Tennessee State Income Tax Guide (2026)

Tennessee is one of nine states with zero personal income tax. The other 8 are Alaska, Florida, Nevada, New Hampshire, South Dakota, Texas, Washington, and Wyoming. (New Hampshire formerly taxed dividends and interest under the I&D Tax, similar to Tennessee's repealed Hall Tax, but NH completed its own phase-out in 2025.) Whatever you earn in Tennessee — W-2 wages, 1099 contractor income, K-1 partnership income, business income, dividends, interest, capital gains, retirement distributions — the state doesn't touch it.

The previous Hall Income Tax was a 6% state tax on dividend and interest income that applied for over a century (originally enacted 1929). The phased repeal: 5% in 2017, 4% in 2018, 3% in 2019, 2% in 2020, 1% in 2021, fully eliminated effective tax year 2022. So Tennessee residents pay zero state income tax of any kind starting 2022. The repeal was bipartisan and broadly popular.

Critically, Tennessee's constitutional protection is appreciably stronger than most no-income-tax states. Article II, Section 28 of the Tennessee Constitution bars the legislature from imposing a state income tax on wages and salaries (an amendment ratified by voters in 2014). Repealing this protection and reintroducing an income tax would require a constitutional amendment — a multi-year legislative + voter ratification process. Plan around no income tax for the foreseeable future.

What Tennessee taxes instead: 7% state sales tax (the highest state sales tax in the country) plus 1.5-2.75% local option sales tax. Combined rates 9.25-9.75% in major metros. 0.48% statewide-average property tax. Business franchise tax (0.25% of net worth, $100 minimum). The combined structure is appreciably regressive — sales tax hits consumption-heavy lower-income households harder than HNW residents. Most TN residents earning $100K+ end up appreciably ahead on total state-and-local tax burden versus peer income tax states.

Nashville has been one of the highest-profile US corporate-relocation destinations of the past decade. Oracle's Nashville Yards campus (announced 2021, 8,500 promised jobs) was the highest-profile recent move. AllianceBernstein relocated its global HQ from Manhattan to Nashville in 2018-2020. Mitsubishi Motors North America HQ moved from Cypress CA. Bridgestone Americas, Dollar General (Goodlettsville HQ), Asurion, Mars Petcare, Caterpillar Financial all anchor the corporate-HQ scene. HCA Healthcare HQ has been Nashville-based since the 1960s. Vanderbilt University Medical Center, LifePoint Health, Community Health Systems all anchor the healthcare cluster. The music industry — Sony Music Nashville, Warner Music Nashville, Universal Music Group Nashville, BMI, ASCAP — anchors Music Row.

The Memphis economy is fundamentally different — logistics-dominant. FedEx Corporation HQ (the largest private employer in Memphis), AutoZone HQ, International Paper HQ (announced relocation to Memphis in 2024-2025), ServiceMaster, Smith & Nephew. The Memphis economy depends heavily on FedEx's continued health — a single-point-of-failure that Memphis hasn't fully diversified away from. Memphis cost of living remains among the lowest of any major US metro.

The structural trap for TN-resident remote workers: New York's convenience-of-employer rule. If you work remotely for a New York-based employer from Tennessee, NY can claim your wages as NY-source income unless your employer formally requires (in writing) that you work from TN for the employer's necessity (not your convenience). For NY-employer-TN-resident remote workers, this means filing a NY non-resident return and paying NY state tax on the wages — appreciably eroding the no-income-tax pitch for this specific configuration. Tennessee has no income tax to credit against, so the NY tax is a pure additional cost. The same trap applies to remote workers for employers in Delaware, Connecticut (limited), Massachusetts (limited), Nebraska, and Pennsylvania (limited). Talk to a CPA if your remote-work setup involves an employer in any of these states.

Four scenarios that cover most readers. Find the one closest to you. If none match, the calculator at the top is for you.

Tennessee property tax statewide effective average is about 0.48% on market value — among the lowest in the country. Approximate effective rates by county on a primary residence: Davidson (Nashville) 0.62-0.75%, Williamson (Franklin/Brentwood/Nolensville) 0.50-0.65%, Knox (Knoxville) 0.55-0.65%, Hamilton (Chattanooga) 0.60-0.75%, Shelby (Memphis) 1.20-1.35% (the structural outlier), Rutherford (Murfreesboro) 0.55-0.70%, Wilson (Lebanon/Mt. Juliet) 0.50-0.65%, Sumner (Hendersonville/Gallatin) 0.50-0.65%.

Shelby County's 1.20-1.35% effective property tax is the structural outlier — driven by Memphis school-funding mechanics and the city's narrower tax base relative to its population needs. A $300K Memphis primary residence pays appreciably more in property tax than a $300K equivalent in Knox or Davidson County. The Memphis-vs-suburban-Memphis (Germantown, Collierville, Bartlett, Cordova) decision has appreciable tax math implications driven primarily by this property tax differential.

Sales tax is where Tennessee's revenue model bites. Combined state + local rates: Nashville 9.25%, Memphis 9.75%, Chattanooga 9.25%, Knoxville 9.25%, Franklin 9.75%, Memphis suburbs 9.25-9.75%. Second-highest combined sales tax rates in the country. The structural implication: consumption-heavy households (younger families, lower-income workers) feel the sales tax appreciably more than HNW residents or retirees who consume less relative to income. TN offers an annual back-to-school sales tax holiday (typically late July, exempts clothing, school supplies, and computers under specified thresholds) and occasional gun safety / disaster preparedness holidays. Senior Property Tax Freeze programs available in most TN counties — apply through your county trustee.

No state real estate transfer tax beyond a small recording fee. The OBBBA SALT cap raise to $25K softens the deductibility hit on annual property tax for high earners. Most TN filers don't approach the SALT cap on property tax alone given the low effective rates.

If you're earning $100K+ in TN and you're not doing most of these, you may be leaving real money on the table. None of this is exotic. Most of it is 30 minutes of setup once a year and discipline the rest of the year.

Tennessee is one of the most tax-favorable states in the country for working professionals and retirees alike. Zero state income tax on wages, salaries, investment income, and retirement income — with constitutional durability via Article II Section 28 — plus among-the-lowest property tax effective rates in the country (~0.48% statewide). The structural offset is the second-highest combined sales tax in the country (9.25-9.75% in major metros), which is appreciably regressive. For most professionals and retirees, the combined state-and-local tax burden appreciably beats peer income-tax states once you factor in the property tax advantage.

Run your numbers in the calculator above. The TN state line is $0 — your only state-and-local tax exposure is property tax and sales tax.

Add property tax for your specific county using the Tennessee Comptroller's property tax lookup. Memphis (Shelby County) is the structural outlier — verify your bill carefully before closing on a Memphis-area property. For Williamson, Knox, Davidson, and Hamilton counties, the rates are appreciably more uniform.

If you're a remote worker for an out-of-state employer, verify with a CPA whether your employer's state has a convenience-of-employer rule (NY especially; also CT, DE, MA, NE, PA). The biggest tax mistake most TN residents make isn't paying too much state tax — it's missing the Senior Property Tax Freeze (for retirees 65+) or assuming a remote work arrangement is automatically TN-only without verifying the employer-state convenience-of-employer claim.