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.
| Tax Component | Tennessee | Texas |
|---|---|---|
| Federal tax | $13,170 | $13,170 |
| State tax | $0 | $0 |
| FICA | $7,650 | $7,650 |
| Total tax | $20,820 | $20,820 |
| Take-home | $79,180 | $79,180 |
| Effective rate | 20.82% | 20.82% |
| Annual Difference | — | — |
Tennessee has no state income tax and Texas has no state income tax, but at your income level the state tax owed is the same.
Tennessee Total Tax
20.82% effective rate
Texas Total Tax
20.82% effective rate
Annual savings
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 1.40% effective rate versus Tennessee's 0.52%. On a $400,000 home, that's a difference of roughly $3,520 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. Texas's 6.25% base rate, with state plus local rates capped at 8.25%, is lower. For a household spending $60,000 annually on taxable goods, the state rate gap alone is roughly $450 more in Tennessee, before local taxes. 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 ~0.52%; residential assessed at 25% of market value | Effective rate ~1.40%; no cap on annual assessment increases; aggressive reassessment in growing metros |
| Sales Tax | Base rate 7%, plus local taxes; 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 $2.65M 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 $5,600/year versus Tennessee's $2,080—a $3,520 annual difference. Over a 30-year mortgage, that's $105,600 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 $2,640 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 $5,600 in Tennessee state sales tax versus $5,000 in Texas state sales tax, before local taxes in either state. That $600 annual state-rate 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 $3,520 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 | $13,408 | $13,408 | $0 |
| $100,000 | $20,820 | $20,820 | $0 |
| $150,000 | $36,209 | $36,209 | $0 |
| $200,000 | $51,073 | $51,073 | $0 |
Based on single filer, standard deduction, 2026 tax year. Includes federal income tax, state income tax, and FICA.
Understanding Each State
Tennessee
Tennessee has no state income tax on wages and no longer taxes investment income. Tennessee relies on a 7% state sales tax (one of the highest in the US, plus local additions), 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, averaging about 1.6% of home value) and a 6.25% state sales tax plus local additions. 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 be a large annual cost 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, the 2026 federal SALT cap is $40,400, phasing out above $505,000 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.