The facts on Tennessee’s Tax Climate

  • 6%
    Individual Income Tax
    Flat Rate
  • 6.5%
    Corporate Income Tax
    Flat Rate
  • 7%
    Sales Tax
  • $748
    Property Tax
    Collections Per Capita

Tennessee’s Individual Income Tax System

Tennessee’s personal income tax system consists of a flat 6% rate on exclusively dividend and interest income. No other personal income is subject to state taxation. Tennessee’s 2010 state-level individual income tax collections were $27 per person, which ranked 43th highest nationally.


50-State Table of Individual Income Tax Rates

50-State Table of State Individual Income Tax Collections

50-State Table of State and Local Individual Income Tax Collections Per Capita

Tax Freedom Day Arrives on March 31 in Tennessee

Tax Freedom Day is the day when Americans finally have earned enough money to pay off their total tax bill for the year. In 2012, Tennessee taxpayers work until March 31 (ranked 50th nationally) to pay their total tax bill. The Tax Freedom Days of neighboring states are: Alabama, April 6 (ranked 43rd nationally); Mississippi, April 1 (ranked 48th nationally); Arkansas, April 11 (ranked 31st nationally); Missouri, April 7 (ranked 42nd nationally); Kentucky, April 9 (ranked 37th nationally); Virginia, April 20 (ranked 11th nationally); North Carolina, April 11 (ranked 31st nationally); and Georgia, April 10 (ranked 35th nationally).

Tennessee’s State and Local Tax Burden Among Nation’s Lowest

Throughout the past three decades Tennessee’s state and local tax burden has consistently remained one of the nation’s lowest, currently estimated at 7.6% of income (47th nationally), below the national average of 9.8%. Compared to the 1977 data, Tennessee had a tax burden of 8.2% (47th nationally), decreasing 0.6% overall. Currently Tennessee taxpayers pay $2,752 per capita in state and local taxes.
Tennessee’s State-Local Tax Burden, 1977-Present
Other States’ State/Local Tax Burdens
Map of U.S. Showing all State’s Burdens and Ranks
Historical Chart Comparing All States’ State/Local Tax Burdens from 1977 to 2009

Tennessee’s 2013 Business Tax Climate Index Ranks 15th

Tennessee ranks 15th in the Tax Foundation’s State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property. The ranks of neighboring states are as follows: Kentucky (24th), Virginia (27th), North Carolina (44th), Georgia (34th), Alabama (21st), Mississippi (17th), and Arkansas (33rd).

50-State Comparison of Business Tax Climates (data only)
2013 State Business Tax Climate Index (full study)