgage insurance deductions.

If you qualify, you can deduct the full amount paid towards your PMI on your taxes. For more information, be sure to consult your real estate agent or lender.

Property Tax Deductions

Many Tennessee mortgage lenders require homeowners to pay their state and local taxes via escrow throughout the year. If this applies to you, you’re likely eligible for a property tax deduction.

In order to qualify, you’ll need to itemize your taxes and ensure you paid property taxes at the time of closing or throughout the year. You can also only claim up to $10,000 for your property taxes at one time, even if your state and local total a higher amount.

Tax Breaks and Write-Offs for Sellers

If you’re selling a home in Tennessee this year, there are a few tax breaks and deductions you should be aware of. From writing off pre-sale repairs to deducting moving costs, here are a few ways you can save money on your taxes after your home’s sale.

Presale Repairs and Improvements

It’s hard to get away from making some minor repairs during the home selling process. Whether these repair request popped up after inspection or were recommended by your realtor, if they were financed before closing, you may be able to write them off on your taxes.

The IRS handles repairs and improvements differently, so it’s important to know how each is defined. A repair is considered required maintenance to ensure your home is restored to its full value or functioning as expected. An improvement is an enhancement that adds value to the home.

Some examples of repairs include: roof repairs, mold removal, smoke detector replacements, and broken door knob replacements. Examples of improvements include: upgrading to central air conditioning, remodeling your kitchen, and refinishing your basement.

Repairs can be deducted in full on your taxes, but improvements can only be partially deducted. Improvements follow a depreciation schedule, allowing you to make deductions over a certain period of time.

Check with your real estate agent to learn more about deducting home repairs and improvements from your taxes.

Mortgage Interest and Property Taxes

If you’re selling your Tennessee home in 2019, you’re still eligible to deduct mortgage interest and property taxes for the months you paid interest this year. In order to take the mortgage interest deduction, you’ll need to owe less than $750,000 on your mortgage, prior to the sale. For property taxes, you can only deduct up to $10,000. It’s also important to hold on to records of your closing date in case you’re audited.

Moving Costs

If you’re in the military, are moving for your job, and sold your home as a result, you can deduct your moving expenses from your taxes. To qualify, you’ll need to be an active duty military member.


The rules around real estate taxes and tax breaks can be complicated and often vary from region to region. In order to better understand your tax requirements and options, it’s best to connect with a certified tax professional to ensure you save the most money possible.

If you’re looking to sell your Tennessee home in 2019, let Clever connect you with a talented real estate agent in your city. Learn more here.

If you’re looking to buy in Tennessee in 2019, let Clever connect you with a top real estate agent in your city. Learn more here.

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