Tennessee is one of nine states with no state income tax on wages. If you work in Tennessee, you won't see any state income tax withholding on your paystub.
No State Income Tax on Wages
Tennessee does not impose a personal income tax on wages, salaries, or other earned income. This means:
- No state income tax line on your paystub
- No state tax return to file for wage income
- More take-home pay compared to states with income tax
Tennessee previously had a "Hall Tax" on interest and dividend income, but this was fully phased out in 2021. Tennessee now has no state income tax of any kind.
What You Will See on Your Paystub
While Tennessee has no state income tax, your paystub will still show federal deductions:
| Deduction | Rate | Notes |
|---|---|---|
| Federal Income Tax | Varies | Based on W-4 and income |
| Social Security | 6.2% | Up to $181,200 wage base |
| Medicare | 1.45% | No wage limit |
| State Income Tax | 0% | Not applicable in Tennessee |
Other Tennessee Taxes
Tennessee generates revenue through other taxes instead of income tax:
- Sales Tax: 7% state rate, plus local taxes up to 2.75% (9.75% max—one of the highest in the nation)
- Property Tax: Varies by county, averaging around 0.6% of assessed value
- Franchise & Excise Tax: Applies to businesses, not individuals
Tennessee has one of the highest combined sales tax rates in the country. While you save on income tax, everyday purchases cost more.
Nashville & Music Industry
Special considerations for Nashville's entertainment industry:
- Royalty income from music is not taxed by Tennessee
- Session musician income is not subject to state tax
- Out-of-state artists performing in Tennessee don't owe Tennessee income tax
- Self-employed musicians still owe federal self-employment tax
Tennessee's lack of income tax makes it attractive for songwriters and artists who earn substantial royalty income.
Working Remotely
Tennessee's lack of income tax makes it popular for remote workers:
- You won't owe Tennessee income tax (there isn't one)
- You may still owe tax to the state where your employer is located
- Some states have "convenience of the employer" rules that could affect you
If you work remotely for a New York employer, you may still owe New York taxes under their "convenience of the employer" rule.
Tennessee vs. Neighboring States
| State | Income Tax | Sales Tax (max) |
|---|---|---|
| Tennessee | None | 9.75% |
| Kentucky | 4.0% | 6.0% |
| Georgia | 5.39% | 8.9% |
| Alabama | 2% - 5% | 11% |
| North Carolina | 4.5% | 7.5% |
| Arkansas | 2% - 4.4% | 11.625% |
Comparing Take-Home Pay
Here's how a $75,000 annual salary in Tennessee compares to other states:
| State | State Tax Rate | Annual State Tax | Monthly Difference |
|---|---|---|---|
| Tennessee | 0% | $0 | — |
| Georgia | ~4.8% | ~$3,200 | -$267 |
| North Carolina | ~4.0% | ~$2,650 | -$221 |
Relocating to Tennessee
Many people relocate to Tennessee for tax advantages:
- No income tax on wages or investment income
- No estate or inheritance tax
- Growing job market in Nashville, Memphis, and Knoxville
- Lower cost of living than many coastal areas