Tennessee state tax: Overview
Although Tennessee has one of the highest sales tax rates in the U.S., relatively low property taxes compared to other states, Tennessee has no income taxes, and a generally low cost of living.
[Data for this state tax guide was gathered from a number of sources including the Census Bureau, the state’s government website, and the Sales Tax Handbook. Property taxes are cited as a rate percentage rather than the assessed value.]
Tennessee income taxes
There is no income tax in Tennessee. The state previously taxed income earned from stocks and bonds, but this tax was repealed in 2021.
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Tennessee sales tax
Tennessee has a 7% statewide sales tax. There's also an additional state tax of 2.75% on sales of single items that applies to the portion of the sales price from $1,600 to $3,200. Localities can add up to 2.75%, with an average combined state and local rate of 9.55%, according to the Tax Foundation.
- Groceries are taxable but at a reduced rate of 4% (local taxes may still apply)
- Clothing is taxable.
- Prescription drugs are tax-exempt.
How much are property taxes in Tennessee?
Tennessee's property tax rate is below the national average. The average effective property tax rate in Tennessee is 0.66%, and the annual property taxes paid are less than $1,300.
Tennessee Property Tax Breaks for Retirees
Property Tax Relief Program: Tennessee has a property tax relief program that reimburses income-eligible adults age 65 or older for taxes paid on their primary residence.
Note: Veterans with disabilities and their surviving spouses (of any age) might also qualify for the Tennessee property tax relief program.
Property Tax Freeze: There's also a property tax freeze program available for eligible Tennessee residents. If approved, homeowners can have their tax-assessed value frozen, preventing tax increases in following years. Homeowners must meet specific criteria to qualify.
- Age 65 or older by the end of the tax year in which the application is filed
- Own the primary residence in a participating Tennessee county or city
- Income must not exceed county limits. (Income limits can change each year.)
Tennessee gas tax and motor vehicle taxes
Motor vehicle purchases are taxable. (7% basic rate, plus 2.75% state tax on sales price between $1,600 and $3,200). Additional local taxes may also apply.
Tennessee's gas tax is $0.274, which is lower than many other states in the U.S.
Tennessee taxes on alchohol and tobacco
| Cigarettes | $0.62 per pack |
| Other tobacco products | 6.6% of wholesale price |
| Beer | $1.29 per gallon |
| Wine | $1.21 per gallon |
| Liquor | $4.40 per gallon |
| Marijuana | N/A (not permitted without a prescription) |
Tennessee estate and inheritance taxes
There is no estate tax or inheritance tax in Tennessee.
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