Quick Answer
Tennessee has no income tax on wages, salaries, or any other income as of 2021. The state previously taxed interest and dividend income at 1-6% but eliminated this tax completely. W-2 employees in Tennessee have zero state income tax withholding, increasing take-home pay compared to states with income taxes.
Best Answer
Sarah Chen, Payroll Tax Analyst
W-2 workers earning wages and salaries in Tennessee
Does Tennessee tax your paycheck?
No, Tennessee does not tax any income, including wages, salaries, bonuses, commissions, or tips. Your Tennessee pay stub will show zero state income tax withholding — only federal taxes, Social Security, and Medicare are deducted.
Example: $70,000 salary comparison
Compare a $70,000 salary in Tennessee versus neighboring Kentucky:
Tennessee (biweekly paycheck):
Kentucky (biweekly paycheck):
Annual savings in TN: $3,500 (no state income tax)
Tennessee's tax history: The Hall Income Tax
Tennessee previously had the "Hall Income Tax" that taxed interest and dividend income:
This makes Tennessee one of only eight states with no income tax whatsoever.
What this means for your W-4 and payroll
Tennessee's revenue sources instead
Since Tennessee doesn't tax income, it relies on:
Key benefits for different income levels
What you should do
Use our paycheck calculator to see your exact Tennessee take-home pay. With no state income tax, your calculation is straightforward — just federal taxes and FICA. This makes Tennessee particularly attractive for high earners and retirees who can save thousands annually.
Key takeaway: Tennessee employees keep 100% of their income after federal taxes and FICA, saving $2,000-$5,000+ annually compared to states with typical 5% income tax rates.
*Sources: [Tennessee Department of Revenue](https://www.tn.gov/revenue.html), [IRS Publication 15](https://www.irs.gov/pub/irs-pdf/p15.pdf)*
Key Takeaway: Tennessee has zero income tax on all types of income, allowing workers to save $2,000-$5,000+ annually compared to states with typical 5% income tax rates.
Annual state income tax savings by moving to Tennessee
| Previous State | Tax Rate | Annual Savings on $60K | Annual Savings on $90K |
|---|---|---|---|
| Kentucky | 5.0% | $3,000 | $4,500 |
| North Carolina | 4.75% | $2,850 | $4,275 |
| Virginia | 5.75% | $3,450 | $5,175 |
| Georgia | 5.75% | $3,450 | $5,175 |
| Alabama | 5.0% | $3,000 | $4,500 |
More Perspectives
Sarah Chen, Payroll Tax Analyst
Workers who relocated to or from Tennessee for tax advantages
Moving to Tennessee: Immediate paycheck impact
Relocating to Tennessee can significantly increase your take-home pay. Once you establish Tennessee residency, your employer stops withholding state income tax, giving you an immediate raise equivalent to your previous state's tax rate.
Establishing Tennessee residency
To qualify for no state income tax:
Timeline for tax benefits
Your tax savings begin immediately upon establishing residency:
Cost-of-living considerations
While you save on income tax, factor in:
Cross-border work situations
If you live in Tennessee but work in another state, you may still owe that state's income tax. However, working in Tennessee means no state tax regardless of where you live.
Key takeaway: Moving to Tennessee eliminates state income tax immediately upon residency, but factor in higher sales tax rates when budgeting for everyday purchases.
*Sources: [Tennessee Department of Revenue](https://www.tn.gov/revenue.html)*
Key Takeaway: Establishing Tennessee residency eliminates state income tax immediately, but factor in the state's 9.25-9.75% total sales tax rate for cost-of-living calculations.
Sources
- IRS Publication 15 — Employer's Tax Guide for withholding requirements
- Tennessee Department of Revenue — Official state tax information and elimination of Hall Income Tax
Related Questions
Reviewed by Sarah Chen, Payroll Tax Analyst on February 28, 2026
This content is for educational purposes only and is not a substitute for professional tax advice. Consult a qualified tax professional for advice specific to your situation.