Tennessee Property Taxes 101: TN Property Tax FAQs

How do you calculate Tennessee property taxes (including the assessment ratio)? Are there any exemptions? We answer these and more.

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Tennessee Property Taxes 101: TN Property Tax FAQs

Posted by Gary Ashton on Monday, June 10th, 2024 at 9:08am.

Property Taxes in Tennessee

If you're wondering about property taxes in Tennessee, you're not alone. Understanding how these taxes are calculated, what factors influence rates, and when important deadlines fall can have a tremendous impact when you're buying a home in Tennessee.

For informational purposes only. Always consult with a tax or financial advisor before proceeding with any real estate transaction.

Understanding Tennessee Property Tax Basics

Property tax rates are set by county commissions and municipal governments, taking into account local services and the county's tax base value. These taxes are only collected locally, and fund only local services—the state does not receive funds from property taxes, unlike other Tennessee taxes.

Different property classes—such as residential, farm, commercial, industrial, public utility, and business personal property—are subject to varying assessment ratios. For instance, residential and farm properties in Tennessee are typically assessed at 25%.

County assessors calculate the appraised value of each property in their jurisdiction for tax purposes. This is not necessarily the same value as the current fair market value or a bank's appraisal.

The tax appraisal value, property class assessment ratio, and local property tax rate combine to determine a property's tax bill. Be careful of using online calculators to estimate your property taxes; not many factor in the assessment ratio.

In addition, remember that a lower tax rate doesn't necessarily equate to a lower tax bill. For example, if you buy a luxury home worth $1 million in a county with a low property tax rate of 0.4%, you'll pay $1,000 to the county—1 million times 25% times 0.4%. However, if you buy a home worth $500,000 in a county with a tax rate of 0.7%, you'll pay $875 to the county. (The rest of the tax bill will come from school districts, cities, and other taxing districts; the combined rate is called the "effective tax rate.”)

It's also worth noting that taxpayers in Tennessee can appeal their property's fair market value or assessment classification, potentially shifting the property taxes they owe in their favor.

How Are Property Taxes Calculated?

How Much Are Property Taxes in Tennessee?

To calculate property taxes in Tennessee, you multiply the appraised value of the property by the assessment ratio for its classification and then multiply the result by the local tax rate.

Property classifications like residential and commercial/industrial have specific assessment percentages, set by law in Tennessee. Residential properties are typically assessed at 25%, while commercial and industrial properties are assessed at 40% and business personal property at 30%.

These assessment ratios guarantee consistency in property tax calculations across different property types. The final property tax amount due is determined by the product of the appraised value, assessment ratio, and the local tax rate.

Local tax rates are established by county commissions and city governing bodies, playing a significant role in shaping the overall property tax obligations.

Before you buy a home, it's important to estimate your property taxes for calculating your home-buying budget. This is especially important to remember if you're a first-time home buyer so you don't get surprised by homeownership expenses. Comparing the property taxes of nearby cities can help you narrow down your home search if you're looking at a general area.

Important Deadlines and Payment Options

To ensure timely payment and avoid penalties, property owners in Tennessee should be aware of the specific deadlines and flexible payment options available for property taxes. Property tax payments in Tennessee are due annually from October 1 through February 28.

Keep in mind that late payments incur interest charges at a rate of 1.5% per month starting in March. To assist with financial management, partial payments for property taxes are accepted.

By understanding these deadlines and payment options, property owners can stay compliant with their obligations and prevent additional financial burdens. Be sure to plan and make timely payments to avoid any unnecessary complications or fees.

What Happens if You Don't Pay Your Property Taxes?

If you don't pay your property taxes, they become delinquent, and the tax authority can place a lien on your home. This gives them the authority to sell your home in order to recover the unpaid taxes. There's typically quite a few warnings beforehand, and you can stop the process at any point by paying the delinquent taxes.

If your property is sold at auction, you generally have a one-year redemption period to reclaim your house. (It could be shorter if the taxes are multiple years overdue or the property is abandoned.) However, in order to redeem the house, you'll need to pay:

  • The delinquent taxes
  • A penalty amount
  • Interest on the taxes
  • Interest on the full purchase price the buyer made at auction

In addition, after you file to redeem your home, you may have to pay for any reasonable insurance payments, improvements, or other fees the buyer paid as part of owning the property during the redemption period. 

How to Lower Your Property Taxes in Tennessee

If you think you're paying too much in property taxes, you may be able to take it up with your local County Board of Equalization. This is only an option if your property's assessed value is mistakenly too high.

Some county assessors have a process to resolve disputed valuations informally, and this can speed up getting your taxes resolved. If not, a taxpayer can appeal to the county board, and then has 30 days to escalate to the State Board of Equalization if the results from the county board still aren't satisfactory.

The appeals process is vital for addressing any discrepancies in property assessments and provides a formal channel for challenging property tax assessments. The goal of the appeals process is to guarantee fair and accurate property assessments, allowing property owners to contest the valuation of their property for tax purposes.

Your county's Board of Equalization oversees the appeals process. To get started, you'll need to pay a non-refundable $10 filing fee and aim to appeal by August 1 of the tax year in question or within 45 days from the postmarked date on the county board's notice. It's important to review your property assessment carefully and act promptly if you believe there are errors.

While your appeal is in progress, you need to at least pay the undisputed portion of your taxes in order to avoid penalties. Once the final certificate of assessment is given to you by the board, you'll owe the amount of any underpayment of taxes, if applicable, plus interest. The applicable interest rates are available on the State Board of Equalization appeal page.

If your property valuation is correct, your next step should be to see if you're eligible for a property tax exemption or relief program.

Exemptions and Relief Programs

Property Tax Exemptions in Tennessee

If you're a property owner in Tennessee, exemptions and relief programs may be able to provide valuable assistance in managing your tax obligations.

Tax relief programs in Tennessee cater to specific groups such as homeowners who are elderly, disabled, or veterans—or their surviving spouses—each with distinct eligibility criteria. Low-income elderly or disabled homeowners may be eligible for reimbursements through these initiatives.

To qualify for tax relief, individuals typically need to meet requirements such as age, disability, income limits, and disability rating for veterans. The Trustee's Office oversees the administration of these programs, offering support to those who meet the criteria.

If you require assistance or clarification regarding property tax relief, you can reach out to your county trustee's office for guidance. They can provide details on exemptions, payment deadlines, and appeal processes related to property taxes.

Tips for Managing Property Taxes

Staying informed about key deadlines is essential for timely payments. Property tax bills are typically mailed in September, with payments due from October 1 to the end of February.

To help manage your financial obligations, consider utilizing partial payments, which are accepted for property taxes. That said, it's vital to be aware of interest charges, as late payments accrue 1.5% interest per month. By making payments on time, you can avoid these fees.

Familiarize yourself with the roles of the Trustee's Office, County Assessor, and other relevant entities in Tennessee involved in property tax management. By staying organized and informed, you can effectively manage your property taxes and avoid penalties while living in Tennessee.

For informational purposes only. Always consult with a tax or financial advisor before proceeding with any real estate transaction.

Property Taxes Shouldn't Be a Mystery

By understanding how property taxes affect your home purchase, knowing key factors that influence rates, and being aware of deadlines and payment options, you'll be better equipped to manage your property taxes in Tennessee. If something seems off and you believe you could be overpaying, consider reaching out to your county's Board of Equalization to start the appeals process.

Ready to move to the great state of Tennessee? Call The Ashton Real Estate Group of RE/MAX Advantage with Nashville's MLS at (615) 603-3602 to talk with a real estate agent who can help you find your dream Tennessee home.


Gary Ashton

The Ashton Real Estate Group of RE/MAX Advantage

The #1 RE/MAX team in the World!

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