Tennessee Retirement Tax Guide

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Income tax: zero, on everything

Tennessee has no state income tax of any kind. That wasn’t always true — the state used to tax interest and dividends through the “Hall tax,” but that was phased out and fully repealed as of January 1, 2021. Today, none of the following is taxed by the state:

• Social Security benefits
• Pension income (public or private)
• 401(k), 403(b), and IRA withdrawals
• Wages, interest, dividends, and capital gains

For a retiree drawing, say, $100,000 a year from retirement accounts, that’s the difference between a real state tax bill and nothing at all. It’s why Tennessee competes directly with Florida and Texas as a retirement destination — same no-income-tax headline, cooler climate, lower housing cost.

Estate & inheritance tax: none

Tennessee repealed its inheritance tax (the estate-tax phase-out completed in 2016), so there is no state estate or inheritance tax. Your heirs deal only with federal estate tax, which affects very few households. This matters if you’re moving from a state like Illinois that does levy an estate tax.

Property tax: low

Tennessee’s property taxes are among the lower in the nation, helped by the 25%-of-value assessment ratio. In Hamilton County the effective rate runs roughly 0.38% unincorporated to 0.86% in-city Chattanooga — see the full Hamilton County property tax guide and the senior Tax Relief & Freeze programs.

The bottom line

For a retiree living mainly on Social Security, a pension, and retirement-account withdrawals, Tennessee is genuinely tax-friendly: nothing on your income, nothing on your estate, low property tax. The honest caveat is the sales tax on day-to-day spending. If you’re coming from a state that also exempts retirement income (Illinois, Pennsylvania) or has no income tax (Florida, Texas), the move is about property tax and cost of living, not income tax — see our moving-from guides linked on the Chattanooga hub.