Tennessee Salary Calculator

Tennessee Income Tax Overview (2026)

Tennessee eliminated its income tax on investment income (Hall Tax) in 2021 — now has zero income tax. Workers pay only federal income tax and FICA. Tennessee has a 7% state sales tax plus local taxes up to 2.75%.

In addition to state tax, all Tennessee workers pay federal income tax (10%–37% marginal rates) and FICA — Social Security (6.2%) and Medicare (1.45%), totaling 7.65% of gross wages. Voluntary deductions like 401(k) contributions or health insurance premiums further reduce taxable income.

Cost of Living in Tennessee

Tennessee has seen rapid cost growth, especially Nashville. Nashville median home prices exceeded $480,000 in 2026. Memphis is significantly more affordable at $175,000. Knoxville and Chattanooga are mid-range.

When evaluating a job offer in Tennessee, consider not just the salary but total compensation — employer benefits, retirement match, and location-specific costs. A $70,000 salary in a low cost-of-living Tennessee city may be more livable than $85,000 in a high-cost metro.

Top Industries and Employers in Tennessee

Tennessee's economy is anchored by healthcare (HCA Healthcare HQ), automotive (Volkswagen, Nissan), music and entertainment, logistics, agriculture. The state median household income is approximately $54,000 per year, though this varies significantly by region and occupation.

Tennessee follows the federal minimum wage floor of $7.25/hour, so entry-level pay here is set largely by employer competition rather than state law, and the state's $54,000 median household income sits close to the national average, with healthcare as the largest single influence on local pay scales.

How Tennessee Compares to Other States

Because Tennessee has no state income tax, residents keep significantly more of each paycheck than in neighboring states. For a $75,000 salary, the difference between Tennessee and a high-tax state like California can exceed $6,000 per year.

For workers evaluating a potential relocation, state income tax is just one factor. Property taxes, sales taxes, cost of living, job market depth, and quality of public services all contribute to the complete financial picture. Use our Salary Calculator to compare take-home pay across all 50 states side by side.

How to Calculate Your Tennessee Take-Home Pay

Your net pay is your gross salary minus: (1) federal income tax based on your bracket and filing status, (2) FICA at 7.65% of gross wages, (3) Tennessee state income tax (zero in Tennessee), and (4) any voluntary deductions such as 401(k), HSA, or health insurance premiums. The calculator above handles steps 1–3 automatically.

Tax-Advantaged Strategies for Tennessee Workers

Regardless of your state tax rate, contributing to pre-tax retirement accounts like a 401(k) or traditional IRA reduces your federal taxable income dollar for dollar. In 2026, you can contribute up to $24,500 to a 401(k) and $7,500 to an IRA. For someone earning $60,000 in Tennessee, maxing the 401(k) reduces federal taxable income by $24,500 — saving approximately $2,940 in federal tax (at 12% marginal rate) plus the full FICA contribution on deferred amounts.