Tennessee does not have a state inheritance tax

Tennessee has no inheritance tax — a tax on money or property you receive from someone who has died. You will not owe Tennessee state tax on an inheritance, regardless of the amount or your relationship to the person who left it to you.

This is different from the federal estate tax, which applies only to very large estates (those worth more than $13.61 million in 2024, though this threshold changes yearly). Most Tennessee residents will never encounter either tax because their estates fall well below the federal limit.

Tennessee also has no state income tax on wages, retirement income, or investment gains, which means inherited money is treated the same way as any other income you receive — with no additional state tax burden.

Key Takeaways

  • Tennessee does not tax inheritances at the state level, so you owe no tax to Tennessee on money or property you receive from a will or trust.
  • The federal estate tax only applies to estates worth more than $13.61 million (as of 2024), and that threshold is adjusted each year by the IRS.
  • Tennessee has no state income tax, so inherited cash or investment income is not taxed by the state once you receive it.
  • If you inherit property in Tennessee, you will not owe state tax on the inheritance itself, though property taxes on real estate continue as normal.

How federal estate tax differs from state inheritance tax

An estate tax is paid by the person's estate before money is distributed to heirs. An inheritance tax is paid by the person who receives the inheritance. Tennessee has neither, but the federal government has an estate tax that applies only to the largest estates.

The federal estate tax threshold for 2024 is $13.61 million. If someone's total estate is below that amount, no federal estate tax is owed. The executor or trustee handling the estate does not need to file a federal estate tax return unless the estate exceeds this limit. This threshold is set to drop significantly after 2025 unless Congress changes the law, so the rules may shift depending on when someone dies.

Even if an estate is large enough to owe federal tax, Tennessee itself collects nothing. The tax goes to the IRS, not to the state.

What happens to inherited property in Tennessee

When you inherit real estate in Tennessee, you do not owe tax on the inheritance itself. However, property taxes continue. The property will be reassessed for tax purposes, and you become responsible for paying the annual property tax bill to your county.

If you inherit a house, the county assessor may adjust the assessed value when ownership changes. You should contact your county assessor's office to understand what your property tax bill will be going forward. Property tax rates vary by county and by the type of property.

Inherited vehicles and other personal property do not trigger state tax in Tennessee either, though you will need to register a vehicle in your name with the Tennessee Department of Revenue if you plan to drive it.

States that do have inheritance taxes

Twelve states currently tax inheritances: Iowa, Kentucky, Maryland, Nebraska, New Jersey, Pennsylvania, and six others. These states tax the person who receives the inheritance, not the estate itself. The tax rate and the amount you owe depend on your relationship to the person who died and the size of what you received.

In states with inheritance tax, spouses and children often pay little or nothing, while more distant relatives or unrelated people may owe tax on larger amounts. Tennessee is not one of these states, so if you inherit from someone in Tennessee or someone who lived in Tennessee, you will not owe Tennessee inheritance tax.

If you inherit from someone who lived in a state with an inheritance tax, you may owe tax to that state depending on where the person lived and where the property is located. The rules vary by state.

How to report inherited money on your taxes

Inherited cash itself is not taxable income to you in Tennessee or to the federal government. You do not report the inheritance on your state or federal income tax return as income.

However, if the inherited money earns interest or investment gains after you receive it, that income is taxable. For example, if you inherit $50,000 and deposit it in a savings account, the interest you earn is taxable income. If you inherit stock and it increases in value, the gain is taxable when you sell it.

You will receive tax documents from the estate or financial institution showing any income earned after the inheritance was transferred to you. Report this income on your federal tax return. Tennessee has no state income tax, so you will not file a state income tax return.

What to do if you are inheriting property or money

If you are named in a will or trust, the executor or trustee will contact you with information about what you are inheriting and when you will receive it. You do not need to take action to avoid Tennessee inheritance tax — there is none to avoid.

If you inherit real estate, you will need to transfer the deed into your name. This is usually handled by the executor or an attorney managing the estate. Once the deed is transferred, contact your county assessor to understand your property tax obligations.

If you inherit a retirement account like an IRA or 401(k), the financial institution holding the account will provide instructions on how to claim it. Distributions from these accounts may be taxable as income, depending on the type of account and your relationship to the person who died. The institution will send you tax documents showing what is taxable.

Frequently Asked Questions

Do I owe Tennessee tax if I inherit money from someone who lived out of state?

No. Tennessee has no inheritance tax, so you owe nothing to Tennessee regardless of where the person lived or where the money is located. However, if the person lived in a state with an inheritance tax, you may owe tax to that state depending on the state's rules and your relationship to the deceased.

What if I inherit a house in Tennessee — do I owe tax on it?

You do not owe tax on the inheritance itself. However, you become responsible for property taxes once the deed is in your name. Contact your county assessor to learn what your annual property tax bill will be.

Is inherited money considered income for Tennessee taxes?

No. The inheritance itself is not income and is not taxed by Tennessee or the federal government. If the inherited money earns interest or investment gains after you receive it, that income is taxable, but the original inheritance is not.

What is the federal estate tax threshold for 2024?

The federal estate tax applies only to estates worth more than $13.61 million in 2024. This threshold changes each year. Most Tennessee residents will not encounter federal estate tax because their estates fall below this limit.

Do I need to report an inheritance on my tax return?

You do not report the inheritance itself as income. However, if you inherit a retirement account or if the inherited money earns income after you receive it, you will receive tax documents showing what is taxable. Report that income on your federal tax return.