Tool | August 2016

State-by-State Guide to Taxes

Compare state tax rates and rules -- on income, ordinary purchases, gas, "sin" products, property, and more -- across the U.S.

Tennessee

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The Bottom Line
Map of Tennessee

Mixed Tax Picture

The Volunteer State has no broad-based income tax and is beginning to phase out its tax on stock dividends and interest income, known as the Hall Tax (the 2016 rate on those is 5%). But be prepared to fork over some substantial sales taxes in Tennessee. It has the the highest combined sales tax rates in the nation, at an average of 9.46%, according to the Tax Foundation.

Sales Tax

7% state levy. Localities can add up to 2.75%, with an average combined rate of 9.46% (the nation's highest), according to the Tax Foundation. Groceries are taxed at 5% by the state, plus whatever local rate is in effect. Local taxes are limited, though: Only the first $1,600 of any item is taxable.

Income Tax Range

There's no state income tax, so salaries, wages, Social Security benefits, IRA distributions and pension income are not taxed. But Tennessee does have the Hall Tax, which taxes dividends and some interest at 6%. The first $1,250 in taxable income for individuals ($2,500 for joint filers) is exempt. Beginning in tax year 2016, the tax rate will decrease to 5%, and by 2022, the Hall Tax will be phased out entirely.

See Kiplinger.com’s Retiree Tax Map to learn how Tennessee taxes Social Security income and other forms of retirement income.

Motor Fuel Taxes

Gasoline: $0.21 per gallon.
Diesel: $0.18 per gallon.

Property Taxes

The median property tax on Tennessee's median home value of $142,900 is $1,066.

See Kiplinger.com’s Retiree Tax Map for details on tax breaks for seniors in Tennessee.

Vehicle Taxes

Sales tax is due on purchases.

Sin Taxes

Beer: $1.29 per gallon (highest in the country)
Wine: $1.27 per gallon
Liquor: $4.63 per gallon

Cigarettes: $0.62 per pack
Other tobacco products: 6.6% of the wholesale price

Travel Taxes

Hotel: There is no state lodging tax, but municipalities can levy one as high as 5%. Up to a 9.75% sales tax is due as well.
Rental cars: 3%, plus sales tax.

Taxes On Wireless Service

12.0%

Inheritance and Estate Taxes

As of January 1, 2016, Tennessee no longer imposes an inheritance tax. The state also does not have an estate tax.

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