Governor Bill Haslam and Republican leaders in the state legislature have proposed changes to the Tennessee Inheritance Tax as discussed recently in an article in The Tennessean (see full article here). The current Tennessee Inheritance Tax Exemption amount is $1 million with inheritance tax rates ranging from 5.5% – 9.5%. The proposal would raise the exemption to $1.25 million and will continue to raise the exemption incrementally over the next several years to $5 million. The current Federal Estate Tax Exemption amount is also $5 million.
The cut in inheritance tax would cost the state of Tennessee approximately $14 million a year and is paired with a proposal to a reduction in state sales tax on food. Democrats have expressed little opposition to cutting both taxes. Haslam plans to cover the tax loss with rising revenue from other taxes.
The change to the Tennessee Inheritance Tax would keep wealthy residents from leaving Tennessee and avoid the sale of family businesses to pay death taxes.