Tennessee does not have a state income tax on wages

If you work in Tennessee or live there, you do not pay state income tax on the money you earn from a job. Tennessee eliminated its tax on wages in 2021, and that remains the law. You still pay federal income tax — that goes to the IRS no matter where you live — but Tennessee itself takes nothing from your paycheck.

This is different from sales tax, property tax, and other state taxes Tennessee does collect. This guide covers only income tax on wages and self-employment income.

Key Takeaways

  • Tennessee has no state income tax on wages, salaries, or self-employment income from work.
  • You still owe federal income tax to the IRS, which is separate from state tax.
  • Tennessee does collect sales tax (around 9.5% statewide) and property tax on real estate.
  • If you moved to Tennessee from another state, you may still owe income tax to your former state for the part of the year you lived there.
  • Retirement income like pensions and Social Security are not taxed by Tennessee, though federal tax may apply.

What Tennessee does tax instead

Tennessee makes up the revenue it does not collect from income tax through other taxes. The state sales tax is 7%, and local taxes add another 1.5% to 2.75%, bringing the total to around 9.5% depending on where you shop. This is one of the higher combined sales tax rates in the country.

Tennessee also taxes property — real estate and sometimes personal property like vehicles. The rate varies by county. Renters do not pay property tax directly, but landlords do, and that cost often shows up in rent.

The state also collects taxes on gasoline, alcohol, and tobacco, and has a business tax on corporations.

If you moved to Tennessee from another state

Moving to Tennessee does not immediately erase what you owe to your old state. If you lived in another state for part of the year and worked there, that state may still want income tax for the months you were a resident. You will need to file a part-year return in your former state and a part-year return in Tennessee.

The key date is usually when you moved — when you changed your address with your employer, got a Tennessee driver's license, or signed a lease. Keep documentation of that date. Some states tax you based on where you worked, not where you lived, so the rules vary. Contact your former state's revenue department or a tax preparer if you are unsure.

Retirement income and pensions

Tennessee does not tax retirement income, including pensions, 401(k) withdrawals, and distributions from IRAs. Social Security benefits are also not taxed by Tennessee. This applies whether you are retired and living in Tennessee or moved there after retiring.

However, federal tax may still apply to some of this income. The IRS taxes most retirement withdrawals and Social Security depending on your total income and filing status. Tennessee's lack of state tax does not change what you owe the federal government.

Self-employment and business income

If you are self-employed or run a business in Tennessee, you do not pay state income tax on your business income. You still owe federal self-employment tax and federal income tax on that same money. You also owe Tennessee's business tax if you operate as a corporation or certain other business structures — this is separate from income tax and is based on your gross receipts or net income depending on your business type.

Sole proprietors and single-member LLCs typically do not owe Tennessee's business tax, but the rules depend on your structure. A tax preparer or the Tennessee Department of Revenue can tell you what applies to your situation.

How to file taxes in Tennessee

Because Tennessee has no income tax, you do not file a state income tax return. You file only a federal return with the IRS. If you lived in another state earlier in the year, you file a part-year return in that state as described above.

You can file your federal return yourself using free software, through a tax preparer, or by mail. The IRS website lists free options based on your income. The deadline is usually April 15, though it can shift by a day or two if that date falls on a weekend or holiday.

Frequently Asked Questions

Do I have to file anything with Tennessee if I live and work there?

No. You file only a federal return with the IRS. Tennessee does not require an income tax return because it does not tax wages. You may owe other taxes like sales tax or property tax, but those are collected at the point of sale or on your property bill, not through a return you file.

If I work in Tennessee but live in another state, do I owe Tennessee income tax?

No. Tennessee taxes no one on wages, whether they live in the state or not. You owe income tax to the state where you live. Some states tax based on where you work instead, but Tennessee does not tax income at all, so it does not matter where your job is located.

Does Tennessee tax Social Security or retirement pensions?

No. Tennessee does not tax Social Security, pensions, 401(k) withdrawals, or IRA distributions. The federal government may tax some of this income depending on how much you receive and your filing status, but Tennessee takes nothing from retirement income.

What if I moved to Tennessee mid-year?

File a part-year return in the state where you lived before the move, covering the months you were a resident there. File a part-year return in Tennessee for the months after you moved, though since Tennessee has no income tax, you may not need to file anything with Tennessee itself — only with the IRS. Your former state's revenue department can tell you the exact deadline and what to include.

Is Tennessee's lack of income tax the same as having no taxes at all?

No. Tennessee collects sales tax (around 9.5% combined), property tax on real estate, and taxes on gasoline, alcohol, and tobacco. You pay these when you buy things or own property. The state simply does not tax the income you earn from work.