Tennessee state taxes at a glance
| Individual income tax | No broad individual income tax on wages |
|---|---|
| Rate structure | No individual income tax; the Hall income tax on interest and dividends was fully repealed for tax years beginning in 2021. Sales tax is among the highest in the country, and businesses pay franchise and excise taxes. |
| Tax agency | Tennessee Department of Revenue |
| Main individual return | None for individuals (federal return only). Businesses may file franchise and excise tax returns. |
| Local income taxes | No local income taxes. Local governments add sales taxes and some levy business taxes. |
| Sales tax | A 7% state rate plus a local rate of up to 2.75%; food is generally taxed at a lower 4% state rate. Tax Foundation ranked Tennessee’s combined rate second highest in the nation in mid-2026 (about 9.6%). |
| Property tax | Assessed by county assessors; residential property is assessed at 25% of appraised value, then taxed at local rates. A state-run relief program helps some low-income older and disabled homeowners. |
| Retirement & Social Security | No state income tax, so Social Security and retirement income are not taxed by Tennessee. |
Verify current-year figures: state rates, brackets, credits and filing rules change. Treat this page as a starting orientation and confirm details on the Tennessee Department of Revenue website.
How Tennessee income tax works
Tennessee has no individual income tax. For years the state taxed interest and dividends through the Hall income tax, but the Department of Revenue states that the Hall tax was fully repealed for tax years beginning on January 1, 2021, so no Hall return is due for those years. A typical Tennessee employee’s paycheck therefore shows federal income tax, Social Security and Medicare, but no state income tax line, and most residents file only a federal return.
The state makes up the revenue elsewhere. The general sales tax is 7% at the state level plus a local rate of up to 2.75%, and food is generally taxed at a reduced 4% state rate; Tax Foundation’s mid-2026 ranking puts Tennessee second in the country for combined sales tax at about 9.6%. Businesses pay franchise and excise taxes: according to the Department, the excise tax is 6.5% of Tennessee taxable income and the franchise tax is 0.25% of Tennessee net worth (with a minimum). These apply to many LLCs, corporations and other entities rather than to sole proprietors, so if you formed an LLC, check how Tennessee treats your entity before assuming a small business owes nothing.
Property taxes are local. County assessors value property, and residential property is assessed at 25% of its appraised value before local rates are applied. The state also operates a property tax relief program for some low-income older and disabled homeowners and for disabled veterans, which you apply for through your county trustee or the state Comptroller’s program. See our no-income-tax-states guide for the general picture.
Filing your Tennessee return and free options
With no individual state return, your free-filing question is purely federal: see our free filing hub and VITA. Skip any paid “state” add-on in software for Tennessee. If you worked in another state, for example in Georgia or Kentucky, you may owe a nonresident return there.
Sole proprietors still owe federal self-employment tax, and businesses should check the Department’s franchise and excise tax pages for registration, due dates and online filing. Sales tax applies to retail sales and many services, and sellers register with the Department.
For the federal side, see our guides to free federal filing options and the complete guide to filing taxes.
Things Tennessee residents often ask about
- Hall tax is gone: repealed for tax years beginning in 2021; older returns may still be relevant for past periods.
- Sales tax is high: 7% state plus up to 2.75% local, with food at a lower state rate.
- Franchise and excise tax: applies to many LLCs and corporations, not to most sole proprietors.
- No state refund to track: “Tennessee tax refund” searches usually mean a federal refund; use the IRS tool.
- Work in another state: income earned physically in a state with income tax can be taxed there.
Official Tennessee links
- Tennessee Department of Revenue
- Tennessee: Hall income tax (repealed)
- Tennessee: sales and use tax rates
- Federation of Tax Administrators: State tax agencies
Frequently asked questions
Does Tennessee have a state income tax?
No. The Hall income tax on interest and dividends was fully repealed for tax years beginning January 1, 2021.
What is Tennessee’s sales tax?
A 7% state rate plus a local rate of up to 2.75%, with food generally taxed at 4% at the state level.
Do Tennessee businesses pay income tax?
Many entities pay franchise and excise taxes: 6.5% of Tennessee taxable income and 0.25% of net worth, with minimums.
General information only — not tax, legal or financial advice. Tax figures change every year; verify the current numbers at IRS.gov or with a qualified professional. Read the full disclaimer.