Nashville property tax is a very attractive element of the city. Residents and businesses are drawn to the low rate of $4.516 per $100 of property, much lower than many other major cities. For example, residents in Memphis, Nashville’s neighbor to the west, pay a rate of $7.77.
With a growing economy, low cost of living, and affordable housing, Nashville is a great spot to look at if you’re planning to move, and the property tax rate is some very delicious icing on the city’s towering cake.
How is property tax calculated in Tennessee?
Property taxes in the state of Tennessee use the following components:
- Appraised Value – The county property assessor determines the value of a property by looking at property sales on a neighborhood-to-neighborhood basis. In 1989, the state began requiring counties to conduct this assessment every four years. The next assessment in Nashville is scheduled for 2017.
- Assessment Ratio – State law has established that 25 percent of the appraised value is taxed for residential and farm properties, therefore the assessment ratio is 25 percent. So, for a $100,000 house, $25,000 would be taxed. The assessment ratio increases to 40 percent for commercial and industrial properties.
- Assessed Value – The assessed value is the result of the appraised value times the assessment ratio.
- Tax Rate – In 2015, the property tax rate in Nashville was $4.516 per $100 assessed value for properties in the Urban Services District. That decreases to $3.924 for the General Services District. This system is explained below.
- Total Property Tax Bill – The total bill is calculated by multiplying the assessed value by the tax rate.
Why does Nashville have two different tax rates?
Unlike Memphis and Shelby County, Nashville and Davidson County have a consolidated government, so there is no county tax rate to add to the city rate. However, Nashville does have a two-tiered system that helps distribute the burden of the tax and government services equally to rural and urban parts of the county.
The Urban Services District, or USD, is technically the urban part of Nashville. The tax rate is in this area is $0.592 higher than the General Services District. USD neighborhoods pay higher tax for city services like additional police and fire protection, street lighting, sidewalks, and garbage pickup. The USD includes East Nashville, Antioch, Bordeaux, Donelson, Inglewood, West Meade, Hillwood, Bellevue, and more.
The General Services District, or GSD, includes areas that have not been annexed into the USD. This area was originally meant to cover the more rural areas of Nashville, but annexation has not kept up with urbanization. In the ‘60s, when this division was first established, the GSD included everything in Davidson County except for 72 miles extending from East Nashville to a little bit west of The Nations. Now, the area includes more urban “satellite cities” like Forest Hills, Belle Meade, Oak Hill, and Berry Hill. These incorporated municipalities pay the GSD rate, but may also be required to pay an additional city rate if the city government has put that into place.
The original idea of the split was that the GSD would not receive the same services that the USD gets. While GSD neighborhoods still do not have curbside recycling, trash pick-up, or street lights provided by the city, most areas do receive USD-level police and fire protection, water and sewer services, and street cleaning. Officials and legislators have been speculating for years that the two-tiered system will soon be a relic of the past as Nashville continues to grow and urbanize.
What is the Certified Tax Rate?
State law requires that a Certified Tax Rate (CTR) be set after each reappraisal. To prevent local governments from a potential windfall in revenues based on a reappraisal, “The Truth in Taxation Law” holds that the CTR cannot result in more revenue than in the previous tax year, except on new construction. This means that a rise in assessed value after the 2017 reappraisal would not necessarily result in an increase in the tax rate.
In fact, this law has resulted in a decrease of Nashville’s tax rate as recently as 2013. The decrease occurred because the 2013 reappraisal revealed an aggregate real estate value increase of 5.3 percent. Since assessed value when up, people were paying more in taxes than the previous year, so the county had to make the adjustment to prevent a windfall. It’s interesting to note that this decrease came a year after Mayor Karl Dean pushed through the first property tax hike in seven years.
How does Nashville property tax rate compare to other major cities?
Nashville has an attractive property tax rate compared to other major cities, largely due to its consolidated government. The lack of income tax in the state means that property taxes are a bit higher than in states that tax income, but Davidson County is at the bottom of the list comparing major cities in Tennessee. Let’s take a look:
- Memphis: $7.77 per $100 assessed value
- Knoxville: $5.0457
- Chattanooga: $5.074
- Nashville/Davidson County: $4.516
While home values are increasing at historic levels in Nashville, the CTR keeps tax rates in check, so the rate itself is unlikely to rise. Though residents will likely soon pay more in taxes than they have in the past — especially in the hottest areas of the city — they will be doing so only because their houses have risen in value. And if there are good reasons for tax increases, that’s definitely one of them.
2 Point Highlight
With a growing economy, low cost of living, and affordable housing, Nashville is a great spot to look at if you’re planning to move, and the property tax rate is some very delicious icing on the city’s towering cake.
While home values are increasing at historic levels in Nashville, the CTR keeps tax rates in check, so the rate itself is unlikely to rise.
