Taxes in Knoxville
Tennessee charges zero state tax on any form of income -- wages, salary, interest, dividends, and retirement withdrawals are all untaxed at the state level, with the last remnant (the Hall Tax on interest and dividends) fully repealed effective January 1, 2021 -- and offsets that with a combined sales tax rate of 9.25% inside Knoxville (7% state + 2.25% Knox County), part of a statewide 9.61% average that the Tax Foundation ranked 2nd-highest of any state for 2026.
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Learn moreNo Income Tax on Any Income Type, Not Just Wages
Tennessee's zero-income-tax status is genuinely comprehensive: unlike states that tax wages but not retirement income (or vice versa), Tennessee taxes none of it -- wages, salaries, interest, dividends, and retirement-account withdrawals are all free of state income tax, per 2026 tax-guide sourcing. This follows the full repeal of the old Hall Income Tax (which had applied only to interest and dividend income, phased down from 6% starting in 2016 and eliminated entirely effective January 1, 2021) -- a real, completed structural change, not an ongoing phase-out.
A Genuinely High Combined Sales Tax Rate
Tennessee's 7% state-level sales tax rate is the second-highest state rate in the country, behind only California's 7.25%, per 2026 Tax Foundation data. Layered with Knox County's 2.25% local rate, Knoxville's combined rate runs 9.25% -- close to the 9.61% statewide average the Tax Foundation cites for 2026, which itself ranks 2nd-highest among all states (behind Louisiana's 10.13%, ahead of Washington's 9.57% and Arkansas's 9.48%). This is a real, structural trade-off for the zero-income-tax benefit, not a minor detail.
Groceries Get a Reduced Rate, Not a Full Exemption
Food and food ingredients are taxed at a reduced 4% state rate rather than the full 7% general rate, but local sales tax still applies to groceries at the full local rate -- meaning groceries in Knoxville run about 6.25% combined (4% state + 2.25% Knox County) versus 9.25% on most other purchases, per 2026 sourcing. Prepared food (restaurant meals, for instance) is taxed at the full 7% state rate plus local tax, the same as general merchandise.
No Estate or Inheritance Tax
Tennessee does not impose a state estate tax or inheritance tax -- the state's inheritance tax was fully repealed effective January 1, 2016, following a phased reduction that began in 2012, per 2026 estate-planning sourcing. Only the federal estate tax (a $13.61 million per-individual exemption for 2026, $27.22 million for a married couple with proper planning) remains relevant for Tennessee residents' estates, and only for very large estates.
Property Taxes (Summary -- See Full Topic Page)
Property tax is genuinely low in Knoxville by national standards -- a computed effective rate of approximately 0.93%, modestly below the roughly 1.02% national median -- with real, state-funded relief programs (a Property Tax Freeze and a separate Property Tax Relief program) available for qualifying seniors, disabled residents, and disabled veterans. See the property-taxes topic page for the full breakdown; this summary intentionally does not repeat that detail.
Key takeaways
- Tennessee taxes zero income of any type -- wages, interest, dividends, and retirement withdrawals are all untaxed at the state level, following the Hall Tax's full repeal effective January 1, 2021.
- Tennessee's combined sales tax burden is genuinely high in exchange: a 9.25% combined rate inside Knoxville (7% state + 2.25% Knox County), part of a 9.61% statewide average the Tax Foundation ranked 2nd-highest of any state for 2026.
- Groceries are taxed at a reduced 4% state rate (about 6.25% combined in Knoxville) rather than fully exempted, while prepared food and general merchandise are taxed at the full 7% state rate (9.25% combined).
- Tennessee has no state estate or inheritance tax (fully repealed effective January 1, 2016) -- only the federal estate tax, with a $13.61 million per-individual 2026 exemption, remains relevant, and only for very large estates.
- Property tax is genuinely low (computed ~0.93% effective rate) with real state-funded relief programs for qualifying seniors, disabled residents, and disabled veterans -- see the property-taxes topic page.
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