What is the Tennessee transfer tax rate?
The rate is 37 cents for every $100, set by Tenn. Code Ann. § 67-4-409(a). That is $3.70 per $1,000, or 0.37%. The tax applies to deeds, court deeds, decrees, partition deeds and other instruments that transfer an interest in Tennessee real estate, and the statute describes it as a tax “for state purposes only.”
The base is the consideration or the value of the property, whichever is greater. Value means what the property would bring at a fair and voluntary sale. So a below-market sale to a friend or a related entity is still taxed on market value, not on the lower price written into the contract.
Quitclaim deeds are treated differently. A quitclaim that uses the statutory form and conveys only the grantor’s interest is taxed on the actual consideration. A deed with general warranty language is taxed under the regular rule.
Who pays the transfer tax in Tennessee?
The buyer. Section 67-4-409(a) places the tax on the grantee or transferee, and the County Technical Assistance Service’s guide for county officials says the same. That runs opposite to neighboring Kentucky and North Carolina, where the seller pays.
The grantee, an agent or a trustee also has to swear to the consideration or value on the instrument before it can be recorded. A knowingly false oath is perjury. No oath is needed when the transfer is exempt.
Because the buyer carries the tax, sellers sometimes assume it is not their problem. It is, indirectly. An apartment buyer underwrites total acquisition cost, so a $7,400 or $18,500 tax comes out of what that buyer can offer. Sellers who agree in the contract to split it or credit it are usually trading that concession for price or terms.
When and where the tax is paid
The tax is paid to the register of deeds in the county where the property is located, at recording. The register may not record the deed until the tax is paid. No tax is due until title actually passes by deed, so a signed contract alone does not trigger it.
If several instruments are used for the same transfer, only one state tax is due. That helps when a closing involves a corrective deed or a deed from a trustee after the main conveyance.
- Transfer tax: 37 cents per $100 on the greater of price or value, owed by the buyer.
- Mortgage tax: 11.5 cents per $100 of debt above the first $2,000, owed by the borrower.
- Oath of consideration or value: sworn by the grantee or an agent on the deed.
The Tennessee mortgage tax
Tennessee also taxes recorded debt. Section 67-4-409(b) charges 11.5 cents per $100 of indebtedness, or 0.115%, and the first $2,000 of the debt is not taxed. The incidence falls on the mortgagor or debtor, and the lender collects it and remits it.
For a seller this matters in two places. First, the buyer’s new loan adds to the buyer’s closing costs. A $1,400,000 loan on a $2,000,000 purchase carries a mortgage tax of $1,607.70. Second, if you carry back a note secured by a deed of trust, that note is recorded debt too. A $400,000 seller-carry note would carry $457.70, which the buyer owes as the debtor.
Are there county or city transfer taxes in Tennessee?
The transfer and mortgage taxes are state taxes collected locally. The register of deeds in each county collects them at recording, along with the county’s recording fees, and § 67-4-409 does not set a separate county or city transfer rate. A Nashville or Memphis apartment sale uses the same 0.37% as a sale in a small county.
Recording fees for the deed and the deed of trust are charged separately by the register. They are small next to the transfer tax on any building of five or more units.
The value rule deserves attention, though. Because the tax runs on the greater of price or value, the oath on the deed has to reflect market value when the price is lower, and the CTAS guide tells registers to report a false affidavit to the district attorney. If your sale price is low for a reason, such as deferred maintenance or below-market leases, keep the inspection reports and rent roll that explain it in the closing file.
Exemptions and entity transfers
Tennessee’s exemption list is short and mostly family- and trust-related. Section 67-4-409 exempts:
- Creating or dissolving a tenancy by the entirety between spouses.
- Deeds that divide land held by tenants in common into separate parcels.
- Releases of a life estate to the remainder beneficiaries.
- Executor deeds and trustee deeds that carry out a testamentary devise, and trustee deeds distributing property to beneficiaries of a testamentary or revocable living trust.
- Transfers into a revocable living trust created by the transferor or spouse, and reconveyances back.
- Divorce and domestic settlement transfers.
- Under subsection (e), instruments from mergers, consolidations and sales of substantially all of a corporation’s in-state assets under a plan of reorganization.
What the exemption list leaves out
There is no general exemption for deeding property into your own LLC or partnership. Because the tax runs on the greater of consideration or value, a deed from you to an LLC you own is taxed on market value even if no money changes hands. Plan the entity structure before you buy, not right before you sell.
There is also no gift exemption, no foreclosure or deed-in-lieu exemption in the text of § 67-4-409, and no exemption for 1031 exchanges. The buyer of your relinquished property pays the transfer tax as usual, and you pay it as the buyer when you close on Tennessee replacement property.
On the other side, the statute taxes instruments that transfer an interest in real estate. It has no controlling-interest provision, so a sale of the membership interests in an LLC that owns the building, with no new deed, is not reached by § 67-4-409. Lenders and title insurers often push for a deed anyway, so this is a structuring question for your attorney, not a default.
Worked example: transfer tax on a Tennessee apartment building
A 40-unit building in Knoxville sells for $2,000,000. The transfer tax is $2,000,000 ÷ $100 × $0.37 = $7,400, owed by the buyer. If the buyer finances $1,400,000, the mortgage tax is ($1,400,000 − $2,000) ÷ $100 × $0.115 = $1,607.70.
At $5,000,000 the transfer tax is $18,500. With a $3,500,000 loan the mortgage tax is $4,022.70. Ask your title company to show both lines on the buyer’s settlement statement so you can see what the buyer is carrying.
| Sale price | Transfer tax (0.37%) | Loan amount | Mortgage tax (0.115% over $2,000) |
|---|---|---|---|
| $2,000,000 | $7,400 | $1,400,000 | $1,607.70 |
| $5,000,000 | $18,500 | $3,500,000 | $4,022.70 |
| $2,000,000 with $400,000 seller-carry note | $7,400 | $400,000 | $457.70 |
Tennessee compared with neighboring states
Tennessee’s 0.37% is higher than most of its neighbors, and it is one of the few in the region that puts the tax on the buyer by statute. Only Arkansas charges more among the states below.
| State | Statewide rate | Tax on $2,000,000 |
|---|---|---|
| Tennessee | $0.37 per $100 (0.37%) | $7,400 |
| Arkansas | $3.30 per $1,000 (0.33%) | $6,600 |
| North Carolina | $1 per $500 (0.2%), paid by the transferor | $4,000 |
| Kentucky | $0.50 per $500 (0.1%), paid by the grantor | $2,000 |
| Georgia | $1 per $1,000 (0.1%) | $2,000 |
| Alabama | $0.50 per $500 (0.1%) | $2,000 |
How transfer tax fits into the rest of your selling costs
Tennessee has no personal income tax on wages or investment income, so an individual seller’s large tax items are federal: capital gains on the appreciation and depreciation recapture on what you deducted over the years. If the building sits in an LLC or corporation, ask your CPA how Tennessee’s franchise and excise taxes treat the gain, because those taxes reach most entities.
A 1031 exchange can defer the federal gain and recapture if you identify replacement property within 45 days and close within 180. The transfer tax doesn’t go away in an exchange, but in Tennessee it falls on the buyer at each step, so it shows up in your price on the sale and in your closing costs on the purchase.
Run the numbers in order: the buyer’s transfer and mortgage taxes shape the offer, your federal tax shapes what you keep, and the exchange or installment choice shapes when you pay. A clean rent roll and current financials narrow the gap between the first two.
Seller financing can help a buyer who is stretching to cover the transfer and mortgage taxes, and it can spread your federal gain under the installment method. The mortgage tax on the note is the buyer’s cost, not yours.
Selling your Tennessee apartment building to Skyline
Skyline Capital Investments buys apartment buildings with five or more units across Tennessee, from Memphis to Chattanooga, as a direct buyer. We can offer seller-carry terms and work inside your 1031 deadlines.
Send the address and unit count through the form on this page, or call (469) 660-2977. We typically respond within 48 hours.
