Does Tennessee Have an Inheritance Tax?

Tennessee does not impose an inheritance tax, which means that if you inherit assets from a Tennessee resident, the state will not tax your inheritance. The state also does not have an estate tax, a tax levied on a deceased person’s overall estate before assets are distributed.

The absence of these taxes applies regardless of the value of the inherited assets or the heir’s familial relationship to the deceased. Heirs can receive property, cash, or other assets without the concern of a state-level tax diminishing the value of their inheritance.

The Repeal of the Tennessee Inheritance Tax

While Tennessee is currently free of inheritance and estate taxes, this was not always the case. For many years, the state levied an “inheritance tax,” which functioned more like an estate tax imposed on the total value of a decedent’s estate if it exceeded a certain exemption amount.

The shift away from this tax began with legislation passed in 2012 that initiated a gradual phase-out. The exemption amount was increased incrementally, reducing the number of estates subject to the tax. This process culminated on January 1, 2016, when the Tennessee inheritance tax was fully repealed.

This repeal was a significant change in the state’s tax policy, intended to encourage residents to remain and retire in Tennessee. For any individual who died on or after that 2016 date, their estate is not subject to any Tennessee death-related tax. An estate of a person who died before 2016 that has not yet been settled would still be subject to the laws in effect at the time of death.

Federal Estate Tax Considerations

Although Tennessee does not have its own estate tax, the federal government does. This tax applies to the transfer of property at death and is calculated based on the value of the deceased’s “gross estate,” which includes assets like cash, stocks, real estate, and business interests.

The federal estate tax affects only a very small percentage of the population due to a high exemption amount. For 2025, the federal estate tax exemption is $13.99 million per individual. This means an individual can pass away with assets valued up to this amount without incurring any federal estate tax. For married couples, this exemption can be combined, allowing them to pass on nearly $28 million tax-free with proper planning.

If an estate’s value exceeds the exemption, a tax is owed only on the amount above the threshold, with rates that can reach up to 40%. The current high exemption amount is a result of the Tax Cuts and Jobs Act of 2017 and is scheduled to be reduced significantly at the end of 2025 unless Congress acts to extend it. This potential change makes long-term estate planning a consideration.

Inheritance Taxes for Out-of-State Heirs

A common point of confusion arises when an heir lives in a different state than the deceased. While the estate of a Tennessee resident is not subject to a state tax, the beneficiary may have a tax obligation to their own state of residence. Tax liability is determined by where the heir lives, not where the deceased lived.

Currently, a handful of states impose an inheritance tax. As of 2025, these states include:

• Kentucky
• Maryland
• Nebraska
• New Jersey
• Pennsylvania

Iowa’s inheritance tax is fully eliminated as of January 1, 2025. Each of these states has its own rules, with tax rates often depending on the heir’s relationship to the decedent.

For example, most of these states exempt spouses from the tax, and some provide exemptions for children and other close relatives. More distant relatives or unrelated beneficiaries often face higher tax rates. If you are an heir living in one of these states, you should investigate your state’s specific inheritance tax laws to understand your potential obligations.