About Tennessee State Taxes

Tennessee is one of only 9 states with no personal income tax on wages and salaries. This makes Tennessee one of the most tax-friendly states in the nation, especially for middle and high-income earners.

Tennessee's Tax History

Tennessee previously had a "Hall Tax" on investment income (dividends and interest), but this was completely eliminated in 2021. Now Tennessee has absolutely no tax on:

• Wages and salaries
• Investment income (dividends, interest)
• Capital gains
• Retirement income
• Social Security benefits

How Tennessee Funds State Services

Without income tax, Tennessee relies on:

• Sales Tax: 7% state rate (one of the highest) plus local taxes
• Property Tax: Relatively low property taxes
• Business Taxes: Franchise and excise taxes on businesses
• Excise Taxes: Taxes on specific goods and services

Tennessee Tax Benefits

• No Income Tax: Keep your entire paycheck (minus federal tax)
• Retiree Paradise: No tax on Social Security, pensions, or retirement accounts
• No Investment Tax: Hall Tax eliminated in 2021
• Low Cost of Living: Combined with no income tax = high purchasing power

Frequently Asked Questions

Does Tennessee have state income tax?

No! Tennessee has no state income tax on wages, salaries, or investment income. This makes it one of the most tax-friendly states in America.

What was the Tennessee Hall Tax?

The Hall Tax was a 6% tax on dividends and interest income that existed until 2021. It has been completely eliminated, so Tennessee now has zero income tax on all types of income.

Is Tennessee good for retirees?

Absolutely! Tennessee is one of the best states for retirees because it doesn't tax Social Security, pensions, 401(k) withdrawals, or any other retirement income. Property taxes are also relatively low.

How does Tennessee compare to neighboring states?

Tennessee (0%) is better than all its neighbors: Georgia (5.75%), North Carolina (4.75%), Virginia (5.75%), Kentucky (4.5%), Alabama (5%), Mississippi (5%), Arkansas (4.9%), and Missouri (4.95%).

States With No Income Tax

Tennessee is one of 9 states with no personal income tax:

• Alaska
• Florida
• Nevada
• New Hampshire (only taxes dividends/interest)
• South Dakota
• Tennessee
• Texas
• Washington
• Wyoming

Tennessee vs. High-Tax States

Annual tax savings for various income levels:

• $50,000 income: Save $2,000-$3,000 vs. most states
• $100,000 income: Save $4,000-$10,000 vs. high-tax states
• $200,000 income: Save $10,000-$26,000 vs. CA/NY

Popular Tennessee Cities

• Nashville: Growing tech hub, music city, no income tax
• Memphis: Major logistics hub, affordable living
• Chattanooga: Outdoor recreation, gigabit internet
• Knoxville: College town, low cost of living

Tips for Tennessee Residents

• Maximize your earnings - no state income tax to worry about
• Be aware of 7%+ sales tax when budgeting
• Tennessee is ideal for remote workers and high earners
• Retirees can stretch their retirement income further
• Consider relocating to TN to save on taxes