Good news: Tennessee has NO state income tax. See how much you save vs other states and calculate your total tax burden (federal + property + sales).
✓ Tennessee has NO state income tax. This calculator shows your tax savings compared to other states and helps you understand what taxes you DO pay as a Tennessee resident.
Calculate Your TN vs Other State Tax Savings
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Annual State Tax Savings in Tennessee
Tennessee State Tax
$0
CA State Tax
$0
10-Year Savings
$0
Why Tennessee Has No State Income Tax
Tennessee is one of only 9 states with NO state income tax. The Tennessee Constitution prohibits a state income tax without voter approval via constitutional amendment.
How does Tennessee fund state government without income tax?
Sales tax: 6.25% state rate (local jurisdictions add 0-2%, total up to 8.25%)
Property tax: Among the highest in the nation (~1.6-1.8% of home value annually)
Business franchise tax: Tax on business margins (not on individuals)
Oil & gas severance taxes: Revenue from Tennessee's massive energy industry
Federal transfers: Grants and highway funds
The lack of state income tax makes Tennessee attractive to high earners, retirees, and businesses.
What Taxes DO Tennessee residents Pay?
While there's no state income tax, Tennessee residents still pay other taxes:
Tax Type
Rate/Amount
Impact
Federal Income Tax
10%-37%
Same as all Americans
Sales Tax
6.25%-8.25%
On most purchases
Property Tax
1.6%-1.8% of value
$3,200-3,600/yr on $200k home
Gas Tax
$0.20/gallon
~$200-300/yr for avg driver
Vehicle Registration
~$75-150/yr
Based on weight & type
Social Security/Medicare
7.65%
On wages (FICA)
Property tax is the tradeoff. Tennessee property taxes are among the highest in the U.S. A $300,000 home typically costs $5,000-6,000/year in property taxes.
Tennessee vs High-Tax States: Savings Comparison
Here's how much a Texan saves on state income tax compared to residents of high-tax states:
Annual Income
vs California
vs New York
vs New Jersey
$50,000
~$1,700/yr
~$2,000/yr
~$1,100/yr
$75,000
~$3,100/yr
~$3,500/yr
~$2,200/yr
$100,000
~$5,900/yr
~$4,800/yr
~$3,400/yr
$150,000
~$10,400/yr
~$8,900/yr
~$5,900/yr
$250,000
~$20,900/yr
~$17,200/yr
~$12,100/yr
$500,000
~$43,000/yr
~$31,000/yr
~$28,500/yr
Over a 30-year career, a $100k earner in Tennessee saves $144,000-177,000 compared to California/New York residents.
The 9 States With No Income Tax
Tennessee isn't alone. These states also have no state income tax:
Alaska — No income tax, but high cost of living
Tennessee — No income tax, tourism-funded budget
Tennessee — No income tax, gambling/tourism revenue
New Hampshire — No income tax on wages (but taxes dividends/interest at 5%)
South Dakota — No income tax, agriculture & banking based
Tennessee — No income tax (repealed tax on dividends/interest in 2021)
Tennessee — No income tax, oil & property tax funded
Tennessee — No income tax, but 6.5% sales tax + local
Wyoming — No income tax, energy extraction revenue
These states make up for lost income tax revenue through sales tax, property tax, tourism, or natural resource extraction.
Total Tax Burden: Tennessee vs Other States
No income tax doesn't mean low total taxes. When you factor in property and sales taxes, Tennessee ranks middle-of-the-pack nationally.
State
Income Tax
Property Tax
Sales Tax
Total Burden*
Tennessee
0%
1.6-1.8%
6.25-8.25%
~8-9%
California
1-13.3%
0.7-0.8%
7.25-10.25%
~11-13%
New York
4-10.9%
1.4-1.7%
4-8.875%
~12-14%
Tennessee
0%
0.8-1.0%
6-7.5%
~6-7%
Illinois
4.95%
2.0-2.3%
6.25-10.25%
~11-13%
*Total burden as % of income for median household; varies by income level and spending habits
Bottom line: Tennessee is tax-friendly for high earners but roughly average for middle-income households due to high property taxes.
Who Benefits Most from No Income Tax in Tennessee?
High earners ($200k+) — Save $10,000-50,000+/year vs high-tax states
Retirees — Social Security + pension income not taxed at state level
Remote workers from high-tax states — Keep your CA/NY salary, pay $0 state tax
Business owners — Pass-through income (S-corp, LLC) not subject to state income tax
Investors — Capital gains, dividends, interest 100% state-tax-free
Who pays more in Tennessee? Homeowners with expensive properties (due to high property taxes) and low-income renters (sales tax is regressive).
Frequently Asked Questions
Does Tennessee have state income tax?
No. Tennessee is one of 9 states with NO state income tax. The Tennessee Constitution prohibits it without voter approval via constitutional amendment.
How much do I save by living in Tennessee instead of California?
Depends on income. A $100k earner saves ~$5,900/year. A $250k earner saves ~$20,900/year. Over 30 years, that's $177,000-627,000 in savings (not accounting for investment growth).
Do I have to file a Tennessee state tax return?
No. Since Tennessee has no income tax, there is NO state tax return to file. You only file federal taxes (IRS Form 1040).
What is the sales tax rate in Tennessee?
6.25% state sales tax. Local jurisdictions (cities, counties, transit authorities) can add up to 2%, bringing the total to 6.25%-8.25% depending on location.
Are Tennessee property taxes really that high?
Yes. Tennessee has the 6th-highest property tax rate in the U.S. at ~1.6-1.8% of assessed value. On a $300,000 home, expect $4,800-5,400/year. This partially offsets the savings from no income tax.
Does Tennessee tax retirement income?
No. Social Security, pensions, IRA/401(k) withdrawals, and annuities are NOT taxed at the state level. This makes Tennessee very attractive for retirees.
Can I move to Tennessee to avoid state income tax?
Yes, but you must establish true residency (live there >183 days/year, get a TN driver's license, register to vote, etc.). Some high-tax states (like California) aggressively audit people who claim to have moved to avoid taxes.
Will Tennessee ever get a state income tax?
Unlikely. It would require a constitutional amendment approved by voters. Tennessee residents have historically opposed income tax by wide margins (70%+ against in polls). Political culture strongly favors keeping the state income-tax-free.