Tennessee has no state income tax, relatively low property taxes (0.56% effective rate), and a cost of living below the national average in most of the state. The tradeoff is sales tax: Tennessee has one of the highest combined sales tax rates in the country (up to 9.75%), which hits spending on everything from cars to everyday purchases. Nashville has transformed from an affordable mid-size city into one of the Southeast’s most expensive metros, with home prices more than doubling since 2015. Memphis, Knoxville, Chattanooga, and the Tri-Cities area remain genuinely affordable. Tennessee is especially attractive to higher earners and retirees — the no-income-tax structure saves thousands compared to states like California or New York, and the state doesn’t tax Social Security or retirement income.
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 |
Related: Cost of Living by State | States with No Income Tax | Property Tax by State
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