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Tennessee State Taxes: What You’ll Pay in the 2026 Tax Season

Valerie Bauman,

Updated March 19, 2026

AARP

Published March 14, 2025

/ Updated March 19, 2026

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Tennessee is among the handful of states that have no individual income tax, which helped place it in the top 10 most competitive states when it comes to taxation, according to the Tax Foundation. But at 9.61 percent, the state has one of the highest combined state and average local sales tax rates in the country.

The big picture:

Income tax: Tennessee has no state individual income tax.
Property tax: The state had an effective property tax rate of 0.52 percent of assessed value. Actual rates vary from one county to the next.
Sales tax: Tennessee has an average combined state and local sales tax of 9.61 percent. The statewide sales tax is 7 percent. Local governments can also impose their own sales tax, which cannot exceed 2.75 percent.

How is income taxed?

There is no state income tax.

What about investment income?

While Tennessee does not tax earned income, the state does have a limited tax on certain dividend and interest income. For example, taxable investment income includes dividends from investment trusts or mutual funds, income from stock distributions and interest on bonds. Examples of taxable dividends and interest can be found here, and examples of nontaxable dividends and interest can be found here.

Are Social Security benefits taxed?

Social Security and other retirement income is not taxed in Tennessee.

How is property taxed?

The state has an effective property tax rate of 0.52 percent, though actual rates vary from one county to the next, according to the according to the latest Tax Foundation data. The lowest property tax rate is 0.12 percent in Pickett County, while the highest is 0.97 percent in Shelby County. The median property tax paid ranged from $535 in Fentress County to $3,004 in Williamson County.

What about sales and other taxes?

Sales tax: Tennessee has an average combined state and local sales tax of 9.61 percent. The state has a 7 percent sales tax, and local governments impose their own sales tax, which can be as high as 2.75 percent. Exemptions include gasoline, textbooks, school meals and many health care products. Groceries are taxed at a lower 4 percent rate. A full list of exemptions is available here.
Gas and diesel: Gasoline is taxed at 26 cents per gallon. Diesel is taxed at 27 cents per gallon.
Vehicle tax: Vehicle purchases are subject to the state’s 7 percent sales tax. Additionally, local sales tax applies on the first $1,600 of the vehicle’s purchase price. There is also an additional state tax rate of 2.75 percent that applies to the portion of the price that is between $1,600 and $3,200.
Alcohol: Alcoholic beverages consumed at a restaurant or bar is subject to a 15 percent liquor-by-the-drink tax. Alcohol purchased to be consumed off premises is subject to state and local sales taxes. Manufacturers, importers and wholesalers also pay excise taxes, which can be passed on to the consumer.
Lottery: With no state income tax, lottery winnings are not taxed in Tennessee, but winnings are subject to federal income tax.

Will my heirs or estate have to pay inheritance and estate taxes?

No, Tennessee does not have an inheritance or estate tax.

Are there any tax breaks for older residents?

Property tax relief: To be eligible for this benefit, residents must be 65 or older on the last day of the year or be disabled. They must also have an annual income of $38,470 or less and live in their primary residence. The maximum market value on which tax relief is calculated is $33,600. Also eligible for property tax relief are 100 percent disabled veterans or their surviving spouses. For this group, the maximum market value on which tax relief is calculated is $175,000, and there is no limit on their income. Tax relief savings depend on the specific tax rates in each city and/or county where the property is located. There is no maximum dollar amount.
Property tax freeze: Thirty-six cities and 27 of the 95 counties in Tennessee offer the option to freeze a resident’s property taxes at a set amount, which is based on the amount of taxes owed in the year they first qualify for the program. From that point forward, as long as the owner continues to qualify for the program, the amount of property taxes owed on that property typically won’t change, regardless of rate increases or countywide reappraisal. The only times it would change are when residents make improvements to a property to increase its value or when the homeowner sells the property. To qualify, residents must be 65 or older and own their principal residence, and their total income must exceed whatever limit the local jurisdiction set for that year. A list of participating jurisdictions and their income limits for 2026 can be found here.

Is military retirement income taxed?

No, Tennessee does not tax military retirement income.

What is the deadline for filing taxes in 2026?

Tennessee does not have an income tax, so there is no state filing deadline. Federal tax returns are due April 15, 2026.

More AARP Financial Resources

AARP Retirement Calculator Determine if you are saving enough to retire when — and how — you want.
AARP’s Social Security Calculator Figure out when to claim and how to maximize your Social Security benefits.
AARP Tax Tools Explore resources to help you calculate and prepare taxes.

Valerie Bauman is a journalist and author with two decades of experience working for publications, including Newsweek, Bloomberg and The Associated Press. Throughout her career, she’s covered politics and the law, including pharmaceutical litigation, mass torts and election law.