Does Tennessee Tax Retirement Income? What Retirees Keep in 2026

Does Tennessee tax retirement income? No.

The state doesn’t tax your Social Security, your pension, or a single dollar you pull from a 401(k) or an IRA.

Tennessee has no state income tax at all, and it hasn’t since the old Hall tax on interest and dividends was fully repealed after 2020.

So a retiree in Knoxville and a retiree in Memphis keep the same slice of their nest egg, which is all of it, as far as the state is concerned.

The federal government still takes its cut, the same as it would anywhere.

The catch isn’t your income.

It’s the checkout line, and it’s your county tax bill.

Note: This is general information, not financial or tax advice. Tax rules and dollar amounts are subject to change, so confirm the current details with a professional.

Does Tennessee Tax Retirement Income?

No. Tennessee is one of a handful of states with no income tax on individuals, so it never touches your retirement income.

The state just collects its money a different way.

It taxes what you spend and what you own, not what you earn.

Federal taxes are another story.

What the IRS taxes, it still taxes, no matter which state you retire in.

Here’s how the state treats every slice of retirement money, and where retirees still end up paying.

1. Social Security

Social Security is the biggest check for most retirees, and Tennessee leaves it completely alone.

The state takes no cut of your monthly benefit, whether you claimed at 62 or held out until 70.

Same check, no state deduction.

The only tax that can reach a Social Security check is federal.

Past certain income limits, the IRS can tax up to 85% of your benefit, but that’s a national rule that follows you into any state.

Cross into Tennessee and that federal math doesn’t change, though the state side of the bill drops to nothing.

2. Pensions

Pension income gets the same free pass in Tennessee.

A teacher’s pension from the Tennessee Consolidated Retirement System, a factory pension out of a plant near Chattanooga, a federal or military pension: The state taxes none of it.

Your pension never lands on a state return because there’s no state return to file.

The full pension is yours.

Federal income tax still applies to most pension money, the way it always has.

Military retirees get one more reason to look toward Tennessee, since the state stacks no tax of its own on top of that federal bill.

3. 401(k) and IRA Withdrawals

Every dollar you withdraw from a 401(k) or a traditional IRA comes out untaxed by Tennessee.

Pull $2,000 for a roof repair or $60,000 to travel, and the state’s share is identical.

Not a cent.

Roth withdrawals are already tax-free at the federal level, so they stay clean top to bottom.

Even a required minimum distribution, the withdrawal the IRS forces once you turn 73, counts only as federal income.

Tennessee adds nothing to that bill.

4. Interest and Dividends

Interest and dividends are the one kind of retirement money Tennessee used to tax, and it's the piece that changed.

For decades the state charged the Hall tax on bond interest and stock dividends, even while wages went untouched.

That tax dropped a point a year until it disappeared, gone for tax years starting in 2021.

Gone for good.

So the interest and dividends your savings earn in retirement now reach you free of any state tax.

For anyone living partly on certificate-of-deposit interest or dividend checks, that repeal keeps a few hundred more dollars in their pocket each year.

The Hall tax was the last thread of a state income tax in Tennessee, and lawmakers cut it.

The Sales Tax Catch

Tennessee pays for skipping the income tax at the register.

The state sales tax is 7%, and once your county and city add their share, the average combined rate hits 9.61%.

That's the second-highest combined sales tax in the country, behind only Louisiana.

That adds up on a big-ticket purchase.

Groceries get a break, but not a pass, since food is taxed at a reduced 4% state rate plus your local tax.

Lawmakers pushed to wipe out the grocery tax in 2026, and the effort stalled, so it's still on your receipt.

Buy a $500 appliance in Memphis, where the combined rate reaches 9.75%, and about $49 of that is sales tax.

For a retiree spending down savings, that sales tax adds up in a way the missing income tax never will.

Property Taxes Stay Low

Property taxes in Tennessee run low, which eases the sales-tax sting for anyone who owns a home.

The average effective property tax rate sits around 0.52% of a home's value, one of the lowest anywhere.

On a $300,000 house, that's roughly $1,560 a year, less than what many retirees paid up north on a smaller place.

Room to breathe.

Homeowners 65 and older can stretch it further.

A statewide tax relief program reimburses low-income seniors for part of their property tax bill.

In many counties and cities, a separate tax freeze locks an older homeowner's bill at its current amount, so a reappraisal can't push it up.

Nashville, Knoxville, Memphis, and Chattanooga all run the freeze, each with its own income limit.

How Tennessee Compares

Among no-income-tax states, Tennessee keeps good company with the neighbors and rivals chasing the same retirees.

Florida draws the headlines, and it also taxes no pension, no 401(k), and no IRA withdrawal.

The gap shows up in the details, since Florida leans on tourists and property while Tennessee leans harder on the checkout line.

A handful of states skip a personal income tax entirely, and retirees keep drifting toward them.

That pull is why Tennessee keeps landing on lists of the best and worst states to retire.

Retirees keep coming.

Frequently Asked Questions

Here are the questions Tennessee retirees ask most about their taxes.

Does Tennessee tax Social Security?

No. Tennessee has no state income tax, so Social Security benefits aren't taxed at the state level. Federal tax may still apply depending on your total income.

Does Tennessee tax pensions and 401(k) withdrawals?

No. Tennessee doesn't tax pension income or withdrawals from a 401(k) or IRA. Only federal income tax applies to that money.

Is the Hall income tax still in effect?

No. The Hall tax on interest and dividends was fully repealed for tax years beginning in 2021. Tennessee now has no tax on personal income of any kind.

What taxes do retirees pay in Tennessee?

Retirees mainly feel Tennessee's sales tax, which averages about 9.61% combined and runs 4% at the state level on groceries. Property taxes are low, and seniors 65 and older may qualify for tax relief or a tax freeze.