TENNESSEE PAYCHECK CALCULATOR
Tennessee never taxed wages, and since January 1, 2021, it doesn’t tax anything else either. The Hall Tax, a decades-old state tax on interest and dividend income, got phased out completely that year, making Tennessee a true zero-income-tax state across every category. In exchange, Tennessee leans harder on sales tax than almost anywhere else, with a combined average rate around 9.61%, among the highest in the country.
A Tennessee paycheck still gets trimmed by federal income tax, Social Security, and Medicare, but there’s no state withholding line at all. There’s no local income tax anywhere in the state either. Curious how Tennessee stacks up against its neighbors? Check the calculators for Kentucky, Georgia, Mississippi, and Alabama.
Calculate Your Take-Home Pay
Estimate only. Does not include local sales tax, property tax, or pre-tax deductions like 401(k) or health insurance. Consult a tax professional for exact figures.
Every Deduction on a Tennessee Paycheck
- Federal income tax: Withheld based on your W-4 and the 2026 IRS brackets, which run from 10% to 37% depending on taxable income and filing status.
- Social Security tax: A flat 6.2% on wages up to $184,500 for 2026, capping out at $11,439 for the year.
- Medicare tax: 1.45% on all wages with no cap, plus an extra 0.9% once you cross $200,000 as a single or head of household filer, or $250,000 filing jointly.
- Tennessee state income tax: None. There is no state withholding line on a Tennessee paycheck.
- Local income tax: None. Tennessee doesn’t allow cities or counties to levy their own income tax.
- Pre-tax deductions: 401(k) contributions, HSA contributions, and employer health insurance premiums reduce your taxable wages before any of the above taxes are calculated.
How Tennessee Got to Zero Income Tax
Tennessee’s constitution has effectively kept wages and salaries out of state tax reach for most of its history, but investment income was a different story until recently. The Hall Tax, named for the state senator who introduced it back in 1929, taxed interest and dividend income at rates as high as 6%. Lawmakers began phasing it out in 2016, cutting the rate by one percentage point a year, until it hit zero on January 1, 2021. That closed the last gap, making Tennessee genuinely income-tax-free across every category, wages, investment returns, retirement distributions, all of it.
Hall Tax Phase-Down, 2016 to 2021
| Year | Hall Tax Rate |
|---|---|
| 2016 | 6% |
| 2017 | 5% |
| 2018 | 4% |
| 2019 | 3% |
| 2020 | 2% |
| 2021 | 0% (fully repealed) |
The repeal was part of a deliberate strategy to compete with Florida and Texas for retirees and investors weighing where to plant themselves long-term. It worked well enough that Nashville in particular has seen a wave of relocation growth since, driven in part by the tax picture and in part by the city’s broader economic momentum.
Tennessee vs Nearby States at $70,000 (Single)
| State | State Income Tax Owed | Estimated Net Pay |
|---|---|---|
| Tennessee | $0 | $58,075 |
| Kentucky | $2,332 | $55,743 |
| Mississippi | $2,400 | $55,675 |
| Georgia | $2,745 | $55,330 |
Every one of Tennessee’s neighbors charges some form of income tax, which puts Tennessee ahead on this specific comparison by more than $2,000 a year at this income level. The gap only grows for higher earners, since none of Tennessee’s neighbors here have a rate anywhere close to zero.
Tennessee’s Tax Trade-Offs
| Category | Tennessee | National Average |
|---|---|---|
| State income tax | None | ~5.5% |
| Combined sales tax (avg) | 9.61% | ~7.0% |
| Effective property tax rate | 0.52% | ~1.0% |
| Estate/inheritance tax | None | Varies by state |
| Tax Foundation 2026 ranking | 8th overall | N/A |
Tennessee’s property tax rate is genuinely one of the lowest in the country, and that’s true almost everywhere in the state outside Memphis, which runs closer to the national average. Sales tax is where the trade-off shows up hardest. At 7%, Tennessee’s state rate is tied for the highest in the nation, and once local rates stack on top, cities like Nashville and Memphis land close to 9.75%, among the highest combined rates anywhere in the country.
Retirees in Tennessee
Tennessee has become one of the more popular retirement destinations specifically because of its tax structure. Social Security, pensions, 401(k) and IRA distributions, and even investment income are all completely exempt now that the Hall Tax is gone. Combined with property taxes well below the national average outside Memphis, a retiree living on a fixed income keeps more of it here than in most states. The catch is the same one everyone in Tennessee runs into: groceries and everyday purchases carry a sales tax high enough to eat into some of those savings, especially for retirees on tighter budgets who spend a larger share of their income on taxable goods.
Federal Tax Bracket Example: $70,000 Single Filer
Start with $70,000 in gross wages. Subtract the 2026 federal standard deduction of $16,100, leaving $53,900 in taxable income. Here’s how the brackets apply:
- 10% on the first $12,400 = $1,240
- 12% on the next $38,000 (from $12,400 to $50,400) = $4,560
- 22% on the remaining $3,500 (from $50,400 to $53,900) = $770
Total federal tax: $6,570, an effective rate of about 9.4% on gross pay. Since Tennessee adds nothing on top of that at the state level, this filer’s paycheck deductions stop entirely at federal, Social Security, and Medicare.
Frequently Asked Questions
Does Tennessee have a state income tax?
No. Tennessee has never taxed wages or salaries, and it fully repealed the Hall Tax, its old tax on interest and dividend income, effective January 1, 2021. Every type of income, including investment income, goes completely untaxed at the state level.
What was the Hall Tax and why does it matter now?
The Hall Tax was a state tax on interest and dividend income only, dating back to 1929 and named for the state senator who introduced it. It never applied to wages. Tennessee phased it down from 6% starting in 2016, cutting it one percentage point a year until it hit zero on January 1, 2021, making Tennessee a true zero-income-tax state across every income category.
Why is sales tax so high in Tennessee?
Tennessee’s 7% state sales tax rate is tied for the highest state-level rate in the country. Local governments add up to 2.75% more, pushing the average combined rate to about 9.61%, among the highest of any state, and Nashville and Memphis both sit close to or above that average.
Are groceries taxed in Tennessee?
Yes, but at a reduced state rate of 4% instead of the full 7%, plus whatever local rate applies. Prescription drugs are exempt entirely.
Is Social Security or retirement income taxed in Tennessee?
No. Since Tennessee has no state income tax at all, Social Security, pensions, 401(k) and IRA distributions, and any other retirement income are completely exempt.
Does Tennessee have an estate or inheritance tax?
No. Tennessee repealed its estate tax effective January 1, 2016, and has never had an inheritance tax. Only the federal estate tax can apply, and only to estates well above $13 million.
Tennessee’s zero-income-tax status took decades to fully arrive, wages were always exempt, but investment income only caught up in 2021. What’s left standing is a state that funds itself almost entirely through sales tax and property tax instead, a trade that clearly favors high earners and investors over households that spend most of what they make on everyday goods.