Cost of Living in Tennessee
Tennessee's cost of living is shaped by a genuinely rare combination -- no tax on wages, genuinely low property tax, and one of the highest sales tax rates in the country -- layered on top of real regional variation from Nashville's rising costs to Memphis's genuine affordability to Knoxville's and Chattanooga's more moderate, mid-size-metro price points.
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Learn moreThe tax trade-off, precisely: no income tax, low property tax, high sales tax
Tennessee levies no tax on wages or salaries at all, and its statewide average effective property tax rate (roughly 0.55%) runs well below the ~0.91% national average. But Tennessee's ~9.61% average combined state-and-local sales tax rate is the second-highest in the nation after Louisiana -- a real, disclosed trade-off that matters more for high-spending households than the income- and property-tax savings might suggest. Tennessee does apply a reduced 4% state rate (plus applicable local rate) to unprepared grocery purchases rather than the full 7% state rate that applies to prepared food and other retail -- a real, partial offset worth knowing, though it does not close the overall sales-tax gap with lower-sales-tax states.
Nashville's cost of living has risen with its growth -- though the housing-price run has genuinely cooled
Nashville's home-price appreciation ran extremely hot from 2012 to 2022 (roughly 140% cumulative growth on the FHFA index, peaking at 26.9% single-year appreciation in 2021), but that run has genuinely, currently cooled: prices fell 2.3% in 2023 and grew only about 1.9% in 2024, with 2025 growth essentially flat. Nashville's current median sale price (~$480,000 per Redfin) still sits meaningfully above the national median and above every other major Tennessee metro in this dataset.
Memphis, Knoxville, and Chattanooga offer real, substantially lower costs of living
Memphis is a genuine affordability standout: a ~$210,000 median sale price runs less than half of Nashville's figure. Knoxville's ~$325,000 median sale price runs about 19% below the national average and roughly a third below Nashville's, with overall cost of living cited around 14% below the national average (versus Nashville's roughly 2% below). Chattanooga's ~$356,000 median sale price runs about 12% below the national average, with overall cost of living cited as roughly 18% cheaper than Nashville's.
Homeowners insurance runs meaningfully above the national average -- but the real driver varies by region
Tennessee's statewide average homeowners insurance premium (~$3,408/year per a June 2026 LendingTree report) is the 7th-highest in the country, roughly 42% above the national average cited alongside it. This is not one uniform statewide risk story: West Tennessee's premium pressure traces largely to earthquake exposure, Middle Tennessee's to tornado risk, and East Tennessee's to wildfire and flood exposure -- see the homeowners-insurance topic for the full regional detail.
Key takeaways
- Tennessee combines no tax on wages, a genuinely low property tax (~0.55% statewide average), and one of the highest sales tax rates in the country (~9.61% combined average, 2nd-highest nationally) -- a real, disclosed trade-off, not a uniformly low-cost picture.
- Nashville's cost of living has risen with its growth, though its formerly extreme home-price appreciation has genuinely cooled since 2022 -- 2025 growth ran essentially flat.
- Memphis, Knoxville, and Chattanooga each offer real, substantially lower costs of living than Nashville, with Memphis the clearest affordability standout (median sale price less than half of Nashville's).
- Homeowners insurance runs meaningfully above the national average statewide (~42% above), but the underlying driver genuinely varies by region -- earthquake risk in the west, tornado risk in the middle, wildfire/flood risk in the east.
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