0% State Income Tax
Tennessee eliminated ALL income taxes in 2021. You keep 100% of your income (minus federal tax). This saves middle-income earners $2,500-$3,600+ per year compared to surrounding states!
Tennessee's No Income Tax Victory
On January 1, 2021, Tennessee became one of only 9 states with no income tax at all. Tennessee eliminated the "Hall Tax" (a 6% tax on investment income), making the state 100% income tax-free.
- $0 state tax on wages and salaries
- $0 state tax on retirement income (Social Security, 401k, IRA, pensions)
- $0 state tax on investment income (dividends, interest, capital gains)
- $0 state tax on self-employment income
- $0 state tax on bonuses, commissions, tips
- No state tax forms to file at all!
How Much Do You Save vs Neighboring States?
On $75,000 income, here's what you pay in Tennessee vs surrounding states:
| State | Tax Rate | Annual State Tax | TN Savings |
|---|---|---|---|
| Tennessee | 0% | $0 | — |
| Georgia | 5.19% flat | ~$3,270 | Save $3,270/year |
| North Carolina | 4.25% flat | ~$2,646 | Save $2,646/year |
| Virginia | Up to 5.75% | ~$3,595 | Save $3,595/year |
| Kentucky | 4% flat | ~$3,000 | Save $3,000/year |
| Alabama | Up to 5% | ~$3,000 | Save $3,000/year |
| Mississippi | 4.4% flat | ~$2,800 | Save $2,800/year |
| Arkansas | Up to 3.9% | ~$2,200 | Save $2,200/year |
| Missouri | Up to 4.95% | ~$2,900 | Save $2,900/year |
Long-Term Savings:
If you earn $75,000/year in Tennessee vs Georgia:
- Annual savings: $3,270
- 10-year savings: $32,700
- 20-year savings: $65,400
- 30-year career savings: $98,100+
That's a down payment on a house, retirement fund, or generational wealth!
What Taxes Does Tennessee Have?
Tennessee funds its government through other taxes:
Sales Tax
- State rate: 7%
- Total rate (with local): 9-10% depending on city
- Nashville: 9.25%, Memphis: 9.25%, Knoxville: 9.25%, Chattanooga: 9.25%
- Groceries ARE taxed in Tennessee (4% state + local)
Property Tax
- Varies by county
- Average effective rate: ~0.7% of home value
- Lower than many states (TX: ~1.8%, IL: ~2.3%, NJ: ~2.5%)
Excise Taxes
- Gas tax, alcohol tax, tobacco tax, etc.
- Standard for most states
Is Tennessee's No-Tax Status Permanent?
Tennessee's constitution makes it very difficult to add an income tax:
- 2014 Constitutional Amendment: Requires supermajority + voter approval
- Political Culture: Strong conservative/libertarian opposition to income tax
- History: Tennessee resisted income tax for decades, finally eliminated Hall Tax in 2021
While nothing is 100% guaranteed, Tennessee's no-tax status is about as secure as it gets.
Best Places to Live in Tennessee (By Income Level)
For Income $30,000 - $50,000
Recommended: Clarksville, Johnson City, Kingsport, Jackson
Why: Low cost of living, 0% state tax maximizes every dollar
Housing: $800-$1,200/month for 2BR
For Income $50,000 - $80,000
Recommended: Knoxville, Chattanooga, Memphis suburbs, Murfreesboro
Why: Good job markets, affordable living, no income tax
Housing: $1,200-$1,800/month
For Income $80,000 - $150,000
Recommended: Franklin, Brentwood, parts of Nashville, Germantown (Memphis)
Why: Excellent schools, professional jobs, 0% tax amplifies income
Tax Savings: On $120k, save ~$5,000-6,000/year vs Georgia/NC
For Income $150,000+
Recommended: Belle Meade (Nashville), Brentwood, Franklin, Collierville
Why: Premium neighborhoods, no income tax = massive savings
Tax Savings: On $200k+, save $10,000-15,000/year vs high-tax states
Tennessee for Retirees
Tennessee is consistently ranked as one of the best states for retirement:
- $0 tax on Social Security
- $0 tax on 401k/IRA withdrawals
- $0 tax on pension income
- $0 tax on investment income (dividends, interest)
- Low cost of living
- No estate tax or inheritance tax
- Moderate property taxes (~0.7%)
If you retire in Tennessee vs California with $60k annual retirement income, you save ~$3,000/year in state taxes. Over a 20-year retirement, that's $60,000!
When Moving to Tennessee Makes Sense
- You're moving from ANY state with income tax (instant savings)
- You're retiring (0% on all retirement income)
- You work remotely for a company in a high-tax state
- You value low cost of living + no taxes
- You want Southern culture + financial freedom
- You're a musician/artist (Nashville, Memphis)
- You're a young professional wanting to build wealth quickly
- Higher sales tax (9-10% vs 5-7% elsewhere)
- Groceries are taxed (not common in other states)
- Hot, humid summers
- Some areas have lower-rated public schools (research specific districts)
Tax Filing in Tennessee
Since Tennessee has no income tax, you only file federal taxes. No Tennessee state return needed!
- Cash App Taxes - FREE
- FreeTaxUSA - FREE
- VITA - FREE (income under $64,000)
Nashville: The No-Tax Tech/Music Hub
Nashville has become a major destination for:
- Tech workers: Amazon, Oracle, AllianceBernstein relocated here
- Music industry: Country music capital + growing indie scene
- Healthcare: HCA Healthcare, Community Health Systems HQs
- Remote workers: From CA, NY, IL escaping high taxes
On a $150k tech salary, moving from San Francisco to Nashville saves ~$13,000/year in state tax alone!
State rankings: Lowest Tax States 2025 | Best States for Retirees | States with Flat Tax | Highest Tax States 2025
Related Resources
- Georgia Tax Calculator - Compare TN vs GA (5.19%)
- North Carolina Tax Calculator - Compare TN vs NC (4.25%)
- Virginia Tax Calculator - Compare TN vs VA
- All State Tax Calculators
- All 9 No-Tax States