Tax in Tennessee: a complete guide
From income and sales tax to how much property tax you’ll need to pay, this guide tells you everything you need to know about tax in Tennessee.
Tennessee state income tax
Tennessee is one of nine states in the US that does not levy a state income tax. Also included are Alaska, Florida, Nevada, New Hampshire, South Dakota, Texas, Washington, and Wyoming.
However, for those living and working in Tennessee, the lack of state income tax doesn’t mean they pay no taxes on their income. Like every other US citizen, they have to pay federal taxes.
In 2023, seven different federal income tax brackets dictate how much you’ll owe each tax year.
For single filers, these include:
| Income bracket | Tax owed |
|---|---|
| $0 - $11,000 | 10 percent of taxable income |
| $11,001 – $44,725 | $1,100 plus 12 percent of the excess over $11,000 |
| $44,726 - $95,375 | $5,147 plus 22 percent of the excess over $44,725 |
| $95,376 - $182,100 | $16,290 plus 24 percent of the excess $95,375 |
| $182,101 - $231,250 | $37,104 plus 32 percent of the excess over $182,100 |
| $231,251 - $578,125 | $52,832 plus 35 percent of the excess over $231,250 |
| $578,126 and over | $174,238.25 plus 37 percent of the excess over $578,125 |
For people who are married and filing jointly, these include:
| Income bracket | Tax owed |
|---|---|
| $0 - $22,000 | 10 percent of taxable income |
| $22,001 – $89,450 | $2,200 plus 12 percent of the excess over $22,000 |
| $89,451 - $190,750 | $10,294 plus 22 percent of the excess over $89,450 |
| $190,751 - $364,200 | $32,580 plus 24 percent of the excess $190,750 |
| $364,201 - $462,500 | $74,208 plus 32 percent of the excess over $364,200 |
| $462,501 - $693,750 | $105,664 plus 35 percent of the excess over $462,500 |
| $693,751 and over | $186,601.50 plus 37 percent of the excess over $693,750 |
Tennessee also has a flat corporate income tax rate of 6.50 percent.
If you’re unsure about filing your taxes, a financial advisor can help. Here, they can review your income sources and develop a unique tax strategy just for you.
Tennessee Sales Tax
Tennessee has a statewide sales tax rate of seven percent.
However, local counties and municipalities can also add their own rates on top of this. The maximum additional rate is 2.75 percent, bringing Tennessee's maximum sales tax amount to 9.75 percent. The average, however, usually falls around 9.55 percent.
Certain items are also exempt from sales and use tax, including:
Several healthcare products
School meals
Specific organizations also do not need to pay sales tax. These include government agencies, some nonprofit organizations, and organizations purchasing goods for resale.
Tennessee also holds annual tax holidays. In 2023, to coincide with the beginning of the new school year, Tennessee had its traditional sales tax holiday on clothing, school supplies and computers during the last full weekend in July.
For 2023, Tennessee's General Assembly has approved a three-month grocery tax holiday on food & food ingredients, which began at 12:01 a.m. on Tuesday, August 1, 2023, and ends at 11:59 p.m. on Tuesday, October 31, 2023.
Tennessee Property Tax
According to data from the U.S. Census Bureau, the average American household spends $2,690 on real estate property taxes, with the national average around 1.07 percent.
Based on data from 2022, Tennessee’s average effective property tax rate was 0.71 percent. This meant residents paid, on average, $1,548 in property taxes.
Like many other states, property tax in Tennessee is collected at a local level. County assessors appraise real estate for assessment purposes and assess tax liability. The county commission and city governing bodies determine local property tax rates, which county trustees and city collecting officials then collect.
Tennessee Motor Tax
When buying a vehicle in Tennessee, you must be aware of the tax you must pay.
Tennessee’s state sales tax applies when purchasing a vehicle, meaning you must pay seven percent sales tax. Tennessee cities and counties can charge a local sales tax of up to 2.75 percent on the first $1,600 of a car's total purchase price.
Fuel tax also needs to be taken into consideration. In Tennessee, expect to be charged:
$0.26 per gallon of gasoline
$0.27 per gallon of diesel
Tennessee Estate Tax
Tennessee does not have an estate tax or inheritance tax.
However, it’s important to remember federal estate tax can still apply if your estate is above a certain threshold ($12.92 million in 2023); otherwise, there will be no fees on the estate or inheritance you leave behind.
Also, if you live in Tennessee but inherit an estate from someone living in a state with estate tax, you must abide by local regulations.
Tennessee Retirement Tax
Due to its lack of state income taxes, Tennessee is seen as a retirement-friendly state. Your retirement income from your 401(k), IRA, or Social Security will not be taxed here.
The state also has a lower cost of living than elsewhere in the US, meaning your reduced retirement income will go further.
For further tax guidance and to ensure you’re not paying more tax than you need to, it’s wise to speak to an expert. A financial advisor can help you handle all your tax queries and ensure you’re not paying more tax than needed.
Senior Content Writer
Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.