Tennessee Tax Guide
0%state income tax
Tennessee has no state income tax, having fully phased out its Hall Tax on interest and dividends in 2021. The state has one of the highest sales tax rates in the nation at 7%. Property taxes are among the lowest. Nashville's growth has made TN a hot destination.
Tennessee Tax at a Glance
Income Tax
None
No state income tax
Sales Tax
7%
State-level rate
Property Tax
0.71%
35% below the national average
Estate Tax
No
No state estate tax
How Tennessee Compares to the National Average
Notable Tax Facts
- No state income tax — the Hall Tax on interest/dividends was fully phased out in 2021
- State sales tax of 7% is one of the highest in the nation
- Combined state + local sales taxes can reach 9.75% — among the highest anywhere
- Very low property taxes at about 0.71% effective rate
- Nashville has been one of the fastest-growing cities in the US
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Tennessee Tax FAQ
Does Tennessee have income tax?
No. Tennessee has no state income tax. The state previously taxed interest and dividend income (the Hall Tax), but that was fully phased out as of January 1, 2021.
Why is Tennessee's sales tax so high?
Without income tax revenue, Tennessee relies heavily on sales tax. The 7% state rate plus local additions can reach 9.75%, among the highest combined rates in the nation.
Does Tennessee tax groceries?
Yes, but at a reduced rate. Groceries are taxed at 4% state rate (lower than the general 7% rate), plus any applicable local taxes.
Is Tennessee good for retirees?
Yes. No income tax means all retirement income is untaxed. Low property taxes and no estate tax make it very attractive. The high sales tax is the main tradeoff.
Compare With Other States
Other No-Income-Tax States
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Educational content, not tax advice. Tax rates are approximate and subject to change. Consult a qualified CPA or tax professional for advice specific to your situation. Data reflects widely-known public information as of early 2026.