Overall Tennessee tax friendly. They have no general income tax but do tax interest and dividend income. They have a modest business tax but have a low sales tax. Unfortunately, where they fall short is having one of the highest property taxes in the country.
State Taxes at a Glance – Tennessee
| Type of Tax | 2023 |
|---|
| Individual Rates | None |
| Corporate / Business Tax Rates | 6.50% excise business tax |
| Gross Receipts Tax | Yes |
| Sales Tax | 9.55% (average) |
| Property Taxes | 0.68% as a percentage of primary home |
| Estate or Inheritance Tax | None |
State Income Taxes
Tennessee is one of the most tax friendly states in the union. It has no personal income tax.
Interest and Dividend Taxes
The State of Tennessee is one of only two States that have an I&D (Interest and Dividend) Tax. The other one being New Hampshire. This is probably due to it not having an individual income tax. The I&D Tax is 1.00% for residents whose total Interest and Dividend income is greater than $1,250
NOTE: S Corporation Distributions – the state of Tennessee recognizes S Corporation distributions as Dividends subject to the 1.00% I&D Tax
State Business & Gross Margins Tax
The state of Tennessee has two (2) different business taxes. A Corporate income tax referred to as an Excise Tax and a gross margins referred to as a Franchise Tax. This tax rate effects all businesses such as Corporations, S Corporations, and LLCs.
- Excise Tax – 6.50% tax
- Franchise Tax – 0.02% – 0.3% tax
You can learn more about Tennessee’s tax rates here.
Sales and Property Taxes in Tennessee
Sales Tax – like many states, Tennessee has multiple tax rates. One at the state level and another at the local level. The state rate is 7.00% the average local rate is 2.55% (total average rate for Tennessee Sales Tax is 9.55%, making it the second most expensive state in the union regarding Sales tax, behind Louisiana).
Property Taxes in Tennessee – the average property tax rate for residential property in the state of Tennessee is 0.68%, which is below the national average of 1.08%.
Tennessee DMV fees
Tennessee has flat fees for vehicle registration. Since they are not based on the vehicles value, they are not deductible. To learn more, here’s a link to the Tennesse’s DMV website.
Tennessee Domicile
If you maintain a permanent place of abode for over 6-month days, you are considered a Tennessee resident.
Tennessee Tax on Social Security Benefits
Even though there is a state income tax in Tennessee, they do not assess state income tax on social security benefits.
Payroll Taxes in Tennessee
Unemployment taxes usually consist of three factors. They are the wage base, range of rates, number of schedules. Below is an outline of the three:
- Wage Base – Tennessee has a wage base of $7,000
- UI Rates – range from 0.01% to 10.00%
- Schedules – Tennessee has multiple rate schedules regarding Unemployment taxes.
Tennessee Business Entities – LLCs
Tennessee has an average cost to opening an LLC. Here are some important facts:
- Tennessee’s annual LLC fee is $300
- When you initially register, you pay an additional one time fee of $300
- Secretary of State of Tennessee website – click here
Tennessee Tax Contact Phone Numbers
Important phone numbers for the Tennessee Department of Taxation:
- Website: www.tn.gov/revenue
- Phone# for Individuals – N/A
- Phone# for Businesses – (800) 342-1003