One of the questions I get asked most often by prospective buyers is, “How much will the property tax be on this land?”

While the answer depends on what county in Tennessee the land is in, the process in calculating the tax is pretty easy.

To begin, we must use four components:

The appraised value is how much the county tax assessor determines the property is worth (its fair market value) – let’s say for example: $100,000.

The assessment ratio is established by state law. For farm and residential (in Tennessee), it is 25% of the appraised value.

The assessed value is calculated by multiplying the appraised value by the assessment ratio [25% x $100,000 (.25 x 100,000) ]… which is $25,000.

The tax rate is set by the county commission. In this case, let’s say the county property tax rate is $2.04 for every hundred dollars of assessed value.

To figure the tax, we divide the assessed value ($25,000) by 100 (because the tax rate is per hundred dollars) which is 250.  Then we multiply the 250 by the tax rate (2.04).  The property tax would be $510.00.

$25,000/100 = 250 x $2.04 = $510.00

$25,000 x .0204 = $510.00

When trying to determine what the property tax will be on a prospective purchase, there will be two variables.  The first is the appraised value and the second is the tax rate.

It is a pretty safe bet that the appraised value of the property will be at or above the asking price.  The tax rate will depend on what county the land is in.

Use this fill-in-the-blank formula for calculating the tax in Tennessee

_____________ x    _______.25___=     ____________
appraised value       assessment ratio     assessed value

__________/100 = _________x ___________= _____________
assessed value                                       tax rate               property tax

People are delighted when they learn that salaries, wages, Social Security, IRAs, and pension incomes are not taxed in Tennessee. This is quite an added bonus to its low property taxes.  State sales tax statewide is 7% for tangible property and 6% on food and food ingredients.  Prescription drugs are exempt.  Counties and cities usually add another 1.5% to 2.75% to the total of either rate.