Tennessee has no state income tax. It once taxed interest and dividends through the Hall Tax, but that was fully repealed in 2021, so today wage and investment income alike are completely untaxed by the state.
That makes Tennessee one of the most tax-friendly states in the country for take-home pay. Here is exactly what still comes out of a Tennessee paycheck, what the missing state tax is worth, and how the state pays for itself instead. See your exact take-home with the free Tennessee paycheck calculator.
How Tennessee's income tax works
Tennessee is one of nine states with no tax on wage income, and since the Hall Tax on interest and dividends ended in 2021 it taxes no personal income at all. Your employer withholds only federal income tax and FICA at 7.65% (6.2% Social Security up to the wage base, plus 1.45% Medicare). There is no state or local income tax anywhere in Tennessee, including Nashville, Memphis, and Knoxville.
Because there is no state layer, a Tennessean keeps noticeably more of the same salary than a worker in most neighboring states. The gap is simply the state income tax Tennessee residents never pay.
Your take-home on a $65,000 salary in Tennessee
Here is how a $65,000 salary breaks down for a single filer, using 2025 federal and FICA figures alongside Tennessee's no state income tax.
| Item | Annual |
|---|---|
| Federal income tax | $5,246 |
| FICA (Social Security + Medicare) | $4,973 |
| Tennessee income tax | $0 |
| Take-home pay | $54,782 |
| Percent of gross kept | 84.3% |
On a $65,000 salary a single filer keeps about $54,782, or 84.3% of gross, with no state income tax form to file. In metros like Knoxville, Chattanooga, and Memphis, where housing has historically run below the national average, that high take-home rate stretches even further, though Nashville's costs have risen quickly. Compare with Kentucky.
How Tennessee pays for itself without an income tax
No income tax does not mean no taxes. Tennessee has one of the highest combined sales-tax rates in the country: 7% state plus local add-ons push it to roughly 9.5% to 9.75% in most areas. Property taxes, however, are relatively modest, so the burden falls more on what you spend than on what you earn or own.
For retirees the math is excellent: Tennessee taxes neither wages nor retirement income such as 401(k), IRA, and pension withdrawals or Social Security, and there is no estate or inheritance tax.
How to keep more of your Tennessee paycheck
Even without a state tax to shelter, a traditional 401(k) or HSA still lowers your federal tax, and an HSA also avoids FICA. In a no-income-tax state like Tennessee, those accounts are the main remaining lever to raise your take-home rate.