Does Tennessee have income tax? No, and here is what Franklin homeowners pay instead

At a glance

No state tax on wages or investment income

Tennessee taxes neither your paycheck nor, since 2021, your investment income. The state's only individual income tax was the Hall income tax, and it never reached wages. It applied only to interest from bonds and notes and to dividends from stock, according to the Tennessee Department of Revenue.

The Hall tax was repealed for tax periods beginning on or after January 1, 2021. That makes 2020 the last year anyone owed it. Since then a household that moves to Franklin files no Tennessee individual income tax return for salary, bonuses, interest or dividends.

The Tax Foundation's 2026 state income tax table counts Tennessee among eight states that levy no individual income tax at all.

How Tennessee's income tax rules work

Wages and salaries are not taxed

Tennessee has never taxed earned income. A W-2 salary, a partner draw or a year-end bonus earned while you live in Franklin carries federal income tax and federal payroll taxes, but no state income tax. There is no city or county wage tax in Williamson County either.

The Hall income tax on interest and dividends

The Hall income tax was enacted in 1929 and named for the senator who sponsored it. It was the one exception to Tennessee's no-income-tax reputation, because it reached unearned income: interest from bonds and notes, and dividends from stock. Its rate stood at 6% before 2016 and was phased down to 1% between 2016 and 2020 before full repeal from January 1, 2021.

The 2014 constitutional amendment

In November 2014 Tennessee voters approved an amendment to Article II, Section 28 of the state constitution. It says the legislature shall not levy, authorize or otherwise permit any state or local tax upon payroll or earned personal income, or any tax measured by it.

The practical effect for someone buying a long-term home: a future legislature cannot add a wage tax by passing an ordinary bill. Changing it would require amending the constitution again.

Retirement income, Social Security and capital gains

Because Tennessee no longer levies any individual income tax, the state does not tax pension payments, IRA or 401(k) withdrawals, Social Security benefits or gains from selling investments. Federal rules on all of these still apply. A CPA can tell you how your own mix is taxed federally and whether your former state can still claim any of it.

What Tennessee taxes instead

A state with no income tax still has to fund itself. In Tennessee the money comes mainly from sales tax, business taxes and local property tax. Here is each one as it applies to a Franklin household.

Sales tax: 9.75% on most purchases in Williamson County

The general state sales tax rate is 7%, and Williamson County's local option rate is 2.75%, for a combined 9.75% on most purchases in the county. On a $10,000 taxable purchase that is $975.

Property tax: 25% assessment times the local rate

Residential property in Tennessee is assessed at 25% of its appraised value, and the local rate is applied per $100 of that assessed value. In 2026 the Williamson County rate is $1.30 per $100 for property outside any city (County Only), $1.566 inside Franklin city limits outside the Franklin Special School District, and $2.2433 inside both. The full table, appeals and relief programs are in the Williamson County property tax guide.

Franchise and excise tax on businesses

If you own a business entity that does business in Tennessee, it pays a franchise tax of 0.25% of its Tennessee net worth and an excise tax of 6.5% on net earnings from business done in the state. Business owners should have a CPA review how their entity is treated.

Realty transfer tax when you buy

When you buy a home, Tennessee charges a realty transfer tax of $0.37 per $100 of the price or value, paid by the buyer at recording. On a $1.5M Franklin purchase that is $5,550. The Tennessee closing costs guide covers it with the mortgage tax and the other line items.

Example: state and local taxes on a $1.5M Franklin home

For a high earner, the trade is simple to describe: no state tax on income, and a property tax bill that depends on exactly where the home sits. The table uses 2026 Williamson County rates, 25% assessment, and assumes the county's appraised value equals the price.

Add the one-time $5,550 transfer tax at purchase and 9.75% sales tax on what you buy locally. There is no line for state income tax, whatever your salary or portfolio income.

The point of the example is scale. On a $1.5M home, the gap between the lowest and highest bill above is about $3,500 a year, and that gap is set by city limits and the school district line, not by the house. Check the jurisdiction of any parcel before you compare listings. If it helps, I can confirm the tax district for any Franklin home you are considering.

For the full cost picture beyond tax, including insurance, HOA dues and utilities, see the cost of living in Franklin guide.

Moving to Franklin as a high earner: what changes and what doesn't

Federal income tax still applies

Moving removes the state layer only. Federal income tax, Social Security and Medicare taxes on wages, and federal rules on investment income are the same in Franklin as anywhere else in the country.

Your former state still decides the move year

The year you move, your old state's residency rules decide how much of that year's income it can tax. Rules on part-year residents, sourcing of bonuses, deferred compensation and the sale of a former home differ by state. Ask a CPA licensed in your former state to review the move before you set a closing date. Readers coming from the West Coast will find more in the moving to Franklin from California guide.

Is it better to live in a state with no income tax?

It depends on what you earn and what you own. A household with high wages or large investment income and a modest home keeps the most. A household with lower income and a large, expensive property may find that property tax and sales tax take more than an income tax would have. Run your own numbers: take your current state income tax, then subtract the Franklin property tax for the home you would actually buy and an estimate of local sales tax on your spending.

Common misconceptions about Tennessee taxes

• Assuming no tax means no property tax. Franklin homes carry an annual bill based on the county's appraised value. Inside FSSD the 2026 rate is $2.2433 per $100 assessed.
• Quoting the Hall tax as current. Older articles still describe a tax on interest and dividends. It ended after tax year 2020.
• Forgetting the move year. Your previous state can still tax income earned before you became a Tennessee resident.

What to check before you relocate

1. Ask a Tennessee CPA to review your income mix and any business entity you plan to move.
2. Ask a CPA in your current state how it treats the year you leave.
3. Look up the tax district of each home you consider in the Williamson County Property Assessor's database, and compare city, county and FSSD rates using the property tax guide.
4. Model the full monthly cost, including loan payment and property tax, with the jumbo mortgage calculator.
5. If you are planning an estate as well as a move, read the Tennessee estate and inheritance tax guide.

This page explains how the rules work. It is not tax advice; confirm your situation with a Tennessee CPA or tax attorney.

Common questions

Sources

• Tennessee Department of Revenue: Hall Income Tax
• MTSU Sidelines: Amendment 3 might declare income tax unconstitutional (Oct 2014)
• NFIB: Vote yes on Amendment 3, income and payroll tax ban
• Tax Foundation: State Individual Income Tax Rates and Brackets, 2026
• Tennessee Department of Revenue: Sales and Use Tax / Local Sales Tax
• Tennessee Department of Revenue: Franchise & Excise Tax, Due Dates and Tax Rates
• Williamson County Trustee: 2026 Property Tax Rates & Calculator
• Tennessee Comptroller: How to Calculate Your Tax Bill
• Tennessee Department of Revenue: Realty Transfer and Recordation Tax Manual (March 2022)
• Williamson County Trustee: Tax Relief Brochure TY 2026 (PDF)
• Williamson County Property Assessor: property search