Tennessee has one of the lowest property tax rates in the United States. Homeowners in Tennessee pay just $1,024 median annual property tax, less than half the national average, making it the ninth-lowest in the country in dollar value. However, this isn’t true across the state. In Memphis, the most populous city of Tennessee, tax rates are twice the state average.

Calculating Tennessee Property Taxes

To calculate the property tax rate for property in Tennessee, the following factors need to be considered: the property's appraised value, its assessment ratio, its assessed value and the county's tax rate.

A property's appraised value is determined by the county property assessor. It is meant to represent the fair market value of a given property. The assessment ratio is determined based on which class of property it falls under; residential and farm properties have a rate of 25%, while commercial and industrial properties have a 40% rate. The assessed value is the product of multiplying the appraised value by the assessment ratio.

The appraised value is first multiplied by its assessment ratio to get the assessed value. The assessed value is then multiplied by the tax rate assigned to that county, producing the amount needed to pay the property tax.

The property tax can be determined by computing:

PROPERTY TAX = (APPRAISED VALUE x ASSESSMENT RATIO) x TAX RATE

Or simply:

PROPERTY TAX = ASSESSED VALUE x TAX RATE

Average Property Taxes

The average effective property tax rate in Tennessee for a home priced at the state median value is 0.75%. Actual rates per county may vary widely. The county with the highest effective property tax rate is Shelby, at 1.5%, twice the state average. Shelby is followed by Davidson (0.99%), Hamilton (0.88%), Marshall (0.88%) and Montgomery (0.87%).

Shelby residents pay the second-highest median property taxes in the state at $1,985, and Davidson has the third-highest median property tax at $1,655. The highest median property taxes come from Williamson County, at $2,026 annually. While Williamson’s 0.6% rate is lower than the state average, the disparity comes from the median property value in that county, which is the highest in the state at $334,900.

Shelby County contains Memphis, and Davidson County contains Nashville – the two most populated cities in the state. Consequently, Nashville had the highest gross domestic product (GDP) in the state at $106.9 billion in 2014. Memphis had the second-highest GDP with $69.8 billion.

Tennessee Compared to the National Average

With its 0.75% rate, Tennessee falls on the lower end of the list of the U.S. property tax rates and is significantly lower than the 1.13% U.S. average. It ranks 40th in terms of average effective property tax rate among all the states and the District of Columbia.

Tennessee Compared to Neighboring States

Compared to its neighbor states, Tennessee also has a relatively low effective property tax rate. Only Arkansas (at 0.43%) and Alabama (at 0.62%) have lower rates. The median taxes in dollars for these two states are also much lower – $673 in Arkansas and $538 in Alabama for their respective median home values. This is because the median home prices are $108,700 in Arkansas and $123,800 in Alabama, which are both lower than Tennessee’s $139,900.

Tennessee has the fourth-highest median home value and has the fifth-highest tax rate (per state median home value) among its eight neighbors: Alabama, Arkansas, Mississippi, Kentucky, North Carolina, Missouri, Georgia and Virginia.

Tennessee's neighbor states with the most similar median home values are Missouri at $136,700 and Georgia at $148,000. While these two states also have effective property tax rates lower than the U.S. average, they are still higher than in Tennessee, at 1% for Missouri and 0.96% for Georgia. This puts the median dollar values of their property taxes at $1,372 for Missouri and $1,417 for Georgia.

Conclusion

Compared to the rest of the U.S., most of Tennessee has relatively low tax rates, with the exception of Shelby County, which is the only part of the state where the rates are slightly higher than the national average. Tennessee also has low rates compared to its neighbors, even those with similar median home values.

Texas Property Tax Guide

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