Tennessee doesn’t have an inheritance tax, but that doesn’t mean you’re completely off the hook. A federal tax applies on estates valued above $13.6 million for individuals or $27.2 million for married couples as of 2024.
While many Americans won’t face this tax, seeking legal advice for estates over $10 million is wise. Here’s what you need to know.
Federal Estate Tax
Perhaps you’ve heard about an inheritance tax from family members or friends, but this is outdated information. There hasn’t been an inheritance tax in Tennessee since 2015. However, there are instances when you may owe a federal tax on the transfer of a person’s estate after death. That said, the majority of Americans are exempt from the federal tax.
That’s because, as of 2024, the federal estate tax only applies to:
- Estates valued above $13.6 million for individuals
- Estates valued over $27.2 million for married couples
The exemption for estates valued below a certain amount can transfer to surviving spouses when the other dies. For example, let’s say Mrs. Smith passed away in 2024. Her $13.6 million exemption can be transferred to her husband, Mr. Smith. When Mr. Smith passes away, Mrs. Smith’s $13.6 million exemption will be added to whatever the personal exemption is for Mr. Smith in the year of his death.
Keep in mind that an estate refers to the entirety of a person’s assets, including:
- Property
- Financial accounts
- Personal items
A person’s federal taxable estate is their gross estate, which may be different from their net worth.
Although the majority of Americans will not have to worry about the federal estate tax, that doesn’t mean you shouldn’t seek legal advice when handling a large estate through the probate process. As a general rule of thumb, it’s best to seek legal advice when inheriting an estate valued at more than $10 million.
Gift Tax
Gift tax is often confused with inheritance tax, but there is one key difference. A gift tax applies when both parties involved in the property transfer are alive.
It’s important to make this distinction because the federal gift tax exclusion is much lower than the inheritance tax exclusion. In 2024, the gift tax exclusion is set at $18,000 per person. For example, if your living parents gave you a home, any amount of the home’s value above $36,000 ($18,000 times two parents) would be subject to federal gift tax.
Like the inheritance tax, Tennessee doesn’t have a gift tax, but the federal tax is far more likely to apply in the case of property transfers.
Do you need help navigating federal inheritance tax in Tennessee? Contact us today to schedule your consultation!
There is no inheritance tax in Tennessee but you may be subject to a federal estate tax. It applies to estates valued over $13.6 million for individuals or $27.2 million for married couples in 2024. The exemption for less valuable estates can be transferred to surviving spouses. While many Americans won’t encounter this tax, seeking legal counsel for estates exceeding $10 million is prudent. Additionally, a federal gift tax could apply to substantial gifts. Consult with an estate attorney for a clear understanding of tax implications.
At Johnson, Murrell, & Associates, we understand that handling a loved one’s estate and bills after their passing is an emotional, stressful experience. Our job is to make your life easier, which means guiding you through the process so you understand what’s to come. To schedule a consultation, call us at 865-453-1091 or schedule an appointment.
