Is Tennessee a good state for taxes?

Tennessee has no state income tax (Hall Tax on investments was fully eliminated in 2021) and a cost of living 10% below average. The tradeoff is a high combined sales tax — the state rate is 7% and local additions push many areas to 9.5-9.75%, among the highest in the nation.

Is Nashville still affordable?

Nashville has become significantly more expensive since 2015. Median home prices now exceed $440,000 and the metro cost of living index is around 100-105 — no longer a bargain. However, it still offers no income tax and strong job growth. For affordability, Chattanooga, Knoxville, and Memphis remain much cheaper.

Living in Tennessee: Income, Housing, Taxes & Cost of Living (2026)

Tennessee at a Glance

Metric	Value	National Rank
Population (2024)	7.1 million	15th
Median household income	$63,109	Below average
Median home price	$320,000	Average
Cost of living index	90	Below average
State income tax	None	N/A
Sales tax	7% (+ local up to 2.75%)	Highest state rate
Property tax (effective rate)	0.56%	Very low

Tennessee has the highest state sales tax rate in the nation at 7%.

Income and Housing

City/Area	Median Income	Median Home Price	Median Rent (2BR)	COL Index
Nashville	$72,000	$440,000	$1,600	102
Franklin/Brentwood	$120,000	$650,000	$2,000	115
Memphis	$45,000	$195,000	$1,050	82
Knoxville	$52,000	$310,000	$1,150	88
Chattanooga	$55,000	$310,000	$1,150	88
Clarksville	$58,000	$280,000	$1,100	86
Murfreesboro	$62,000	$380,000	$1,350	95
Johnson City	$45,000	$260,000	$950	84

Nashville: No Longer the Bargain

Nashville’s transformation over the past decade:

Year	Median Home Price	Growth
2015	$210,000	—
2020	$320,000	+52%
2024	$440,000	+38%
2015→2024	—	+110%

Sales Tax Reality: What It Actually Costs

Annual Spending on Taxable Goods	Tax at 9.75% (Nashville rate)	vs. No Sales Tax State
$20,000	$1,950	-$1,950
$35,000	$3,413	-$3,413
$50,000	$4,875	-$4,875

Tennessee does exempt groceries from the full rate (4% state rate on food vs. 7% on everything else).

Tennessee vs. Texas: No-Income-Tax Comparison

Factor	Tennessee	Texas
Income tax	None	None
Sales tax	7% + local (9.75% max)	6.25% + local (8.25% max)
Property tax	0.56% (very low)	1.60% (high)
Median home price	$320,000	$300,000
On a $400K home	$2,240/yr property tax	$6,400/yr property tax
Winner	Tennessee (lower property tax)	Texas has lower sales tax

Tennessee Pros and Cons

Financial Pros	Financial Cons
No state income tax	Highest state sales tax rate (7%)
Very low property taxes (0.56%)	Nashville housing increasingly expensive
Below-average COL (90)	Below-average median income
Nashville job market booming	Memphis has high crime, low income
Diverse geography (mountains, music, river)	Limited public transit statewide