Tennessee Paycheck Calculator

Tennessee Paycheck Calculator

Tennessee Paycheck Quick Facts

• Tennessee income tax rate: 0%
• Median household income: $64,035 (U.S. Census Bureau)
• Number of cities that have local income taxes: 0

How Your Tennessee Paycheck Works

As is the case in all U.S. states, you have to pay federal income and FICA taxes in Tennessee. FICA (Federal Insurance Contributions Act) taxes are Social Security and Medicare taxes. You’ll pay 6.2% and 1.45% of your income for these taxes, respectively. Your employer typically matches these percentages for a total of 12.4% received for Social Security and 2.9% for Medicare. If you earn wages in excess of $200,000 (single filers), $250,000 (joint filers) or $125,000 (married people filing separately), that money is subject to a 0.9% Medicare surtax, which employers do not match.

While your employer typically covers 50% of your FICA taxes, this is not the case if you are a self-employed worker or an independent contractor. In this case, you are responsible for ensuring that 100% of your FICA taxes are paid and will likely need to cover the entirety of them yourself. However, you may be eligible to take a deduction during tax season to get back some of the “employer” portion of your FICA taxes.

As mentioned above, Tennessee employers withhold federal income tax from your paycheck each pay period. This goes to the IRS, where it is counted toward your annual income taxes and funds a range of expenses.

When you start a new job, you'll fill out a W-4 form detailing your filing status, income level and more. This form is how employers know how much to withhold from your pay. If any of your information changes, you'll need to fill out a new W-4 and submit it to your employer. If you're looking to adjust your tax bill come tax season, you can opt to have an added dollar amount of your choice withheld from each paycheck. There is a line on your W-4 where you can enter the additional withholding you’d like.

One item to note is that federal income tax withholdings changed slightly over the last few years. For instance, it no longer uses allowances and it removes the option to claim dependency or personal exemptions. Instead, it includes a five-step process that asks you to enter dollar amounts for other forms of income and deductions.

You won't pay any state income tax earned in Tennessee. You also won't have to pay any local income taxes, regardless of which city you reside in.

Prior to 2021, Tennessee levied a flat tax on income earned from interest and dividends. This was called the "Hall Income Tax" after Sen. Frank Hall, the senator who sponsored it in 1929. At its peak, this tax rate used to be 6%, but a bill signed in 2016 by Governor Bill Haslam set the Hall Income Tax on a track to get repealed by 2021. The tax rate was lowered by 1% each year, meaning it was 1% in 2020, 2% in 2019, 3% in 2018 and so on. So as of Jan. 1, 2021, the Hall Income Tax is fully repealed, meaning Tennessee now has no income taxes of any kind.

While you won't feel a significant impact from a traditional state income tax in Tennessee, the downside is that Tennessee sales tax rates deal a tough hit to taxpayers' cash flows during the year. Tennessee residents pay the highest overall sales tax nationwide, with rates ranging from 8.50% to 9.75% depending on where you live. This doesn't affect your paycheck, but your wallet will feel it whenever you make a purchase.

Overall, Tennessee has a low tax burden compared to other states, making it a relatively affordable place to live. If you’re planning on moving to the Volunteer State or if you’re thinking about refinancing a mortgage there, take look at our Tennessee mortgage guide. It has all the details about mortgage rates and information you’ll want to be familiar with before starting this process.

A financial advisor can help you understand how taxes fit into your overall financial goals. Finding a financial advisor doesn't have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

How You Can Affect Your Tennessee Paycheck

While you can't control all factors in your Tennessee paycheck, there are some choices that affect the size of the checks you receive throughout the tax year.

Say, for example, you decide to pay for health or life insurance through an employer-sponsored plan. Any premiums you pay for this will be subtracted from your wages. These premiums usually come out pre-tax, which means they come out of your pay before income tax is applied. Pre-tax contributions lower your taxable income and save you money on taxes.

You don't have to worry about state or local income taxes in Tennessee, but you can reduce how much you owe in federal taxes. If you're looking to do this, one tactic that you may want to explore is putting money in tax-advantaged accounts like a 401(k) or 403(b) retirement plan. Not only will you be saving for the future, but since these accounts take pre-tax money, you will save some money now, too. Those savings could make it worth the fact that your paychecks will be smaller.

If you have certain fixed medical expenses like copays or prescriptions, you may also want to take advantage of a health savings account (HSA) or flexible spending account (FSA). This helps to lower your taxable income in the same way that a 401(k) does. One important factor to keep in mind, though, is that the money you put into an FSA won’t all roll over from one year to the next. You will lose any money you put in over $500 if you don’t use it by the end of the year (as of 2023). This amount increases to $610 in 2024 and $650 in 2025.