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HEAD-TO-HEAD TAX COMPARISON · 2026

COUNTRY A Tennessee VS COUNTRY B Indiana

Side-by-side analysis of income tax, effective rates, and take-home pay for Tennessee and Indiana in 2026.

Daniel · CountryTaxCalc Updated August 2026 Tax Comparison 2026
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OVERVIEW
Tennessee has no state income tax at all — a constitutional prohibition confirmed by the full repeal of the old Hall Tax on investment income in 2021 — while Indiana levies a flat 2.95% state rate. At $100,000 income, that means Tennessee saves $2,921/year over Indiana's state-only tax bill, and the gap grows to $7,346/year at $250,000. The real Indiana figure is often higher: all 92 of its counties add a separate mandatory local income tax ranging from 0.5% to 3.38% on top of the state rate, which isn't reflected in the state-only headline figures above — in a high-county-tax area, Tennessee's advantage can be meaningfully larger. Indiana pushes back with a much lower combined sales tax (7.0% vs Tennessee's 9.55%, among the highest in the nation), though Tennessee actually edges out Indiana slightly on property tax too (0.52% vs 0.76%). Both states exempt Social Security; Indiana adds a modest $4,000 deduction for other retirement income for filers 65 and older, while Tennessee taxes no retirement income of any kind.
Section 01

The Big Picture

Top-line rates and effective take-home for a typical earner — including income tax, social contributions, and applicable surcharges.

🎸
COUNTRY A
Tennessee
TAX RATE
0%
No Income Tax

Constitutional prohibition on taxing wages and investment income (Hall Tax fully repealed 2021)

🏁
COUNTRY B
Indiana
TAX RATE
2.95%
Flat Tax (State)

Flat 2.95% state rate; all 92 counties add a separate mandatory local tax of 0.5-3.38%

TYPICAL ANNUAL DIFFERENCE
Moving from Indiana → Tennessee at $100,000
$2,921

That's $243/month back in your pocket

Section 02

Tax Savings by Income Level

Net take-home after all income tax, social contributions, and surcharges — for a single employee with no dependents.

GROSS INCOME
🎸 TN TAX
🏁 IN TAX
SAVINGS
10-YEAR
$50,000
$0
$1,446
$1,446
$14,460
$75,000
$0
$2,183
$2,183
$21,830
$100,000
$0
$2,921
$2,921
$29,210
$150,000
$0
$4,396
$4,396
$43,960
$250,000
$0
$7,346
$7,346
$73,460
💡

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🎸

Tennessee Pros & Cons

+ PROS
  • Zero income tax: Save $2,921/year on $100k, $7,346/year on $250k versus Indiana's state-only rate — more if compared to a high-county-tax Indiana area
  • No retirement tax whatsoever: $0 on Social Security, pensions, and 401(k)/IRA withdrawals
  • Slightly lower average property tax: roughly 0.52% versus Indiana's roughly 0.76%
  • Nashville boom: fast-growing tech and healthcare hub with no state income tax to complicate relocation math
  • No state estate or inheritance tax
− CONS
  • Much higher combined sales tax: roughly 9.55% (among the highest in the US) versus Indiana's roughly 7.0%
  • Hot, humid summers compared to Indiana's more moderate Midwest climate
  • Limited public transit in most Tennessee metros compared to some Indiana cities
  • Heavier reliance on sales tax revenue can mean it applies to groceries in ways income-tax states typically avoid
🏁

Indiana Pros & Cons

+ PROS
  • Lower combined sales tax: roughly 7.0% versus Tennessee's roughly 9.55%
  • Social Security is fully exempt, plus a $4,000 deduction for other retirement income for residents 65 and older
  • Indianapolis growth: expanding logistics, insurance, and life-sciences job market
  • Property tax capped at 1% of assessed value for owner-occupied homesteads
− CONS
  • Income tax: 2.95% state rate alone costs $1,446 to $7,346/year more than Tennessee at the income levels shown
  • Hidden county tax: all 92 counties add a separate mandatory 0.5-3.38% local income tax on top of the state rate — not included in the headline state-only figures — pushing the real combined rate to 3.45-6.33%
  • Slightly higher average property tax: roughly 0.76% versus Tennessee's roughly 0.52%
  • No broad exemption for pension or 401(k)/IRA withdrawals beyond the modest $4,000 deduction for those 65 and older
FAQ

Frequently Asked Questions

How much will I save staying in Tennessee vs moving to Indiana?

On $100,000 income, Tennessee saves $2,921/year versus Indiana's state-only 2.95% rate. Over 10 years: $29,210. On $250,000 income: $7,346/year ($73,460 over 10 years). The real savings are often larger, because Indiana's counties add a separate 0.5-3.38% local income tax that isn't included in these state-only figures.

Does Indiana really only charge 2.95% income tax?

That's the state-only rate. All 92 of Indiana's counties add a separate mandatory local income tax on top, ranging from 0.5% to 3.38%, bringing the real combined rate to roughly 3.45% to 6.33% depending on where you live. Tennessee has no state or local income tax at all, so this add-on doesn't affect the comparison from Tennessee's side.

Which state has lower property tax, Tennessee or Indiana?

Tennessee has the slightly lower average effective property tax rate at roughly 0.52%, compared to Indiana's roughly 0.76%. On a $400,000 home, that's about $2,080/year in Tennessee versus $3,040/year in Indiana — a modest savings of about $960/year on top of Tennessee's income-tax advantage.

Which state has lower sales tax?

Indiana has the lower combined sales tax at roughly 7.0%, compared to Tennessee's roughly 9.55% — among the highest in the nation. This is one of the few areas where Indiana comes out ahead, and it partially offsets Tennessee's income-tax savings for high-spending households.

Which state is better for retirees?

Tennessee is generally better for retirees: it taxes no retirement income of any kind, including Social Security, pensions, and 401(k)/IRA withdrawals. Indiana also exempts Social Security but taxes pension and 401(k)/IRA income at the state-plus-county rate, offering only a modest $4,000 deduction for filers 65 and older.

Does Indiana's county tax vary a lot by location?

Yes, significantly. Indiana's 92 counties each set their own local income tax rate within the 0.5% to 3.38% range, and rates can change year to year. Anyone comparing Tennessee's 0% to a specific Indiana county should look up that county's current rate rather than relying on the state-only 2.95% headline figure.

How do Nashville and Indianapolis compare as places to live?

Nashville offers no state income tax, a booming music, healthcare, and tech scene, and faster population growth. Indianapolis offers a lower combined sales tax, capped property tax for homesteads, and a growing logistics and insurance job market, but its total tax burden (income + county tax + property + sales) is typically higher than Nashville's once county tax is included.
From the brief
NL27%new 2027 rate, down from 30%
DK65.4kkr/mo threshold, cut from 78k
MT1940snon-dom regime unchanged since
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