Legal Question in Real Estate Law in Tennessee

You should consult with a tax advisor to confirm, but if your dad pays off your mortgage, that likely will be considered considered a gift for tax purposes and thus a gift tax may be incurred.

Gift tax is calculated at both the state and federal level. You currently can gift up to $13,000.00 per year to a person without incurring a gift tax - this is called the annual gift exclusion, and gifts up to this amount incur no tax at the federal or state level in Tennessee.

Gifts made over the exclusion amount do incur a gift tax in Tennessee - the amount in excess of the exclusion amount is taxed at a rate between 5% - 16%. At the federal level, a donor (the person making the gift) can gift up to $1,000,000.00 in his/her lifetime gift-tax free, so it may be that this gift from your father would incur no federal gift tax. However, this depends upon all relevant facts and should be discussed with a tax advisor.