Tennessee vs Texas Taxes
Compare the total tax burden between Tennessee (no income tax) and Texas (no income tax). Enter your income to see which state saves you more.
Tennessee vs Texas: Two zero-tax states where sales tax and property tax decide everything
Tennessee and Texas are both in the exclusive club of states with no personal income tax, making the headline comparison misleading—neither state will tax your wages, salary, or investment income. Instead, the real rivalry comes down to how each state funds its government through consumption and property taxes, and the resulting impact on your wallet depends entirely on your lifestyle.
Texas has significantly higher property taxes, averaging 1.60% effective rate versus Tennessee's 0.56%. On a $400,000 home, that's a difference of roughly $4,160 per year—a meaningful gap that compounds over time. This is the single biggest cost differentiator between the two states and the primary reason Tennessee can be cheaper overall for homeowners despite comparable sales tax rates.
Tennessee counters with one of the nation's highest sales tax burdens: a 7% state rate plus local taxes pushing combined rates to 9.75% in Nashville and other cities. Texas's 6.25% base rate with locals maxing at 8.25% is notably lower. For a household spending $60,000 annually on taxable goods, that's roughly $900-$1,000 more in Tennessee. Both states tax groceries at reduced rates (Tennessee at 4%, Texas exempts groceries entirely), giving Texas another small edge on everyday spending.
Key Differences Beyond Income Tax
| Category | Tennessee | Texas |
|---|---|---|
| Property Tax | Effective rate ~0.56%; residential assessed at 25% of market value | Effective rate ~1.60%; no cap on annual assessment increases; aggressive reassessment in growing metros |
| Sales Tax | Base rate 7%, combined up to 9.75%; groceries taxed at 4% state rate | Base rate 6.25%, combined up to 8.25%; groceries fully exempt from sales tax |
| Cost of Living | Nashville expensive, but Knoxville, Memphis, and Chattanooga quite affordable; overall below national average | Austin increasingly expensive; Dallas, Houston, San Antonio remain affordable; overall at national average |
| Estate Tax | No state estate or inheritance tax | No state estate or inheritance tax |
| Business Taxes | Franchise and excise taxes: 6.5% excise on net earnings, 0.25% franchise tax on net worth | Franchise (margin) tax: 0.375%-0.75% on revenue above $2.47M threshold; no tax on small businesses below threshold |
Who Benefits from Moving?
Homebuyers comparing $400K+ properties
On a $400,000 home, Texas property taxes run about $6,400/year versus Tennessee's $2,240—a $4,160 annual difference. Over a 30-year mortgage, that's $124,800 in extra property tax in Texas. Tennessee is the clear winner for homeowners at every price point.
Retirees choosing between Nashville and Dallas/Houston
Both states offer zero income tax on retirement income. The tiebreaker is property tax: a retiree downsizing to a $300,000 home saves about $3,120 annually in Tennessee. Texas offers a generous 65+ homestead freeze, but the base rate is still much higher.
High-spending households
A household spending $80,000/year on taxable goods pays roughly $7,800 in sales tax in Nashville (9.75%) versus $6,600 in Houston (8.25%). That $1,200 annual difference partially offsets Tennessee's property tax advantage, but the property tax gap dominates for homeowners.
Bottom line: With no income tax in either state, the decision comes down to property tax: a homeowner with a $400,000 house saves about $4,160 per year in Tennessee versus Texas, making Tennessee the cheaper option for most homeowners despite slightly higher sales taxes.
Tax at Different Income Levels
| Income | Tennessee Total Tax | Texas Total Tax | Annual Savings |
|---|---|---|---|
| $75,000 | $13,687 | $13,687 | $0 |
| $100,000 | $21,099 | $21,099 | $0 |
| $150,000 | $36,542 | $36,542 | $0 |
| $200,000 | $50,885 | $50,885 | $0 |
Based on single filer, standard deduction, 2025 tax year. Includes federal income tax, state income tax, and FICA.
Understanding Each State
Tennessee
Tennessee has no state income tax on wages. The Hall Tax on investment income was fully phased out in 2021. Tennessee relies on a 7% state sales tax (one of the highest in the US, plus local additions up to 2.75%), which particularly impacts lower-income residents who spend a larger share of income on taxable goods.
Tip: No tax on wages or investment income makes Tennessee tax-efficient for both earners and retirees. The high sales tax is the trade-off — factor this into cost-of-living comparisons.
Texas
Texas has no state income tax, relying instead on property taxes (among the highest in the US at ~1.6-1.8% of home value) and an 8.25% combined sales tax in most areas. For wage earners, the absence of income tax is a major advantage, but property owners face a significant ongoing cost.
Tip: While you save on income tax, Texas property taxes can exceed $5,000-$10,000/year on a median-priced home. Factor in property tax when comparing total tax burden against income-tax states where property taxes may be lower.
Key Comparison Points
Income tax structure: Tennessee has no state income tax, while Texas has no state income tax.
Beyond income tax: State tax comparisons should also consider property tax rates, sales tax, and cost of living. A state with no income tax may have higher property or sales taxes that offset the savings.
SALT deduction cap: Under OBBBA (2025+), the federal SALT cap is $40,000, phasing out above $500,000 MAGI toward a $10,000 floor. This limits the federal tax benefit of living in a high-tax state, so the gross state tax difference remains close to the net difference for most earners — especially high earners inside the phaseout.
Frequently asked questions
Is it cheaper to live in Tennessee or Texas?
Based on income tax alone, Tennessee has a lower tax burden. At $100K income, you'd save $0 annually in Tennessee compared to Texas. However, total cost of living also depends on property taxes, sales taxes, and housing costs.
How much would I save moving from Texas to Tennessee?
A single filer earning $100,000 would save approximately $0 per year in total taxes by living in Tennessee instead of Texas. At $150,000 income, the savings change to $0 per year.
What is the income tax rate in Tennessee?
Tennessee has no state income tax.
What is the income tax rate in Texas?
Texas has no state income tax.
Does Tennessee have income tax?
No, Tennessee does not levy a state income tax. Residents pay only federal income tax and FICA. However, Tennessee may have higher property taxes or sales taxes to compensate.