Navigating the complexities of state taxes can be daunting, but understanding Tennessee's tax landscape is essential for residents and newcomers alike.
In this guide, we'll explore key components of The Volunteer State's tax system, from income and sales taxes to property taxes and retirement benefits.
Tennessee state tax: Overview
Tennessee has its pros and cons when it comes to taxes.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The state's sales tax is one of the highest in the United States, but some other advantages balance that out.
For example, there’s no state income tax at all in the Volunteer State, property taxes are on the lower side compared to other states, and the overall cost of living tends to be relatively affordable.
[Data for this state tax guide was gathered from a number of sources including the Census Bureau, the state’s government website, and the Sales Tax Handbook. Property taxes are cited as a rate percentage rather than the assessed value.]
Tennessee income tax
There is no income tax in Tennessee. The state previously taxed income earned from stocks and bonds, but this tax was repealed in 2021.
Tennessee retirement taxes
Tennessee is another state with no income tax, so there is no state tax liability on your retirement income.
- Tax on Taxable Income: N/A
- Social Security: Not taxable
- Pensions: Not taxable
- 401(k) and IRA Distributions: Not taxable
Tennessee sales tax
Tennessee has a 7% statewide sales tax. There's also an additional state tax of 2.75% on sales of single items that applies to the portion of the sales price from $1,600 to $3,200. Localities can add up to 2.75%, with an average combined state and local rate of 9.56%, according to the Tax Foundation.
- Groceries: Taxable
- Clothing: Taxable
- Prescription drugs: Taxable
- Motor Vehicles: Taxable
How much are property taxes in Tennessee?
Tennessee's property tax rate is below the national average, especially in these ten cheapest places to live in Tennessee.
That's because the average effective property tax rate in Tennessee is just 0.49% (according to the Tax Foundation).
Tennessee Property Tax Breaks for Retirees
Property Tax Relief Program: Tennessee has a property tax relief program that reimburses income-eligible adults age 65 or older for taxes paid on their primary residence.
Note: Veterans with disabilities and their surviving spouses (of any age) might also qualify for the Tennessee property tax relief program.
Property Tax Freeze: There's also a property tax freeze program available for eligible Tennessee residents. If approved, homeowners can have their tax-assessed value frozen, preventing tax increases in following years. Homeowners must meet specific criteria to qualify.
- Age 65 or older by the end of the tax year in which the application is filed
- Own the primary residence in a participating Tennessee county or city
- Income must not exceed county limits. (Income limits can change each year.)
Tennessee gas tax
Gasoline: $0.20 per gallon.
Diesel: $0.17 per gallon.
Source: Sales Tax Handbook
Tennessee taxes on alchohol and tobacco
Product | Tax Amount |
|---|---|
Cigarette | $0.62 per pack |
Other Tobacco Products | 6.60% of wholesale price |
Source: Sales Tax Handbook
Product | Tax Amount |
|---|---|
Wine | $1.21 per gallon |
Beer | $1.29 per gallon |
Liquor | $4.40 per gallon |
Source: Sales Tax Handbook
Tennessee estate and inheritance taxes
There is no estate tax or inheritance tax in Tennessee.
Related Content
-
Nvidia Earnings: Live Updates and Commentary November 2025Nvidia's earnings event is just days away and Wall Street is zeroed in on the AI bellwether's third-quarter results.
-
What You Will Pay for Medicare in 2026Medicare premiums for 2026, as well as the costs of Parts A, B, and D, have increased. Here is how much you'll pay in 2026.
-
3 Ways High-Income Earners Can Maximize Their Charitable Donations in 2025Tax Deductions New charitable giving tax rules will soon lower your deduction for donations to charity — here’s what you should do now.
-
Another State Bans Capital Gains Taxes: Will More Follow in 2026?Capital Gains A constitutional amendment blocking future taxes on realized and unrealized capital could raise interesting questions for other states.
-
An HSA Sounds Great for Taxes: Here’s Why It Might Not Be Right for YouHealth Savings Even with the promise of ‘triple tax benefits,’ a health savings account might not be the best health plan option for everyone.
-
Emergency Tax Bill Ends $6,000 Senior Deduction and Tip, Overtime Tax Breaks in D.C.Tax Law Here’s how state tax conformity rules could immediately raise your income tax liability.
-
New RMD Rules: Can You Pass This Retirement Distributions Tax Quiz?Quiz Take our RMD quiz to test your retirement tax knowledge. Learn about RMD rules, IRS deadlines, and tax penalties that could shrink your savings.
-
Ten Retirement Tax Plan Moves to Make Before December 31Retirement Taxes Proactively reviewing your health coverage, RMDs, and IRAs can lower retirement taxes in 2025 and 2026. Here’s how.
-
IRS Updates Capital Gains Tax Thresholds for 2026: Here’s What’s NewCapital Gains The IRS has increased the capital gains tax income thresholds for 2026. You'll need this information to help minimize your tax burden.
-
When to Hire a Tax Pro: The Age Most Americans Switch to a CPATax Tips Taxpayers may outsource their financial stress by a specific age. Find out when you should hire a tax preparer.
