Tennessee Has No State Income Tax on Wages
Tennessee eliminated all state income taxes on wages and salaries. The Hall Income Tax (which only applied to investment income like dividends and interest) was fully repealed as of January 1, 2021. Tennessee workers pay only federal income tax and FICA — making Tennessee one of the most tax-friendly states for workers in the Southeast.
This means a Tennessee worker earning $50,000/year saves approximately $2,000/year compared to a Kentucky worker (4% state tax), $2,475/year compared to an Ohio worker (top rate 3.75%), and significantly more compared to workers in high-tax states like California or New York.
Tennessee Paycheck Deductions
| Deduction | Rate | Tennessee Workers Owe? |
|---|---|---|
| Tennessee State Income Tax | 0% | No — TN has no wage income tax |
| Federal Income Tax | 10%–37% | Yes — based on income + filing status |
| Social Security (FICA) | 6.2% | Yes — up to $176,100 wage base |
| Medicare (FICA) | 1.45% | Yes — all wages |
| Local Taxes | — | Tennessee cities do not impose local income taxes |
Tennessee Minimum Wage 2026
Tennessee's minimum wage is $7.25/hr — the federal minimum. Tennessee does not have its own state minimum wage law. Most major Tennessee employers (especially in Nashville, Memphis, Knoxville, and Chattanooga) pay well above minimum wage due to labor market competition.
Overtime rate at minimum wage: $10.88/hr ($7.25 × 1.5).
TN vs. Neighboring States: Take-Home Pay Comparison
| State | State Income Tax | $50K Take-Home (est.) | Min Wage |
|---|---|---|---|
| Tennessee | 0% | ~$40,000–$42,500 | $7.25/hr |
| Kentucky | 4.0% flat | ~$38,000–$40,500 | $7.25/hr |
| Georgia | 5.49% flat | ~$37,000–$39,500 | $7.25/hr |
| North Carolina | 4.5% flat | ~$37,500–$40,000 | $7.25/hr |
| Virginia | 2%–5.75% | ~$37,000–$40,000 | $12.41/hr |
Frequently Asked Questions
Does Tennessee have a state income tax in 2026?
No. Tennessee has no state income tax on wages or salaries. The Hall Income Tax (on investment income only) was fully repealed in 2021. Tennessee workers pay only federal income tax and FICA.
Is overtime taxed in Tennessee?
Tennessee has no state income tax, so overtime is only subject to federal income tax and FICA. This makes overtime earnings more valuable in Tennessee than in states with state income taxes. Use ClockCalc to calculate your exact overtime pay.
Does Tennessee have local income taxes?
No. Tennessee cities and counties do not impose local income taxes on wages, unlike cities in Kentucky (Louisville 2.2%, Lexington 2.25%) or Ohio.
What is Tennessee's minimum wage in 2026?
Tennessee's minimum wage is $7.25/hr (federal minimum). Tennessee has no state minimum wage law above the federal floor.
How much does a Tennessee worker save vs. Kentucky?
A Tennessee worker earning $50,000/year saves approximately $2,000/year in state income tax compared to a Kentucky worker (4% × $50,000). Over 10 years: ~$20,000+ in tax savings (before investment returns).
Related: Kentucky Paycheck Calculator · Overtime Calculator · Time and a Half Calculator · Salary Increase Calculator · No Tax on OT 2026