Key Tax Facts: Tennessee
- No state income tax on wages, salaries, or investment income
- Hall Income Tax on dividends and interest fully repealed in 2021
- Has one of the highest combined sales tax rates in the U.S.
- No state estate or inheritance tax
Estimate Your 2026 Federal Income Tax
Tennessee State Income Tax Overview
Tennessee has no state income tax on wages, salaries, retirement income, or investment income. Like New Hampshire, it once taxed a slice of investment income through the Hall income tax on interest and dividends, but that tax was fully phased out and repealed effective 2021 - so Tennessee now imposes no broad-based individual income tax at all. Because it collects nothing from personal income, Tennessee leans heavily on sales taxes to fund government: its combined state and average local sales tax is among the highest in the nation, commonly around 9.5%, and the state applies sales tax even to groceries at a reduced rate. Residents therefore feel more of the tax burden at the checkout counter than in high-property-tax states. Property taxes in Tennessee are relatively low by national standards. The state has no estate tax and no inheritance tax. For a resident earning $100,000, the state income tax bill is $0 - a meaningful advantage over income-tax states, though the high sales tax offsets part of the benefit for heavy spenders. Social Security, pensions, and 401(k) or IRA withdrawals are all free of state income tax in Tennessee, which makes it popular with retirees. Federal income tax still applies to all taxable income, using the same brackets and rules that apply in every state.
What Is Different About Tennessee for Taxpayers
Deductions and exemptions
Tennessee has no tax on wages or salaries. Its Hall tax on interest and dividends was fully repealed as of 2021, so the state now taxes no personal income and residents file no state return.
Credits worth knowing
There are no personal income tax credits. Tennessee relies instead on the highest average combined sales tax in the country at 9.55%, which applies to groceries at a reduced rate, plus business and excise taxes.
Retirement, capital gains, and other income
Retirement income, Social Security, capital gains, interest, and dividends are all untaxed at the state level. Property taxes are moderate and the state offers a property tax relief program for low-income seniors, disabled homeowners, and veterans.
Rules summarized from the Tennessee Department of Revenue guidance for tax year 2026. Amounts that index annually are described in general terms; confirm the current figure on the official form instructions.
Tennessee Has No State Income Tax
Tennessee has no state income tax. The former Hall Income Tax on dividends and interest was fully repealed in 2021.
As a Tennessee resident, your state income tax is $0. The calculator above estimates your federal income tax, which applies to all U.S. residents regardless of state.
Where Tennessee Stands Among the 50 States
Tennessee is one of 9 states with no tax on wage income (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming). Of the other 41 states, 14 use a flat rate and 27 use graduated brackets, with a median top rate of 5.2%.
On sales tax the picture is different: Tennessee's combined state and average local rate of 9.55% ranks #2 of 50, against a national median of 7.00%. That is the trade-off for skipping an income tax: Tennessee leans harder on consumption taxes.
Tennessee State Tax at Five Income Levels (2026, single filer)
| Taxable income | Tennessee tax | Effective rate | Marginal rate |
|---|---|---|---|
| $40,000 | $0 | 0.00% | 0% |
| $65,000 | $0 | 0.00% | 0% |
| $100,000 | $0 | 0.00% | 0% |
| $150,000 | $0 | 0.00% | 0% |
| $250,000 | $0 | 0.00% | 0% |
Brackets applied directly to the taxable-income figure shown, before Tennessee-specific deductions, exemptions, or credits. Federal tax is separate and comes on top of every row.
Tennessee vs. Its Neighbors on $75,000 of Taxable Income
A Tennessee resident with $75,000 of taxable income pays about $0 in state income tax. Of Tennessee's 8 neighboring states, 0 would tax that income less and 8 would tax it more -- Tennessee is the cheapest state in its region on this measure.
| State | Structure | Tax on $75,000 | Top rate | Sales tax |
|---|---|---|---|---|
| Tennessee (you) | No income tax | $0 | None | 9.55% |
| Arkansas | Rate to 3.9% | $2,528 | 3.9% | 9.44% |
| Kentucky | Rate to 4% | $3,000 | 4% | 6% |
| North Carolina | Rate to 4.25% | $3,188 | 4.25% | 6.99% |
| Mississippi | Rate to 4.4% | $3,300 | 4.4% | 7.07% |
| Missouri | Rate to 4.7% | $3,349 | 4.7% | 8.28% |
| Alabama | Rate to 5% | $3,710 | 5% | 9.22% |
| Georgia | Rate to 5.19% | $3,893 | 5.19% | 7.36% |
| Virginia | Rate to 5.75% | $4,055 | 5.75% | 5.75% |
Frequently Asked Questions -- Tennessee Income Tax
Does Tennessee have a state income tax?
No. Tennessee does not impose a broad-based state income tax on wages, salaries, or most personal income. Tennessee has no state income tax. The former Hall Income Tax on dividends and interest was fully repealed in 2021.
Do I still owe federal income tax as a Tennessee resident?
Yes. Federal income tax applies to all U.S. residents regardless of state. Tennessee residents pay the same federal tax brackets as everyone else -- only your state income tax is $0.
What taxes do Tennessee residents pay instead of income tax?
Tennessee has no state income tax on wages, salaries, retirement income, or investment income. Like New Hampshire, it once taxed a slice of investment income through the Hall income tax on interest and dividends, but that tax was fully phased out and repealed effective 2021 - so Tennessee now imposes no broad-based individual income tax at all. Bec...
How much does living in Tennessee save compared with neighboring states?
On $75,000 of taxable income a Tennessee resident pays $0 in state income tax, while Arkansas would collect $2,528, Kentucky would collect $3,000, North Carolina would collect $3,188, Mississippi would collect $3,300, Missouri would collect $3,349, Alabama would collect $3,710, Georgia would collect $3,893, Virginia would collect $4,055. Sales tax in Tennessee is 9.55%, ranked #2 of 50.
Do I need to file a Tennessee state tax return?
Tennessee does not require a personal income tax return for most residents. You must still file a federal return with the IRS. Check the Tennessee Department of Revenue for any state-specific obligations that may apply.
What is the sales tax rate in Tennessee?
Tennessee's combined state and average local sales tax rate is 9.55%. States without an income tax typically lean more on sales, excise, or property taxes to fund government services -- use our sales tax calculator to see how that adds up.
Understanding Your Tennessee Tax Estimate
Your results combine two separate bills: federal tax owed to the IRS, and Tennessee state tax -- which for residents here is $0. Tennessee has no state filing requirement for personal income; you only file the federal return. For the mechanics of how bracket math actually works -- why your effective rate is almost always lower than your top bracket -- see our marginal vs. effective tax rate guide.
Combined Sales + Income Tax Picture
Tennessee's combined state-plus-average-local sales tax rate is 9.55%. States without an income tax typically lean more heavily on sales, excise, or property taxes to fund government services -- worth factoring in alongside the $0 income tax figure above. Use our sales tax calculator to see how that adds up on a purchase.
Disclaimer: Estimates for educational purposes only. State tax results are approximations based on published bracket data and do not account for all deductions, credits, exemptions, local taxes, or individual situations. Not tax, legal, or financial advice. Consult the Tennessee Department of Revenue or a qualified tax professional for guidance specific to your situation.