Income Taxes in Tennessee
Tennessee's income tax picture is genuinely simple and, for a relocation decision, unusually clean: the state has never taxed wages or salaries, a 2014 constitutional amendment permanently bars it from ever doing so, and the last vestige of any state-level income tax -- the old Hall Tax on interest and dividend income -- was fully repealed effective January 1, 2021.
Exploring the idea of moving?
We can connect you with a local real estate professional who knows the area -- no pressure, just a starting point.
Learn moreNo tax on wages or salaries -- ever, and now constitutionally permanent
Tennessee has never taxed wages or salaries. A 2014 constitutional amendment (Amendment 3) went further, permanently barring any future state or local tax on payroll or earned income -- this is not just current policy that could change with a future legislature, it is a constitutional protection. This applies to W-2 wages, salaries, and self-employment/business income alike; there is no state withholding and no state income-tax return to file on earned income.
The Hall Tax -- a real, but narrow, historical exception, now fully repealed
Tennessee did, until recently, tax a narrow category of unearned income: the Hall Tax, a 6% tax on interest and dividend income only (it never applied to wages, salaries, capital gains, or retirement-account withdrawals). The state completed a six-year phaseout of the Hall Tax, fully repealing it effective January 1, 2021 -- making Tennessee the second state after Alaska to have fully eliminated a state income tax of any kind. Anyone relocating to Tennessee today owes no state tax on wages, salaries, interest, or dividends.
What this means for retirement income and remote work specifically
Because Tennessee taxes no wage or investment income at all, retirement income (Social Security, pensions, 401(k)/IRA withdrawals) and remote-work income are equally untaxed at the state level regardless of where the paying employer or plan is based -- a genuinely simple picture relative to states that tax some retirement income streams differently from others. See the retiring and remote-workers topics for the fuller detail.
The trade-off runs through sales tax, not property tax
With no income tax funding state and local government, Tennessee leans harder on sales tax than almost every other state -- its ~9.61% average combined state-and-local sales tax rate is the second-highest in the nation after Louisiana. This is the opposite pattern from a state like Texas, where the income-tax trade-off runs more through property tax; in Tennessee, property tax remains genuinely low (statewide average ~0.55%) while sales tax carries the real weight. See the sales-tax topic for the full detail.
Key takeaways
- Tennessee has never taxed wages or salaries, and a 2014 constitutional amendment permanently bars any future tax on earned income -- there is no state withholding or state income-tax return on wage income.
- The old Hall Tax (6% on interest/dividend income only, never wages) was fully repealed effective January 1, 2021 -- Tennessee is the second state after Alaska to fully eliminate a state income tax.
- Retirement income and remote-work income are equally untaxed at the state level -- a genuinely simple picture for retirees and remote workers alike.
- Tennessee's no-income-tax status is funded primarily through sales tax, not property tax -- its ~9.61% average combined sales tax rate is the second-highest in the nation, the real, disclosed trade-off.
Want to know what your budget actually buys here?
Tell us a bit about what you're looking for and we'll connect you with someone local who can walk you through real numbers.
Get local guidanceRead the full Tennessee overview for the complete picture, or explore individual cities and towns we've researched.
Planning a move?
Tell us what you're looking for and we'll connect you with a local expert who can help you make it happen.
Talk to a local expert