What Are Taxes in Tennessee?

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Tennessee Taxes Overview

Tennessee does not charge income tax on wages and salaries. Social Security benefits, pensions, and retirement plan withdrawals are also tax-free. The main source of tax revenue in Tennessee is the sales tax.

Sales Tax Details

  • The state sales tax rate is 7%.
  • Localities can add up to an additional 2.75%.
  • The average combined state and local rate is 9.547%.
  • Some goods are exempt from sales tax, such as industrial machinery, farm equipment, fuel, and medical supplies.

Property Taxes and Other Considerations

  • The average property tax in Tennessee is 0.67% of a home’s value, half the U.S. average.
  • Property tax relief programs are available for eligible seniors to reduce taxes.
  • Pension withdrawals are not taxed in Tennessee.
  • The state sales tax on car purchases is 7%.

Business Taxes in Tennessee

  • Businesses pay taxes based on net worth or property value.
  • Local property taxes also apply, and there is no state property tax.

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