Tennessee Retirement Income Tax 2026: No State Tax on RMDs, IRAs, and 401(k)s

Tennessee imposes no personal income tax. That means a retiree taking $180,000 a year in IRA distributions owes Tennessee $0 in state income tax. The same retiree in California owes roughly $13,000–$15,000. In New York, roughly $8,000–$10,000. Federal income tax applies in all three states — but the state layer disappears completely in Tennessee. Tennessee eliminated its last income tax, the Hall Income Tax on interest and dividends, effective January 1, 2021, completing a six-year phaseout. As of 2026, Tennessee has zero individual income tax in any form.

How Tennessee treats each source of retirement income

Tennessee vs. high-tax states: what a retiree actually saves

The table below shows approximate annual state income tax savings for a Tennessee resident compared to California and New York. Federal income tax is identical across all states at the same income level. California provides no retirement income exemption — every dollar of IRA or RMD income is taxed at rates up to 13.3%. New York excludes $20,000 per person of qualifying retirement income for those 59½ and older, then taxes the remainder at graduated rates up to 10.9%.

Estimates for single filers using approximate 2026 indexed brackets. Married filing jointly savings are higher. NY figures include $20,000 per-person exclusion and 2026 Chapter 59 rates. Social Security is excluded from both CA and NY calculations (both states exempt SS). Federal taxes not included — identical in all states.

Tennessee vs. California retirement tax savings calculator

Enter your retirement income to see your Tennessee state tax bill ($0) and compare it to what the same income would cost in California. For a broader all-50-states comparison, use the state retirement income tax calculator.

Tennessee property tax: low rate, but not zero

Tennessee's statewide average effective property tax rate is approximately 0.55% — lower than Florida (~0.85%), Nevada (~0.49%), and well below Texas (~1.36%) and Illinois (~2.07%).⁴ Actual rates vary by county: Knox County (Knoxville) runs around 0.52%, Hamilton County (Chattanooga) about 0.61%, Davidson County (Nashville) approximately 0.68%, and Shelby County (Memphis) closer to 0.81%. All rates are substantially below the national average of approximately 1.0%.

Tennessee also runs a state Property Tax Relief Program for low-to-moderate income seniors and disabled homeowners.⁴ For 2026:

• Who qualifies: Homeowners age 65 or older (or totally/permanently disabled, or disabled veterans) with total household income at or below approximately $38,470.
• What it covers: State reimburses local property taxes on the first $32,700 of the home's full market value.
• Income test: All household income sources count — including Social Security, retirement distributions, and investment income.
• Disabled veteran track: No income limit; applies on up to the first $175,000 of assessed value.

Note: the income threshold of ~$38,470 is well below the retirement income range of most visitors to this site. A retiree with a $500K IRA taking $30,000/year in RMDs already exceeds the limit. The program provides meaningful relief for modest-income Tennessee seniors but is not a planning tool for larger portfolios.

The sales tax offset: the trade Tennessee retirees make

Tennessee's $0 income tax comes with a visible tradeoff: the state relies heavily on consumption taxes. Tennessee's combined state and local sales tax rate averages 9.61% — among the highest in the country, alongside Louisiana.⁴ The state rate is 7%; local jurisdictions add up to 2.75% more. Nashville sits at 9.75%; Knoxville at 9.25%.

Groceries are taxed in Tennessee — at a reduced rate of 4% (plus local) rather than the full 7% rate, but still taxed unlike in many states. On $60,000/year in living expenses, a Tennessee retiree might pay $3,000–$5,000 in sales tax annually depending on spending patterns.

For most retirees with significant retirement account balances, the math still strongly favors Tennessee:

CA income tax estimated using 2026 MFJ brackets. "TN sales tax premium vs CA" is an approximate additional sales tax cost compared to living in California (CA rate ~8.68% average vs TN 9.61%). Actual difference depends on spending pattern. For retirees spending most income on housing (not subject to sales tax) and healthcare, the sales tax premium may be smaller.

No Tennessee estate tax

Tennessee repealed its state estate tax effective January 1, 2016 (Ch. 501, Public Chapter, 2012 session with full elimination in 2016). As of 2026, Tennessee has no estate tax, no inheritance tax, and no gift tax at the state level. This is particularly relevant for large traditional IRA owners planning wealth transfer: heirs will owe federal income tax on inherited traditional IRA distributions (10-year rule, with annual RMDs if decedent was past required beginning date under T.D. 10001), but they will owe no Tennessee state income tax on those distributions.

Compare Pennsylvania: PA has no state income tax on IRA distributions during your lifetime, but levies a 4.5% inheritance tax on IRA assets passing to adult children at death — with no exemption threshold. Tennessee has no equivalent state-level inheritance tax on IRA accounts.

Roth conversion strategy for new Tennessee residents

If you are currently living in a high-income-tax state (California, New York, Minnesota, Oregon, New Jersey) and plan to relocate to Tennessee, wait until after you establish Tennessee domicile to execute large Roth conversions. Converting $200,000 from a traditional IRA to a Roth IRA while you are a California resident triggers approximately $12,000–$16,000 in California state income tax on the conversion. Converting the same amount one year later as a Tennessee resident costs $0 in state income tax — you still owe federal income tax, but the state layer disappears.

The sequence matters:

1. Move first, convert second. Establish Tennessee domicile: change your driver's license, voter registration, bank address, update estate documents, spend more than half the year in Tennessee.
2. File a final part-year return in your former state. Report only the income you earned while a resident of that state.
3. Execute conversions in your first full Tennessee tax year. Pay federal tax; owe $0 to Tennessee.

When Tennessee doesn't save you state income tax

Tennessee's zero income tax is only a tax advantage relative to states that do tax retirement income. A few important cases where moving to Tennessee produces no state income tax savings:

• Illinois residents: Illinois already exempts 100% of IRA, 401(k), pension, and Social Security income from state income tax (35 ILCS 5/203). An Illinois retiree moving to Tennessee saves nothing on income tax — they already owe $0 in Illinois. The math might still favor Tennessee for estate planning or cost-of-living reasons, but the income tax advantage is zero. See the Illinois retirement income tax guide.
• Pennsylvania residents: Pennsylvania also taxes $0 on qualified retirement distributions (Tax Reform Code of 1971, §303). PA retirees moving to Tennessee owe the same $0 on income in both states. The difference is at death: PA levies a 4.5% inheritance tax on IRA assets to adult children; Tennessee levies nothing. See the Pennsylvania retirement income tax guide.
• Mississippi and Iowa (age 55+) residents: Both states fully exempt qualified retirement income. No income tax savings from relocation to Tennessee.

Tennessee retirement cities: tax context

Tennessee has several distinct retirement corridors, each with different property tax profiles within the zero-income-tax framework:

• Nashville / Brentwood / Franklin (Davidson/Williamson County): Highest cost-of-living in the state. Nashville's property tax rate is approximately 0.68% effective. Williamson County (Brentwood/Franklin) is lower (~0.55%) with highly rated school districts. Strong healthcare access, growing city services for retirees.
• Knoxville / Knox County: Lower cost of living than Nashville. Effective property tax ~0.52%. Proximity to Great Smoky Mountains National Park. University of Tennessee health system.
• Chattanooga / Hamilton County: Midpoint in cost. Effective rate ~0.61%. Scenic geography, lower housing costs than Nashville. Well-regarded cardiology and orthopedic systems.
• Memphis / Shelby County: Lowest cost housing, but higher crime and property taxes (~0.81%). Substantial healthcare infrastructure. Not a primary retirement relocation target.
• Tri-Cities area (Johnson City / Kingsport / Bristol): Very low cost of living and property taxes. Mountain scenery. Ballad Health hospital network. Often overlooked by retirees from the Mid-Atlantic.

Tennessee domicile checklist for relocating retirees

If you're establishing Tennessee as your new domicile from a high-income-tax state, the steps that matter for state income tax purposes:

1. Purchase or lease a Tennessee residence and begin occupying it as your primary home.
2. Get a Tennessee driver's license within 30 days of establishing residency.
3. Update vehicle registration to Tennessee plates.
4. Update voter registration to your Tennessee address.
5. File a Declaration of Domicile (or equivalent notice) in your former state if required — California FTB and New York DTF are aggressive about residency audits.
6. Update estate documents (will, trust, healthcare directive) to reflect Tennessee residency.
7. Spend more than 183 days in Tennessee in the transition year. If your former state has a day-count rule (New York's 183-day statutory residency trap; California's 546-day employment-activity rule), track your days carefully.
8. File a part-year return in your former state for income earned while a resident there.

For the tax relocation decision framework — including the federal law protecting your retirement income from former-state taxation (4 U.S.C. §114), how California and New York audit departing residents, and the Roth conversion sequencing strategy — see the retirement state tax relocation guide.

How Tennessee fits into broader retirement distribution planning

Eliminating the state income tax layer changes several planning calculations for Tennessee retirees:

• QCDs still matter — but only for federal tax purposes. A Qualified Charitable Distribution reduces federal AGI, which affects IRMAA tiers and Social Security provisional income. But there is no Tennessee state income tax to offset. The federal benefit is unchanged; there is just no state-level add-on benefit. See the QCD calculator for federal impact analysis.
• IRMAA is entirely a federal issue. Tennessee has no state equivalent of IRMAA. Medicare Part B and Part D surcharges are set by CMS based on 2024 federal MAGI — Tennessee residency does not affect IRMAA tiers. See the IRMAA calculator to model your federal exposure.
• Inherited IRA planning is simpler. Tennessee heirs inheriting a traditional IRA (10-year rule, annual RMDs if decedent was past RBD per T.D. 10001) will owe federal income tax on distributions but no Tennessee state income tax. This makes the annual distribution schedule a purely federal-bracket optimization problem — see the inherited IRA 10-year rule calculator.

Sources

1. Tennessee Department of Revenue — HIT-18: Pension Income, Social Security, 401(k), and IRA Distributions: revenue.support.tn.gov. Confirms no Tennessee income tax on retirement distributions.
2. Tennessee Department of Revenue — Hall Income Tax [Repealed for Tax Years Beginning January 1, 2021]: revenue.support.tn.gov. Confirms full repeal effective January 1, 2021.
3. Tax Foundation — Tennessee Tax Rates and Rankings: taxfoundation.org. Confirms no state estate tax; Tennessee repealed estate tax effective 2016.
4. Tax Foundation — State and Local Sales Tax Rates 2026; property tax effective rate sourced from Tax Foundation state property tax data and Tennessee county assessor records. Average combined sales tax rate 9.61%; effective property tax rate approximately 0.55% statewide.

All values verified as of September 2026. Tennessee's income tax framework has been stable since the Hall Tax repeal in 2021. Tennessee has no scheduled changes to its zero-income-tax status. Property tax rates and senior relief program income thresholds are set at the county level and may be updated annually — verify current year thresholds with your county trustee.