Is Tennessee a good state to retire in 2026?

Yes — Tennessee ranks second overall among all 50 states for retirement in 2026. It eliminated its last income tax (the Hall Income Tax on dividends and interest) in 2021, leaving retirees with zero state income tax on any source. Combined with low property taxes (effective rate ~0.56%), a relatively low cost of living, and affordable cities like Chattanooga and Knoxville, Tennessee offers one of the strongest overall tax and cost profiles in the country.

Does Tennessee tax retirement income?

No. Tennessee has no state income tax of any kind as of 2021, when the Hall Income Tax was fully eliminated. Social Security, IRA withdrawals, 401(k) distributions, pension payments, capital gains, and dividend income are all completely exempt from Tennessee state tax.

How affordable is retirement in Tennessee?

Tennessee is significantly more affordable than the national average. A retired couple can live comfortably in Chattanooga or Knoxville on $48,000–$58,000 per year. Median home prices in those cities run $280,000–$310,000. Nashville's suburbs are more expensive at $380,000–$450,000 for median homes. The main cost to watch is Tennessee's combined sales tax of approximately 9.55%, one of the highest in the US, which raises the cost of everyday purchases.

What are the best cities to retire in Tennessee?

The top retirement cities in Tennessee in 2026 are Chattanooga, Knoxville, Maryville, and Murfreesboro. Chattanooga offers mountains, the Tennessee River, strong arts, and lower housing costs. Knoxville combines a university-town atmosphere with access to Great Smoky Mountains National Park and UT Medical Center. Maryville and Farragut (Knoxville suburbs) are quieter options with low crime and very affordable housing. Franklin and Brentwood near Nashville are higher-cost but excellent if you want proximity to a major city.

Retiring in Tennessee 2026 — Taxes, Costs, Healthcare, and Best Cities

Tennessee has no state income tax — Social Security, IRA withdrawals, pension payments, capital gains, and dividends are all completely exempt. The Hall Income Tax on investment income was fully eliminated in 2021, making Tennessee one of only nine states with zero income tax. Paired with effective property tax rates among the lowest in the South (~0.56%), affordable housing in its main retirement cities, and a four-season climate with mild winters, Tennessee ranks second among all 50 states for retirement in 2026. The one cost to plan for is its combined sales tax of approximately 9.55%, the highest trade-off in an otherwise favorable picture.

Tennessee Retirement Quick Facts 2026

Factor	Detail
State income tax	None (Hall Tax eliminated 2021)
Property tax (effective average)	~0.56%
Sales tax (combined average)	~9.55% (7% state + local)
Social Security taxed by state	No
Pensions and IRA withdrawals taxed	No
Median home price — Chattanooga	~$285,000
Median home price — Knoxville	~$300,000
Median home price — Nashville suburbs	~$420,000
Medicare Advantage availability	Good in Knoxville and Nashville; moderate in rural areas

Tennessee Taxes for Retirees

Tennessee’s tax profile for retirees is nearly as strong as Florida’s. With no state income tax of any kind, a couple drawing $75,000 per year in retirement income — from Social Security, 401(k) withdrawals, and investment income — owes nothing to Tennessee at the state level.

Property taxes are among the lowest effective rates in the country. At 0.56% on average, a $300,000 home in Knoxville or Chattanooga generates a property tax bill of roughly $1,680 per year — well below what the same home would cost in Texas (~$4,800), Illinois (~$5,400), or New Jersey (~$6,600). Tennessee’s circuit breaker program also provides property tax relief for low-income seniors.

The significant offset is sales tax. Tennessee’s combined state and local sales tax averages approximately 9.55%, one of the highest in the country. Tennessee charges 5% on food (lower than the 7% general rate) but does not fully exempt groceries. On $30,000 in annual spending, the 9.55% effective rate generates roughly $2,865 in sales tax — a meaningful cost to factor against the income and property tax savings.

Tax Comparison: $75,000 Retirement Income

Tax	Tennessee	Virginia	North Carolina
State income tax	$0	~$3,600 (5.75% effective)	~$3,375 (4.5%)
Property tax on $300,000 home	~$1,680	~$2,700	~$2,400
Total state tax burden	~$1,680	~$6,300	~$5,775

Sales tax not included as it is spending-dependent. Tennessee sales tax adds ~$2,500–$3,500/year for a typical retiree couple.

Cost of Living in Tennessee

Tennessee is one of the most affordable retirement states in the South. Median home prices in Knoxville (~$300,000) and Chattanooga (~$285,000) are below the national median, and the overall cost of living in those cities runs 8–12% below the US average. Even modest Social Security income goes meaningfully further in these cities than in coastal retirement markets.

Nashville and its suburbs (Franklin, Brentwood, Murfreesboro) are a different story. Rapid growth and tech-sector job creation have pushed Nashville home prices toward $400,000–$500,000 in desirable suburbs. Retirees who prioritize Nashville’s culture, healthcare, and airport access should budget accordingly.

For maximum affordability, Johnson City and Kingsport in the Tri-Cities region of Northeast Tennessee offer some of the lowest housing costs in the state, with median home prices around $220,000–$255,000 and a combined cost of living roughly 15–18% below the national average.

Healthcare in Tennessee

Healthcare quality in Tennessee varies significantly by geography. Nashville has a nationally strong healthcare presence — Vanderbilt University Medical Center is consistently ranked among the top hospitals in the Southeast and offers specialist access comparable to major academic centers. HCA Healthcare, one of the largest hospital operators in the country, is headquartered in Nashville, giving the metro area broad hospital coverage.

Knoxville is served by the University of Tennessee Medical Center, a major academic teaching hospital, which gives Knoxville-area retirees hospital access well above average for a city its size. Chattanooga is covered by CHI Memorial and Erlanger Health System, both solid regional systems.

Rural Tennessee has notably thinner healthcare infrastructure, particularly in the western and southern parts of the state. Retirees who need frequent specialist access should prioritize the main metro areas.

Tennessee’s Medicare Advantage market is solid in Knoxville and Nashville, with multiple plan options at competitive premiums. Rural areas have fewer plan options but traditional Medicare remains available statewide.

Best Areas to Retire in Tennessee

Tennessee’s retirement geography falls into three broad zones:

East Tennessee / Appalachian Foothills (Knoxville, Maryville, Chattanooga) — Mountains, rivers, outdoor recreation, Great Smoky Mountains National Park access, affordable housing, and strong healthcare. This is the sweet spot for most retirees.
Middle Tennessee / Nashville Area (Franklin, Brentwood, Murfreesboro, Hendersonville) — Higher cost, big-city amenities, outstanding healthcare at Vanderbilt, and excellent airport connections. Best for retirees who want city access and have higher budgets.
West Tennessee (Memphis area) — Low housing costs, but healthcare quality and amenities are more limited outside Memphis itself. Memphis has Methodist Le Bonheur Healthcare and Regional One Health, but the region overall ranks lower for retiree quality of life.

Top retirement city picks for 2026:

Chattanooga — Tennessee River setting, Lookout Mountain, a vibrant downtown revitalization, median home prices ~$285,000, and good healthcare access. One of the most underrated retirement cities in the South.
Knoxville — University of Tennessee gives the city a young energy, UT Medical Center provides strong healthcare, and access to the Smoky Mountains is hard to beat. Median homes ~$300,000.
Maryville — Knoxville suburb with very low crime, small-town character, and some of the cheapest property taxes in East Tennessee. Good choice for retirees who want quiet proximity to Knoxville amenities.
Franklin / Brentwood — Nashville suburb with excellent schools, upscale amenities, and strong safety ratings. Higher cost ($420,000+ median) but outstanding quality of life.

Who Should Retire in Tennessee?

Tennessee is a strong fit if you:

Want to eliminate state income tax while maintaining a four-season climate with mild winters
Are looking for outdoor recreation — mountains, rivers, national parks — alongside affordable housing
Want lower property taxes than most no-income-tax states (especially versus Texas)
Prefer smaller cities with genuine community character over large metro sprawl

Who Should Look Elsewhere?

Consider another state if you:

Do significant retail spending and are sensitive to a ~9.55% combined sales tax
Need top-tier specialist healthcare in a rural or small-town setting
Want year-round warmth — Tennessee winters are mild but not warm; Knoxville averages 40°F in January
Prefer coastal living or beaches

Pros and Cons of Retiring in Tennessee

Pros	Cons
No state income tax on any income source	Combined sales tax ~9.55% — one of the highest in the US
Very low effective property tax rate (~0.56%)	Rural healthcare access is limited
Affordable housing in Knoxville and Chattanooga	Nashville suburbs have seen significant price appreciation
Four-season climate with mild winters	No coastline
Access to Smoky Mountains and outdoor recreation	Humidity in summer months, particularly in lower elevations
Strong healthcare at Vanderbilt (Nashville) and UT Medical (Knoxville)	Memphis metro lags in retiree amenities vs. other TN cities

Written by WealthVieu

WealthVieu researches and writes data-driven personal finance guides using primary sources including the IRS, Bureau of Labor Statistics, Federal Reserve, and Census Bureau.

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