Tennessee Tax Guide: What You’ll Pay in 2024
Tennessee is one of a handful of states with no personal income tax. Retirement savings and Social Security are also not taxed at the state level. However, you can expect to pay more when shopping here. Tennessee’s sales tax is the second highest in the country. Tennessee also ranks near the top nationally when the state tax is combined with the average local sales tax, according to the Tax Foundation.
The big picture:
- Income tax: 0 percent
There is no personal income tax in Tennessee.
- Property tax: 0.67 percent of a home’s assessed value (average)
Real estate taxes vary by municipality across Tennessee, with an average tax rate of 0.67 percent of a home’s assessed value in 2021, according to the Tax Foundation. Tennessee ranks 37th in the country for average property tax, with No. 1 being the highest rate.
- Sales tax: 9.55 percent (average combined state and local)
A state sales tax rate of 7 percent is levied on the sales of goods and services, the second-highest rate in the country. Local sales tax rates range from 2.25 percent to 2.75 percent, depending on the county or municipality. The state’s average combined sales tax is 9.55 percent, the second highest in the nation, according to the Tax Foundation.
How is income taxed in Tennessee?
Tennessee does not have a personal income tax.
Watch the video below to learn how to identify your 2023 federal income tax brackets.
Are pensions or retirement income taxed in Tennessee?
No. Because Tennessee does not have a personal income tax, distributions from pensions, 401(k)s, 403(b)s and IRAs are not taxed at the state or local level. Tennessee also does not collect income taxes on military retirement pay.
AARP's Retirement Calculator can help you determine if you are saving enough to retire when — and how — you want.
What about investment income?
Tennessee has no tax on investment income, as it repealed all taxes on income earned from interest and dividends starting with the 2021 tax year.
Does Tennessee tax Social Security benefits?
No, but you may pay federal taxes on a portion of your Social Security benefits, depending on your income. Up to 50 percent of your benefits will be taxed if you file an individual tax return and make $25,000 to $34,000 in total income — or if you file jointly and as a couple make $32,000 to $44,000 in total income. Up to 85 percent of your benefits will be taxed by the federal government if your total income is more than $34,000 individually or $44,000 as a couple.
AARP's Social Security Calculator can assist you in determining when to claim and how to maximize your Social Security benefits.
How is property taxed in Tennessee?
Property tax is a local tax based on the value of your house and land, which is determined by county assessors. The average tax rate was 0.67 percent of a property’s assessed value in 2021, according to the Tax Foundation. Rates vary by county and municipality.
The state’s median property tax bill in 2021 ranged from $463 in Fentress County to $2,588 in Williamson County.
Tennessee does not tax personal property such as cars and boats.
The Tennessee Comptroller of the Treasury has more information about how your property is assessed, how to calculate your tax bill and how to file an appeal. The Comptroller’s office also has online information to help you find more information about property taxes in your county.
What about sales and other taxes?
- Sales tax: There is a 7 percent state sales tax on the sales of goods and services, but local taxes can raise the combined total to as much as 9.75 percent. The Tennessee Department of Revenue’s website has more information on local sales tax rates.
- Groceries: The tax rate for most groceries in Tennessee is 4 percent. But prepared food (such as bakery goods and heat-and-eat meals), candy, dietary supplements and alcoholic beverages are taxed at 7 percent, plus the local sales tax rate.
- Gas tax: The gasoline tax is 26 cents per gallon, plus a 1.4-cent special petroleum fee, for a total of 27.4 cents, according to the state Department of Transportation. These are paid by the wholesaler but included in the price at the pump.
- Vehicle tax: Consumers must pay a special sales tax on vehicles registered in Tennessee, in addition to state and local sales tax. Find more information about how to calculate your tax on the state Department of Revenue’s website, or use this sales tax calculator. Cities and counties may also charge a local wheel tax when you register your vehicle or renew your registration.
- Alcohol taxes: Liquor with more than 7 percent alcohol is taxed at $4.40 a gallon, while wine is taxed at $1.21 a gallon. Alcoholic beverages with 7 percent alcohol by weight or less, except for beer, are taxed at $1.10 a gallon. Beer with 8 percent alcohol by weight or less is taxed at $1.29 a gallon, which is the highest beer tax in the nation, according to the Tax Foundation. These taxes are paid by the wholesaler or manufacturer but may be passed on to consumers.
Tennessee consumers are charged a 15 percent tax — known as the liquor-by-the-drink tax — on most individual alcoholic beverages. Alcohol is also subject to state and local sales tax.
- Lottery: Lottery winnings are not subject to state income tax, but winners can still expect to pay federal income tax.
Will I or my heirs have to pay estate or inheritance tax?
No. Tennessee does not have an estate or inheritance tax. On the federal level, estate tax can kick in for high net worth estates.
Are there any tax breaks for older Tennessee residents?
Yes. Low-income homeowners who are 65 and older or disabled, as well as disabled veteran homeowners or their surviving spouses, may be eligible for reimbursement of some or all of their property taxes through the Tennessee Property Tax Relief program. Contact your county trustee or your city tax collector to apply. The Tennessee Comptroller of the Treasury has more information, including detailed eligibility requirements.
Homeowners who are 65 and older and meet income requirements may also qualify for Tennessee’s Property Tax Freeze program if they live in a participating county or municipality. Find more information on the Tennessee Comptroller of the Treasury website.
Are military benefits taxed in Tennessee?
Tennessee doesn’t have a personal income tax, therefore the state does not tax military pensions and active-duty pay. See this guide from the Tennessee Department of Revenue for more information.
What is the deadline for filing Tennessee taxes in 2024?
Tennessee residents do not need to file a state income tax return because there is no personal income tax. The deadline for filing federal income tax returns is April 15, 2024.
For help estimating your annual income taxes, use AARP's Tax Calculator.
This guide was first published on Nov. 27, 2023.
Also of Interest:
- States with Highest and Lowest Sales Tax Rates
- How to Get Free Help With Your Taxes
- 2023-2024 Tax Brackets and Federal Income Tax Rates
Michelle Tuccitto Sullo is a states writer and editor for AARP. She previously served as managing editor of the Hartford Business Journal in Connecticut and has also worked for the New Haven Register, the Connecticut Law Tribune and New Haven Biz.
