Tennessee Real Estate Transfer Tax: Rates, Exemptions, and Refunds

The Tennessee real estate transfer tax is $0.37 for every $100 of a property’s sale price or fair market value, whichever is higher.¹ On a $350,000 home, that comes to $1,295. The buyer is legally responsible, and the county register of deeds collects it when the deed is filed. If you finance the purchase, a second, separate recordation tax applies to the loan itself.

How the Tax Is Calculated

Divide the sale price (or the fair market value if it’s higher) by 100, then multiply by $0.37. The statute always uses the larger of the two numbers, so transferring a home worth $300,000 to a relative for $1 does not avoid tax on the real value.¹

A few examples:

$200,000 home: 2,000 × $0.37 = $740
$350,000 home: 3,500 × $0.37 = $1,295
$500,000 home: 5,000 × $0.37 = $1,850

One limit worth knowing: the tax applies only to freehold (outright ownership) transfers. Leasehold transfers owe nothing.¹

Who Owes the Tax

By statute, the grantee or transferee named on the deed owes the tax, and the register cannot record the deed until it is paid.¹ That means the buyer, in a standard sale.

A purchase contract can shift the cost to the seller as a concession, and in slower markets that happens. If the contract says nothing, the default sits on the buyer. Read the closing statement to confirm who is actually paying.

The Second Tax on Mortgages

If you finance the purchase, Tennessee charges a separate recordation tax on the mortgage or deed of trust. The rate is $0.115 per $100 of the loan amount, with the first $2,000 of debt exempt, and it falls on the borrower rather than the lender.¹

On a $280,000 mortgage, subtract the $2,000 exemption, divide the remaining $278,000 by 100 to get 2,780, then multiply by $0.115 for $319.70. Add that to the transfer tax on the sale price and the total recordation cost at closing climbs quickly. Cash buyers skip this charge entirely because there is no mortgage instrument to record.

Exemptions

Several common transfers owe no transfer tax at all. Family, estate planning, and government situations account for most of them.¹

Spouses and Divorces

Creating or dissolving a tenancy by the entirety between spouses is exempt. Adding a spouse to a deed, removing one, or converting the ownership form through a trustee reconveyance all qualify. Property transfers between divorcing spouses under a settlement decree are also exempt.¹

Trusts and Estates

Moving property into a revocable living trust you created, or taking it back out, is exempt. So are deeds a trustee signs to carry out a will’s instructions or to distribute property to beneficiaries, and executor deeds that implement a specific bequest.¹

Partitions, Life Estates, and Government

Deeds dividing property formerly held by tenants in common owe no tax.
Releasing a life estate to the remainder beneficiaries is exempt.
Any transfer where a “municipality” is the grantee is exempt. Tennessee defines that term broadly to include the state, counties, cities, utility districts, school districts, and their agencies.¹

Quitclaim Deeds

Quitclaim deeds follow a different rule. The tax is based only on the actual consideration paid, not on fair market value.¹ If no money changes hands, no tax is owed. The deed only gets this treatment if its language substantially matches the statutory quitclaim form and conveys only whatever interest the grantor happens to hold. A deed written in fee-simple warranty language is taxed at the standard rate regardless of what the parties label it.

What the Register Needs at Recording

The register will reject a filing that is missing required information, so two items matter before you walk in the door.

Oath of Value

The buyer, or an agent or trustee acting for the buyer, must swear under oath to the actual consideration paid or the fair market value, whichever is higher. The oath can appear on the deed itself or on a separate attachment, and it must be sworn in front of the register or someone else authorized to administer oaths.¹ The register uses the sworn amount to calculate the tax.

Parcel Identification Number

Every deed transferring ownership must include the parcel identification number assigned by the county property assessor.² Deeds of trust and mortgages do not need one. If the transfer is exempt, the deed should state the reason so the register can verify it.

Penalties for Understating the Value

Swearing to a low number on the Oath of Value to shrink the tax is a bad bet. Tennessee’s general tax penalty framework applies to recordation taxes, and the consequences depend on how the Department of Revenue reads the underpayment.³

Late payment: 5% of the unpaid tax for every 30 days (or partial 30-day period) it goes unpaid, capped at 25%. The minimum penalty on a delinquent report is $15, even with no tax owed.
Negligence: a flat 10% of the underpayment if the commissioner finds the taxpayer failed to make a reasonable attempt at compliance.
Fraud: a penalty equal to 100% of the underpayment for willful deception intended to reduce the tax owed.

Interest runs on top of the penalties. Because the transfer tax on even a high-priced home rarely exceeds a few thousand dollars, the risk never matches the reward.

Refunds

If you overpaid, or paid tax on a transaction that should have been exempt, you can file a refund claim with the Tennessee Department of Revenue. The deadline is three years from December 31 of the year in which you paid.⁴ Claims filed later are barred.

The Tennessee Taxpayer Access Point (TNTAP) online portal is the preferred route, and a paper Claim for Refund form by mail also works. Claims of $200 or more require a Report of Debts form disclosing any outstanding debts you owe the state. A claim without proper documentation is not treated as filed, so include copies of the recorded deed, the settlement statement, and anything showing the tax was wrongly calculated.

Federal Tax Treatment

The transfer tax is not deductible on your federal income tax return. The IRS treats it as part of the cost of acquiring or selling the property. A buyer adds it to cost basis, which lowers the taxable gain at a future sale; a seller who paid it as a concession counts it as a selling expense that reduces the amount realized.⁵

1
Justia. Tennessee Code 67-4-409 – Recordation Tax
2
Justia. Tennessee Code 66-24-122 – Parcel Identification Number
3
FindLaw. Tennessee Code 67-1-804 – Taxes and Licenses
4
Tennessee Department of Revenue. Requesting A Tax Refund
5
IRS. Publication 530 – Tax Information for Homeowners