Tennessee Paycheck Calculator

Tennessee never taxed wages, but until recently it did tax interest and dividend income through the Hall Income Tax, introduced in 1929 at 6%. Legislation passed in 2016 set out a phased repeal, cutting the rate by roughly one point a year until it reached zero for tax years beginning January 2021.

The long phase-out matters historically because it means Tennessee's status as a fully no-income-tax state is recent. Sources written before 2021 will describe Tennessee as taxing investment income, and retirees who moved to the state in that period may remember filing returns that are no longer required.

Today there is nothing to file. Tennessee has no personal income tax return, which removes an administrative burden as well as a financial one — a genuine difference from states that levy no tax on wages but still require filings for other income.

Tennessee funds itself principally through sales tax, and the combined state and local rate is the highest in the United States — a 7% state rate plus local options that commonly push the total close to 9.55%.

Unlike most states, Tennessee applies sales tax to groceries, albeit at a reduced rate. That makes the burden noticeably regressive: households spending a large share of their income on essentials pay proportionally more than higher earners who save or invest a greater share.

For anyone modelling a move to Tennessee, the arithmetic is straightforward. The income tax saving is fixed and scales with your salary; the sales tax cost scales with your spending. High earners who save aggressively come out furthest ahead. Property taxes are low by national standards, which reinforces the advantage for homeowners.

Tennessee levies something almost no other state does: a flat annual professional privilege tax of $400 on people holding certain professional licences. It applies to lawyers, lobbyists, securities agents and investment advisers, and it is owed regardless of income — a first-year associate and a senior partner pay the same amount.

The tax once covered around twenty professions, including doctors, dentists, accountants and architects, but legislation in 2019 removed most of them. The remaining group has lobbied for repeal since, so far without success.

It is not withheld through payroll. Licensees pay it directly to the Department of Revenue each June, which means it does not appear on a payslip and is easy to forget until the deadline. If you hold one of the covered licences, budget for it separately from anything this calculator shows.

Beyond that, only federal deductions apply — income tax, Social Security and Medicare. Tennessee runs no disability, paid leave or employee unemployment programme.