No State Income Tax in Tennessee: What It Means

Tennessee has no state tax on wages, and since the Hall tax on interest and dividends was fully repealed in 2021, no state tax on investment income or retirement income either. That shifts planning toward federal taxes, sales tax and property tax. Residents and those relocating can plan around it with help from Integra Wealth's Chattanooga, TN office.

What Tennessee Does Not Tax

• Wages and salaries.
• Interest and dividends (Hall tax repealed as of 2021).
• Social Security, pensions and IRA or 401(k) withdrawals.
• Inheritances (inheritance tax repealed for deaths in 2016 and later).

What Tennessee Does Tax

Tennessee relies heavily on sales tax, which combines a state rate with local rates, along with property taxes set by counties and cities. Businesses face franchise and excise taxes. These costs belong in any budget.

Planning Effects

• Roth conversions: there is no state tax added to the conversion cost.
• Relocation: moving from a high-tax state can reduce taxes on retirement withdrawals, but the timing of the move matters.
• Municipal bonds: since there is no state income tax, in-state munis offer no extra state benefit, so compare yields broadly.
• Business owners: planning focuses on federal tax and Tennessee franchise and excise taxes.

Moving to Tennessee?

Establish domicile clearly: driver's license, voter registration, vehicle registration and where you spend your time. Former states may audit high-income movers. Large income events such as selling a business are often best timed after residency is established.

Retirees Moving to the Chattanooga Area

Many people relocate to the Chattanooga region from higher-tax states. Before the move, review when to realize large gains, when to start Roth conversions, and how your former state treats part-year residents. After the move, update estate documents to Tennessee law with a local attorney.

Living Near the State Line

Chattanooga sits on the Georgia border. Residents who live in Georgia and work in Tennessee owe Georgia tax on wages, while Tennessee residents who work in Georgia generally owe Georgia nonresident tax on those Georgia wages. Where you live, not just where you work, determines much of your state tax picture.

Key Takeaways

• Tennessee does not tax wages, investment income or retirement income.
• Sales and property taxes still matter.
• Roth conversions carry no added state tax.
• Establish domicile clearly when relocating.

Frequently Asked Questions

Does Tennessee have a state income tax?

No. Tennessee does not tax wages, and the Hall tax on interest and dividends was fully repealed starting in 2021.

Is Tennessee a good state to retire in for taxes?

For many retirees, yes, since Social Security, pensions and retirement account withdrawals are not taxed by the state. Sales and property taxes should still be considered.

Do I pay tax on a Roth conversion in Tennessee?

Not at the state level. Federal income tax still applies to the converted amount.

Planning around Tennessee's tax rules? Visit or contact our Chattanooga, TN office.

This article is for educational purposes only and is not individualized investment, tax or legal advice. Talk with a qualified professional about your specific situation.