File Tennessee State Taxes & Get Your TN Tax Refund Faster
Tennessee has no state income tax on wages, salaries, or investment income. The state repealed its Hall income tax on investment earnings in 2021. Therefore, Tennessee is one of eight U.S. states that fully taxes neither wage income nor investment income.
While the state does not collect income tax, it does have one of the highest sales tax rates in the nation. The state relies heavily on sales tax revenue and property taxes to fund government operations and services.
Tennessee Income Tax
Tennessee is one of nine states with no individual income tax. The state previously collected a Hall income tax on investment income from stocks, bonds, and notes receivable at a 6% rate, but this tax was fully repealed in 2021.
Residents do not file state income tax returns and are not taxed on wages, salaries, investment income, retirement distributions, or any other form of personal income. While Tennessee’s lack of income tax attracts retirees and high-income earners, the state recovers revenue through high consumption taxes, which affect households whose spending is a larger share of income.
Sales and Use Tax
Tennessee has a 7% statewide sales tax, which is one of the highest state rates in the nation. Food and food ingredients are taxed at a lower rate of 4%.
The state also imposes an additional 2.75% single article tax on the portion of sales from $1,600 to $3,200 for individual items.
All local jurisdictions have the authority to impose a local sales tax up to 2.75%.
The combined state and local sales tax rate averages about 9.61%, ranking second-highest in the nation behind Louisiana. Some jurisdictions have combined rates as high as 9.75%.
The state charges a consumer use tax on various items. Candy, soda, prepared food, and dietary supplements are taxed at 7%, while some food items are taxed at 4%.
The state also charges 7% sales tax on other consumer items like clothing and housewares. City and municipal taxes may apply depending on where you live.
More information on sales tax rates and local taxes can be found at the Tennessee Department of Revenue website, here.
Property Taxes
Tennessee property taxes are assessed and collected by local governments, such as counties and cities, to fund local services. The average effective property tax rate is 0.49%, which is below the national average.
Residential property owners pay taxes based on 25% of their home's assessed value. Farm property is also assessed at 25%. Property used for industrial or commercial purposes is assessed at 40%, while public utility property is assessed at 55% and business personal property at 30%.
The state has a property tax relief program for income-eligible adults age 65 or older that reimburses taxes paid on their primary residence. Veterans with disabilities and their surviving spouses may also qualify for this program. Additionally, eligible homeowners can apply for a property tax freeze that prevents increases in future years by freezing the tax-assessed value.
Owners of property in the state must pay their personal property taxes by March 1 of each year.
Estate and Inheritance Tax
Tennessee does not impose an estate tax or inheritance tax. The state previously charged an estate tax ranging from 5.5% to 9.5% with an exemption limit that increased from $2 million in 2014 to $5 million in 2015. This tax was fully repealed in 2016.
Frequently Asked Questions
Does Tennessee tax retirement income?
No. The state has no income tax, so retirement income from 401(k)s, IRAs, pensions, and Social Security is not taxed.
What is the property tax freeze program?
Eligible homeowners age 65 or older can have their property's tax-assessed value frozen, preventing tax increases in the following years. Income must not exceed county limits, which can change annually.
How does Tennessee's tax system compare to other states?
Tennessee ranks favorably for having no income tax, but has the second-highest combined sales tax rate in the nation at 9.61%. Property taxes are below the national average at 0.49%.
Note: States & U.S. territories may make changes to their tax laws with little notice. We do our best to keep this information up-to-date, but it is provided on an "AS IS" basis. For more see our terms.