Tennessee state income tax in 2025: A guide

Tennessee is one of the few U.S. states with no income tax. This can potentially boost your take-home earnings if you’re a Tennessee resident. 

With no individual income tax, the state relies on a high sales tax—one of the highest in the country—along with local property taxes to pay for public services. Tennessee’s combined state and local sales tax rate averages about 9.55%, so day-to-day purchases can add up quickly for residents. 

Even without a state income tax, federal income taxes still apply to Tennessee residents earning income. If you made money in the Volunteer State in 2024, you’ll likely need to file a federal tax return for the 2024 tax year (the taxes you pay in 2025).

*Note that you are still responsible for Federal taxes if you meet the IRS income filing threshold. This article addresses state-specific taxes only.

Specific income tax considerations in Tennessee

Tennessee’s lack of an individual income tax means that retirement income, investment earnings, wages, self-employment income, Social Security benefits, and military pay are all untaxed at the state level. This can be a perk for those looking to stretch their money—particularly retirees, investors, and military members—but federal taxes often still apply.  

Here are a couple of scenarios to think about if you earned money in Tennessee: 

• Are you an out-of-state resident working in Tennessee? If you’re a resident of a state with income tax but you work in Tennessee, you may still need to report Tennessee earnings to your home state. For instance, a North Carolina resident who earned income in Tennessee in 2024 will need to include that money on their North Carolina state and federal tax returns. 
• Are you a Tennessee resident working out of state? Tennessee residents who earn income in another state may need to file a nonresident tax return in the state where they worked. For example, if a Tennessee resident earned wages in North Carolina, they would report that income to North Carolina as well as on their federal return.

Does Tennessee have federal income tax?

If you earn money in Tennessee, you likely owe federal income tax. There are seven federal income tax brackets for 2024 (tax filing in 2025), with rates spanning from 10% to 37%, based on your taxable income and filing status. 

Other types of common taxes in Tennessee

While Tennessee residents don’t pay state income tax, they are subject to other taxes:

• Property tax: Local governments set property taxes in Tennessee, meaning rates vary across counties and cities. Property owners pay taxes based on the assessed value of their property, which is determined by the local tax assessor’s office. These funds support things like schools, roads, and public services in each community. The average effective tax rate for Tennessee is 0.56%. 
• Sales tax: Tennessee has a 7% base sales tax rate. Local governments can add up to 2.75%, making for a combined rate of up to 9.75% in some areas. This tax applies to most goods and some services, so it can be a significant source of revenue for state and local budgets, and a significant drain for shoppers.

How to file income tax in Tennessee

While Tennessee doesn’t impose an individual income tax, residents still need to file federal taxes and stay aware of other state taxes. Property and sales taxes will also play a role in the amount of money you take home, and these taxes may be deductible on your federal return (we can help with that!).

TurboTax makes it simple to file your federal taxes and understand how Tennessee-specific rules may affect you. Whether you prefer to file on your own or you’d like guidance from a tax pro, we’re here to help.  Looking for additional support from a local tax professional in Tennessee? TurboTax experts are available to guide you through the process or fully handle your 2024 tax return from start to finish.