Bottom Line
Middle-Class Families: Most Tax-Friendly (Go to the Kiplinger Tax Map for Middle-Class Families)
Retirees: Most Tax-Friendly (Go to the Kiplinger Tax Map for Retirees)
Residents of the Volunteer State are singing "Rocky Top" all the way to the bank, thanks to a low overall tax burden in the state. Tennessee has no income tax. Property taxes are well below average, too. Plus, there are no estate or inheritance taxes.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of Kiplinger’s expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of Kiplinger’s expert advice - straight to your e-mail.
However, the state sticks it to you when you're shopping with the second-highest average combined state and local sales tax rate in the nation. Fortunately, the low income and property taxes in Tennessee far outweigh the state's high sales taxes for most residents
Tennessee Income Taxes
Tennessee has no income tax.
Tennessee Sales Tax
7% state levy. 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 9.547%, according to the Tax Foundation. Local taxes are limited, though: Only the first $1,600 of any single item is taxable.
- Groceries: Taxable (4% state rate; additional local taxes may apply)
- Clothing: Taxable
- Motor Vehicles: Taxable (7% basic rate, plus 2.75% state tax on sales price between $1,600 and $3,200; additional local taxes may also apply)
- Prescription Drugs: Exempt
Tennessee Real Property Taxes
In Tennessee, the median property tax rate is $685 per $100,000 of assessed home value.
Tennessee Property Tax Breaks for Retirees
Tennessee has a property tax relief program that reimburses income-eligible seniors age 65 or older (and others) for taxes paid on their primary residence. For the 2021 program, property tax relief applies to the first $29,100 of market value, and the combined income for eligible owners is limited to $31,190.
There's also a property tax freeze program available for homeowners 65 and older. A senior's income cannot exceed income limits set by his or her county to qualify.
Tennessee Motor Fuel Taxes
Gasoline: 27.4¢ per gallon.
Diesel: 28.4¢ per gallon.
Tennessee Sin Taxes
Cigarettes: $0.62 per pack
Other tobacco products: 6.6% of the wholesale price
Beer: $1.29 per gallon
Wine: $1.21 per gallon
Liquor: $4.40 per gallon
There's also an additional $0.15 tax on each case of alcoholic beverage sold in Tennessee.
Tennessee Estate and Inheritance Taxes
No estate or inheritance tax.
-
-
6 Ways a DAF Can Make Your Year-End Giving Better Than Ever
Giving appreciated assets instead of cash could be the most tax-smart move you can make with a donor-advised fund, but wait, there's more…
-
Life Insurance Strategies to Consider When You Own a Family Business
Not only can life insurance replace lost income, but it can help with estate taxes and provide a sense of fairness for family members who don’t participate in the business.
-
Student Loan Forgiveness Blocked For Now Due to Court Ruling
For now, a Texas federal court ruling has caused the Biden administration to block new applications for student loan forgiveness.
-
$2.04 Billion Powerball Lottery Jackpot Winner Will Have a Massive Tax Bill
The $2.04 billion-dollar Powerball jackpot has its big winner and the federal government will get a big chunk of the prize from taxes.
-
New “Stimulus” Check 2022: Massachusetts Tax Refund Money is Being Sent Now
Massachusetts is returning nearly $3 billion to eligible taxpayers In November and December through tax refunds.
-
What's the Standard Deduction for 2022 vs. 2023?
Tax Breaks Most Americans claim the standard deduction on their federal tax return instead of itemized deductions. How much can you claim on your 2022 and 2023 returns?
-
What Are the Capital Gains Tax Rates for 2022 vs. 2023?
capital gains tax The capital gains tax rate that applies to a capital gain depends on the type of asset, your taxable income, and how long you held the property sold.
-
Virginia 2022 “Stimulus” Tax Rebates
Many eligible Virginians have received an up to $500 tax rebate check for 2022.
-
What Are the Income Tax Brackets for 2022 vs. 2023?
tax brackets Depending on your taxable income, you can end up in one of seven different federal income tax brackets – each with its own marginal tax rate.
-
California Stimulus Checks: More Debit Cards Being Sent This Week
If your last name begins with N to V, a California stimulus payment debit card could be on its way to you soon.
