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Memphis Tennessee Tax Guide 2026: Zero Income Tax, High Shelby County Property Tax & Logistics Sector

Daniel · CountryTaxCalc Updated April 2026
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KEY INSIGHT
Memphis and all of Tennessee have zero state income tax — Tennessee abolished the Hall Tax on investment income effective January 1, 2021. Memphis is in Shelby County, where homeowners pay both county and City of Memphis property tax; those combined rates have historically been well above Nashville/Davidson County's (both were reset in the 2025 reappraisal, so check the current rates with the Shelby County Trustee). The income tax advantage is real, but property tax is a meaningful cost for Memphis homeowners.
At a glance

Key Facts

Tennessee Zero Income Tax — Complete Since 2021
Tennessee has had no income tax on wages or salaries since it never imposed one. The Hall Tax (6% on interest and dividends, primarily affecting retirees and investors) was phased out: reduced from 6% to 5% in 2016, then 4%, 3%, 2%, 1%, and fully eliminated effective January 1, 2021. Since 2021: zero Tennessee income tax of any kind — on wages, capital gains, dividends, interest, rental income, or retirement distributions. Memphis residents pay only federal income tax on all personal income.
Shelby County Property Tax — Among Tennessee's Highest
Tennessee assesses residential property at 25% of appraised value, so tax = appraised value x 25% x the combined rate per $100 of assessed value / 100. Shelby County and the City of Memphis each set their own rate, and both were reset after the 2025 countywide reappraisal, so older published combined rates no longer apply. Memphis combined rates have historically been well above Nashville-Davidson's, so Memphis owners generally pay a higher effective rate on the same market value. Check the Shelby County Trustee for current rates.
Memphis vs Nashville Property Tax Comparison
Nashville-Davidson County's combined property tax rate has historically been well below Memphis's. Both jurisdictions reset their rates in the 2025 reappraisal, so compare current rates directly (tax = appraised value x 25% x rate per $100 / 100) using the Shelby County Trustee and Metro Nashville Trustee rate pages. Property tax is a substantial ongoing cost difference that partially offsets the income tax savings from choosing Tennessee over higher-income-tax states.
FedEx and Memphis Logistics Sector
FedEx is headquartered in Memphis and is one of the area's largest employers. Memphis International Airport (MEM) is one of the world's busiest cargo airports, largely due to FedEx's hub. FedEx stock-based compensation (RSUs and options) is taxed federally as ordinary income at vesting or exercise; Tennessee has no tax on wages, so there is no Tennessee income tax on it. The logistics and distribution sector also generates significant employment around Memphis.
Memphis Sales Tax
Tennessee state sales tax: 7%. Memphis total rate 9.75% (7% state + 2.75% local), the top of Tennessee's local range (local rates are capped at 2.75%). Food is taxed at a reduced 4% state rate, but local rates apply in full, so groceries in Memphis are taxed at 6.75%. Memphis's 9.75% total sales tax is among the highest in Tennessee and the US. Families spending $50,000/year on taxable goods and services pay approximately $4,875 in sales tax in Memphis, compared to $4,625 in Nashville (9.25% combined).
Introduction

Memphis is Tennessee's second-largest city and the global headquarters of FedEx. Tennessee's income tax story is clean: zero, for everyone, on all forms of income since 2021. The Hall Tax (Tennessee's 6% tax on dividends and interest) was phased out completely by January 2021, leaving Tennessee as a pure no-income-tax state. The complication for Memphis specifically is property tax: Shelby County and Memphis property tax rates have historically been well above Nashville's, offsetting some of the income tax advantage for homeowners. Memphis residents should understand this trade-off clearly before comparing Memphis to other Tennessee cities.

Section 01

Memphis vs Nashville: The Real Tax Comparison

Both cities have zero Tennessee income tax on wages. The meaningful differences: property tax (Memphis-area rates have historically been well above Nashville-Davidson's; both were reset in the 2025 reappraisal, so compare current rates), sales tax (Memphis 9.75%; Nashville 9.25%), and housing costs (compare current prices and rents for the neighborhoods you are considering).

For renters there is no direct property tax bill, and the absence of a wage income tax is the same in both cities, so the comparison turns mainly on rent levels and the 9.75% vs 9.25% sales tax.

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FAQ

Frequently Asked Questions

Did Tennessee ever have an income tax?

Tennessee never had a traditional income tax on wages and salaries. The Hall Tax (enacted 1929) taxed interest and dividend income at 6% — primarily affecting retirees and investors with significant investment portfolios. Tennessee phased out the Hall Tax between 2016 and 2021. Since January 1, 2021, Tennessee has had zero income tax of any kind. The complete elimination positions Tennessee alongside Florida, Texas, Nevada, Wyoming, Alaska, South Dakota, and (since its 2025 repeal of the interest-and-dividends tax) New Hampshire as states with no personal income tax on wages or investment income.

Why is Memphis property tax so much higher than Nashville?

Memphis-area rates have historically been higher than Nashville-Davidson's. Contributing factors often cited include Memphis's population decline (about 13,800 fewer residents between the 2010 and 2020 censuses: 646,889 to 633,104, per the U.S. Census Bureau) and the fact that Memphis and Shelby County have never consolidated, unlike Nashville and Davidson County (consolidated in the 1960s), which leaves overlapping city and county governments. Both jurisdictions reset their rates in the 2025 reappraisal, so check current rates before comparing.

How is FedEx equity (RSUs, options) taxed for Memphis employees?

FedEx RSUs vest as ordinary income — taxable federally at vest (employer withholds federal income tax and FICA). Tennessee income tax: zero. No state withholding on FedEx RSU vesting for Tennessee residents. FedEx options (NQOs): taxable as ordinary income at exercise on the spread (market price minus exercise price). ISOs: federal AMT potential; no Tennessee income tax. Capital gains from holding FedEx stock after vesting/exercise: taxable federally (0/15/20% rate depending on holding period); zero Tennessee capital gains tax. This is a significant advantage for FedEx executives and long-term employees with large equity positions.

What is Tennessee's sales tax on groceries?

Tennessee applies a reduced state rate of 4% to food and food ingredients (not prepared food). Shelby County adds its local rate on top. In Memphis: 4% (state food rate) + 2.75% (local) = 6.75% on groceries. This is still significant — higher than states that fully exempt groceries (like Pennsylvania or Texas). Tennessee's high sales tax on food is a notable cost-of-living consideration for lower and middle-income Memphis families.

Are there any Memphis homestead or property tax relief programmes?

Tennessee offers a Property Tax Relief program for qualifying elderly (65+) or disabled homeowners and disabled veterans; amounts are modest and set by the state. Tennessee also lets counties and cities adopt a Property Tax Freeze for homeowners 65+ with income below a published limit. Memphis and Shelby County participate; the Tennessee Comptroller lists a 2026 income limit of $63,470 for Shelby County. Contact Shelby County for application details. The relief available is modest relative to typical Memphis property tax bills.

What is the Memphis sales tax rate and how does it compare to other Tennessee cities?

Memphis combined sales tax: 9.75% (7% state + 2.75% local). Nashville: 9.25% (7% state + 2.25% Davidson County). Knoxville: 9.25% (7% state + 2.25% Knox County). Chattanooga: 9.25% (7% state + 2.25% Hamilton County). Memphis's 9.75% is the top of Tennessee's range (local rates are capped at 2.75%), 0.5% above the Nashville rate. Tennessee's statewide 7% rate is among the highest state sales tax rates in the US before local additions.
Disclaimer:This guide provides general tax information for educational purposes only. Shelby County property tax rates are subject to change. Verify current rates at the Shelby County Assessor website. Consult a Tennessee-licensed CPA for equity compensation and estate planning.
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