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Tennessee State Income Tax: Rates And Who Pays In 2023-2024

Tennessee’s approach to taxation sets it apart from most U.S. states. The state relies heavily on other revenue sources like sales, excise, and property taxes. Read on to explore the key factors pertaining to filing tax returns in Tennessee.
Tennessee State Income Tax
Tennessee State Income Tax: Rates And Who Pays In 2023-2024
Tennessee stands out with its unique tax structure, considering it does not impose a state income tax on wages. Let's understand how Tennessee State Income Tax works and various aspects associated with the tax landscape in the state.
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Tennessee’s approach to taxation sets it apart from most U.S. states – it does not impose a state income tax. In the Volunteer State, the money you earn from your job or investments remains untouched by state income taxes. Instead, Tennessee relies heavily on other revenue sources like sales, excise, and property taxes. 

The state’s sales tax and local areas can add up to 2.75 % more, resulting in an average combined rate of 9.55 %. While property taxes in Tennessee are relatively modest, the absence of income tax provides a unique financial landscape for its residents and businesses, making it an attractive destination for those seeking tax advantages. Check out Beem Tax Calculator to get a quick and accurate estimate of your federal and state tax refund for free.

Tennessee State Income Tax

For the 2022-2023 tax year, Tennessee stands out with its unique tax structure. The state does not impose a state income tax on wages, which means your earnings go untaxed. Tennessee’s income tax rate for your wages is a flat 0%. However, it’s worth noting that income earned from interest and dividends is subject to a modest 1 to 2% tax rate.

Tennessee relies on other forms of taxation to fund essential public services like first responders, infrastructure, schools, and more. 

Tax TypeTennessee Tax Rates
State IncomeNone (0%)
Corporate Income6.50%
Sales Tax7.00% state, with local options up to 2.75%, averaging 9.55% combined
Investment Income1-2% on interest and dividends
Total Tax Burden6.22%
Table 1.0. Tennessee tax types with their rates

Does Tennessee Have State Income Tax?

Tennessee sets itself apart from many other states by not imposing a state income tax. This means that your earnings from wages are not subject to state income tax, making Tennessee an appealing choice for those seeking to reduce their income tax burden. However, before making any relocation decisions, it’s essential to consider other factors like sales, excise, property taxes, overall affordability, and the state’s capacity to invest in critical social services like infrastructure, education, and healthcare.

Furthermore, it’s essential to stay informed about changing legislation. Notably, as of January 1, 2021, Tennessee fully repealed the Hall income tax, which previously applied to investment and interest income. This change enhances Tennessee’s attractiveness as a low-tax destination for states and businesses.

Tennessee State Income Tax – How much will the income after tax in Tennessee with Filing Status

Annual IncomeFiling Status –
Single
Filing Status –
Married Filing Jointly
Filing Status –
Head of Household
$12000$12,000$12,000$12,000
$15000$14,795$15,000$15,000
$20000$19,295$20,000$19,940
$22000$21,095$22,000$21,740
$30000$28,160$29,590$28,940
$35000$32,560$34,090$33,421
$36000$33,440$34,990$34,301
$42000$38,720$40,390$39,581
$45000$43,090$43,090$42,221
$48000$44,000$45,759$44,861
$52000$47,520$49,279$48,381
$54000$50,912$52,799$51,901
$60000$54,032$56,319$55,421
$62000$55,592$58,079$57,181
$65000$57,932$60,719$59,821
$70000$61,832$65,119$64,221
$75000$65,732$69,519$68,621
$80000$73,919$73,919$72,551
$85000$73,532$78,319$76,451
$90000$77,432$82,719$80,351
$92000$78,992$84,479$81,911
$95000$81,332$87,119$84,251
$114000$95,913$103,384$98,960
$115000$96,673$104,164$99,720
$140000$115,673$123,664$118,720
$150000$123,273$131,464$126,320
$160000$130,873$139,264$133,920
$165000$134,673$143,164$137,720
$190000$153,113$162,664$156,676
$185000$149,713$158,764$152,920
$260000$199,780$216,145$203,536
$300000$246,545$246,545$246,545
$350000$258,280$284,545$262,036
$120000$111,873$119,764$114,920
$135000$111,873$119,764$114,920
$170000$138,473$147,064$141,520
$180000$146,073$154,864$149,120
$250000$193,280$208,545$197,036
$28000$26,400$27,790$27,140
$32000$29,920$31,390$30,740
$40000$36,960$38,590$37,821
$44000$40,480$42,190$41,341
$53000$48,400$50,159$49,261
$56000$50,912$52,799$51,901
$58000$52,472$54,559$53,661

Tennessee State Income Tax Rates And Tax Brackets

Tennessee’s tax system has distinct features. While salaries and wages remain untaxed, income from interest and dividends was taxed at 2% in 2019. Notably, local cities in the state do not levy taxes on income.

Most income from stocks, bonds, and notes receivable is subject to a flat 6% tax rate. However, there are exemptions in place. The first $1,250 taxable income for single filers and the first $2,500 for joint filers are exempt from taxation. Additionally, states aged 65 and older, with total income below $37,000 for single filers or $68,000 for joint filers, are exempt.

Tennessee operates with a single tax rate, so there are no tax brackets to navigate. As of 2020, the sole tax rate applicable in Tennessee is 1%.

Tennessee tax rates:

TaxMarginal Tax RateEffective Tax Rate2023 Taxes*
Federal22.00%9.16%$5,161
FICA (Social Security)7.65%7.65%$4,309
State0.00%0.00%$0
Local0.00%0.00%$0
Total Income Taxes16.81%$9,470
Income After Taxes$46,861
Retirement Contributions$0
Take-Home Pay$46,861
Table 2.0. Tennessee tax rates

What Is Tennessee’s Standard Deduction?

Tennessee does not impose a state income tax, which means there’s no state income tax to claim as a deduction on your federal tax return. This is a notable benefit for states and businesses in the state. However, if you pay other state taxes or have deductible expenses, you can consider itemizing your deductions. 

The standard deduction in 2022 for states is $12,400 if you’re single. If your total deductible expenses exceed this amount, it’s worth itemizing. Due to the Tax Cuts and Jobs Act, the total deduction for state and local taxes, including state income taxes, is limited to $10,000 per year ($5,000 for married filing separately), so this is an important limit to keep in mind.

Also know about: What is Adjusted Gross Income?

How To Calculate Tennessee State Income Tax?

Calculating Tennessee’s state income tax is straightforward because the state does not impose a state income tax on wages. Instead, Tennessee taxes certain types of income, primarily interest and dividends. 

To calculate your Tennessee income tax, you’ll need to determine the total taxable interest and dividend income for the tax year. It’s essential to be aware of any exemptions; for example, if you’re over 65 and your total income falls below a specific threshold, you may be exempt from these taxes. The tax rate for interest and dividends in Tennessee is typically 2%, and you can compute your income tax by applying this rate to your taxable interest and dividend income.

Tennessee’s absence of wage income tax simplifies the tax calculation process. Nevertheless, for accuracy and compliance with state tax laws, it’s advisable to consult with a tax professional or refer to the latest guidelines provided by the Tennessee Department of Revenue.

Also Read: Ohio State Income Tax

Do I Have To Pay Tennessee State Income Tax?

In Tennessee, you don’t have to pay state income tax on your wages. The state doesn’t impose such a tax. However, certain types of income, like interest and dividends, may be subject to a 2% tax. You might owe Tennessee income tax if you receive these kinds of income. 

It’s important to check the latest guidelines and exemptions, especially if you’re over 65 or have income below specified thresholds, to ensure you comply with state tax laws. Tennessee’s lack of wage income tax makes it advantageous for residents.

Also Read: Georgia State Income Tax

How to pay Tennessee State Income Tax?

You can utilize the Tennessee Taxpayer Access Point (TNTAP) to pay Tennessee state income tax. This online platform allows you to create an account, file tax returns, and make payments. TNTAP is particularly useful for sales, use, and telecommunications taxes.

To start, create a TNTAP login, which enables you to efficiently handle your tax obligations electronically. The TNTAP website offers step-by-step instructions and video guides to assist you through the process, making it a convenient and accessible way to fulfill your state income tax obligations in Tennessee.

Also Read: Texas State Income Tax

Am I a Resident for Tennessee Income Tax Purposes?

In Tennessee, you’re considered a resident for income tax purposes if you live in the state or have a domicile here. Tennessee doesn’t tax wages but taxes certain types of income.

Resident Status Rules

For Tennessee income tax purposes, your residence is where you live and intend to return during absences. You can have only one residence. Changing residence happens with physical relocation and the intention to permanently stay in a new place, supported by consistent actions aligning with that intention.

Part-Year Resident Status Rules

Part-year resident status in Tennessee’s income tax applies if you moved into or out of the state during the tax year and established residency (domicile). It also applies if you spent at least 183 days in Tennessee during the year and had a suitable year-round living place. You must file a Tennessee return if your gross income from the state exceeds the minimum filing requirements.

Nonresident Status Rules

Nonresident status in Tennessee’s income tax means you live outside the state and didn’t establish residency here. You may still need to file a state return if you earned income in Tennessee. Nonresidents who received income within the state, such as business earnings or investments, must report it and pay the required taxes, but only on that specific Tennessee-sourced income.

Tennessee State Income Tax

Where is My Tennessee State Income Tax Refund?

To track your Tennessee state income tax refund, use the following resources:

  • State: Tennessee
  • Refund Status Phone Support: 1-615-253-0600
  • Hours: Mon. – Fri. 8:30 a.m. – 3:30 p.m.
  • General Tax Information: 1-615-741-0443
  • 2022 State Tax Filing Deadline: April 18, 2023

It’s important to note that Tennessee doesn’t have a state income tax, which means taxpayers are not obligated to file a state return or pay tax on their wages and bonuses.

Also Read: Florida State Income Tax

Why Did My Tennessee State Income Tax Increase?

Tennessee does not have a state income tax on wages. Therefore, your Tennessee state income tax can stay the same since there’s no tax on your earnings. However, if you’ve experienced an increase in your overall state tax liability, it could be due to changes in other types of taxes, such as sales tax or property tax, or shifts in your financial situation, like increased investments or income from sources other than wages. Reviewing your financial circumstances and consulting with a tax professional for a clear understanding of your tax situation is essential.

Tennessee Sales Tax

Tennessee’s sales tax structure has a 7% statewide base rate, making it one of the highest in the country. Cities and counties can also levy extra sales taxes, leading to local rates ranging from 1.50% to 2.75%. This means the combined state and local sales tax rates can vary depending on where you are in Tennessee. 

It’s essential to be aware of these variations when making purchases and understand how they affect the overall cost of goods and services. You can file your taxes online with Beem irrespective of your filing status in Tenessee across all types of tax forms.

5 Things To Know About Tennessee Income Tax

Understanding Tennessee’s income tax system is essential for residents and those considering relocating. Here are five key points to keep in mind:

  1. No Wage Income Tax: Tennessee doesn’t impose a state income tax on wages so you won’t pay state income tax on your earnings. This is a significant benefit for many states.
  2. Tax on Investment Income: While wages are tax-free, Tennessee does tax certain types of income, primarily interest and dividends. The rate for this income is typically 2%.
  3. Residency Matters: Your resident status (full-year, part-year, or nonresident) affects your tax obligations. Ensure you understand your status, as it determines how you’re taxed in the state.
  4. Local Sales Tax: Tennessee has a statewide base sales tax of 7%, but cities and counties can add their own sales taxes, varying from 1.50% to 2.75%. The combined rate may differ depending on your location.
  5. Exemptions and Credits: While wage income is not taxed, explore available exemptions and credits, which may apply to other types of income or specific situations. This can help reduce your overall state tax liability.

Tennessee State Income Tax FAQs

Q) Is Tennessee a high tax state?

Tennessee is generally considered a low-tax state. The absence of a state income tax on wages is a significant tax advantage, making it an attractive destination for those seeking to reduce their income tax burden.

Q) Is Tennessee a tax-friendly state?

Yes, Tennessee is often viewed as tax-friendly due to the lack of an income tax on wages. 

Q) Is Tennessee a good place to live for taxes?

Tennessee’s tax system can make it a favorable place to live for those who wish to minimize their income tax liability.

Q) How much of my paycheck goes to taxes in Tennessee?

Tennessee does not tax your wages, so your paycheck is not subject to state income tax. However, you may still be subject to other forms of taxation, like federal income tax and Social Security tax.

Q) Does Tennessee tax income earned in another state?

Tennessee primarily focuses on taxing income sourced within the state. If you earn income from another state, consult a tax professional to determine your tax obligations.

Q) Does the state of Tennessee tax Social Security income?

Tennessee does not tax Social Security income, making it advantageous for retirees who rely on this source of income.

Q) Can Tennessee state income tax go up?

Tennessee does not have a state income tax on wages. Therefore, your Tennessee state income tax cannot increase due to changes in wage income.

Q) Do seniors have to pay state income tax in Tennessee?

Seniors in Tennessee do not have to pay state income tax on their wages. 

Q) Does Tennessee have state income tax for military?

Tennessee generally does not tax military retirement pay. 

Q) What are Tennessee’s state income taxes for LLCs?

To elect C-corp status, LLCs must file Form 1120 with the IRS. C-corps will pay the 21% federal corporate income tax and Tennessee’s 6.5% corporate income tax.

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Picture of Prem Kishan

Prem Kishan

A seasoned Product Manager who thrives on making a meaningful impact within the organization, Prem is deeply passionate about tackling intricate problems using cutting-edge technology and is a specialist in tax content.

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This page is purely informational. Beem does not provide financial, legal or accounting advice. This article has been prepared for informational purposes only. It is not intended to provide financial, legal or accounting advice and should not be relied on for the same. Please consult your own financial, legal and accounting advisors before engaging in any transactions.

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