Tennessee does not levy a state income tax on individual wages and salary. The Hall Tax on interest and dividends was fully repealed in 2021.
Tax Overview
Tennessee has never taxed wages or earned income. The state did levy the Hall Tax — a tax on interest and dividend income — from 1929 until its full repeal on January 1, 2021. With the Hall Tax gone, Tennessee now has zero state income tax on any type of personal income. To compensate, the state relies on one of the highest combined sales tax rates in the nation, along with business franchise and excise taxes.
Other Taxes in Tennessee
7% state sales tax rate — among the highest in the U.S. Local additions can bring the combined rate up to 9.75%. Groceries are taxed at a reduced 4% state rate.
Property taxes in Tennessee are relatively low compared to the national average. Rates are set by county and city governments, with assessments at 25% of appraised value for residential property.
Tennessee levies a franchise tax (0.25% of net worth or book value of real/tangible property) and an excise tax (6.5% of net earnings) on most businesses.
Gasoline tax of 26 cents per gallon and diesel tax of 27 cents per gallon, plus a 1.4-cent petroleum special tax.
Federal Taxes Still Apply
While Tennessee does not levy a state income tax, residents are still subject to federal income tax, FICA taxes (Social Security and Medicare), and self-employment tax. Use our Federal Income Tax Calculator to estimate your federal tax liability.