See federal withholding and FICA for any salary or hourly rate and pay frequency. Because Tennessee has no state income tax, your take-home is higher than in most states.
Tennessee payroll is one of the simplest in the country. Every Tennessee paycheck has just three taxes withheld: federal Social Security (6.2%), Medicare (1.45%), and federal income tax withholding based on Form W-4. Tennessee has no state income tax on wages, no local or city wage tax, and no employee-paid disability or paid-family-leave premium. The one narrow tax Tennessee ever levied on personal income, the Hall income tax on interest and dividends, was fully repealed for tax years beginning January 1, 2021. Unemployment insurance is funded entirely by employers on the first $7,000 of each worker's wages, so nothing is withheld from employees for unemployment. The result is a short deduction list and higher take-home pay than an income-tax state at the same gross salary.
- Tennessee has no state income tax on wages and no local or city wage tax anywhere in the state, so no state or municipal income tax line appears on a Tennessee pay stub.
- Tennessee never taxed wages. The Hall income tax applied only to interest and dividend income, and it was fully repealed for tax years beginning January 1, 2021. Tennessee now taxes no personal income at all.
- The only taxes withheld from a Tennessee paycheck are federal: Social Security (6.2%), Medicare (1.45%), and federal income tax withholding under Form W-4 and IRS Publication 15-T.
- Tennessee has no employee-paid social-insurance premium. Unlike Washington or California, there is no state disability, no paid family leave contribution, and no employee unemployment tax.
- Unemployment insurance is funded entirely by employers on the first $7,000 of each employee's wages through the Department of Labor and Workforce Development. Nothing is deducted from employees for it.
- At the same gross salary, a Tennessee worker keeps more than a worker in a state with income tax, because the state tax line is simply absent.
What Makes Tennessee Payroll Different
Federal payroll tax is the same in every state. What changes from one state to the next is the second layer: state income tax withholding, employer unemployment taxes, and any employee social-insurance contributions. Tennessee sits at the simplest end of that spectrum. It has no state income tax, like Texas and Florida, and unlike Washington or New Jersey it also has no employee-paid premiums of any kind. That makes a Tennessee paycheck about as short as an American paycheck gets.
A worker moving to Tennessee from an income-tax state sees the difference immediately: the "state tax" line that used to eat a chunk of each check is gone, and nothing replaces it. The federal baseline behind the three taxes that remain is explained in the how payroll taxes work guide, and the FICA half of it is covered in the what is FICA tax guide.
Employee Withholding Overview in Tennessee
A Tennessee employee sees federal taxes only. There is no state income tax line and no employee premium line. The deductions are all federal.
| Deduction | Who Pays | Rate | Wage Cap |
|---|---|---|---|
| Social Security (federal) | Employee + Employer | 6.2% | $176,100 (2025) / $184,500 (2026) |
| Medicare (federal) | Employee + Employer | 1.45% | None |
| Additional Medicare (federal) | Employee only | 0.9% | Wages over $200K ($250K MFJ) |
| Federal income tax withholding | Employee only | Varies (W-4) | None |
| Tennessee state income tax | — | None | No state income tax |
| Local / city wage tax | — | None | No local wage tax |
| Employee unemployment / disability | — | None | Employer-funded UI only |
The federal lines work identically to any other state. For Social Security, the 2025 wage base is $176,100 (rising to $184,500 for 2026), after which Social Security stops for the year. Medicare has no cap, and the 0.9% Additional Medicare Tax applies to high earners. There are no Tennessee state lines to add, so once the federal taxes are subtracted, the rest is take-home pay.
Why Tennessee Has No State Income Tax
Tennessee does not tax wages, salaries, or other earned income, and it never has. Unlike states that repealed an income tax, Tennessee simply never adopted a general one. For decades the only tax it levied on personal income was the Hall income tax, a narrow tax on interest and dividends that never touched wages. That tax is now gone as well, so today Tennessee taxes no personal income at all.
Tennessee raises revenue through other channels instead, principally the state and local sales and use tax, which is among the highest combined rates in the country, and business taxes such as the franchise and excise tax and the business tax on gross receipts. None of those is withheld from a normal wage paycheck. The Tennessee Department of Revenue confirms the state collects no tax on wages or salaries, so the "state tax" line on a Tennessee pay stub is simply absent.
The Repealed Hall Income Tax
For most of the twentieth century Tennessee taxed one slice of personal income: the Hall income tax, named for the state senator who sponsored it in 1929. It applied to interest and dividend income, not to wages or salaries, historically at a 6% rate. Wage earners never paid it; it fell mainly on retirees and investors living on portfolio income.
The Phase-Out and Full Repeal
Beginning in 2016 the legislature phased the Hall tax down by one percentage point per year and set it to disappear entirely. It was fully repealed for tax years beginning January 1, 2021. Since then Tennessee has taxed no form of personal income, whether wages, salaries, interest, or dividends. The Tennessee Department of Revenue now lists the Hall income tax among its archived taxes.
The practical effect for payroll is that there was never anything to withhold for the Hall tax in the first place, because it was not a wage tax. Its repeal simply means that a Tennessee retiree living on investment income now also owes no state income tax, matching the wage earner who never did.
Employer Payroll Obligations in Tennessee
Because there is no state income tax to withhold, a Tennessee employer's state-level payroll duty is narrow: pay state unemployment insurance. The federal side, covered in the employer payroll tax obligations guide, includes the matching 6.2% Social Security and 1.45% Medicare plus the Federal Unemployment Tax (FUTA). On top of that, Tennessee adds a state unemployment tax paid entirely by the employer.
| Employer tax | Basis | Wage base |
|---|---|---|
| Tennessee unemployment (SUI) | Reserve-ratio experience rated | $7,000 per employee |
| New-employer SUI rate | Standard new-employer rate until experience builds | $7,000 per employee |
| Employee unemployment share | None | Not deducted from employees |
| State income tax withholding | None | No state income tax |
| FUTA (federal, after state credit) | 0.6% | $7,000 per employee |
The Tennessee unemployment tax is assessed on only the first $7,000 of each employee's wages, one of the lowest taxable wage bases in the country, and the employer's rate is set by its reserve-ratio experience with the Department of Labor and Workforce Development. New employers pay a standard rate until they build enough history for a calculated one. None of this is deducted from employee pay. Because there is no state income tax, Tennessee employers also have no state withholding return to file, which is one less filing than employers in income-tax states manage. The combined cost-to-hire can be modeled with the employer payroll tax calculator.
Tennessee Has No Local Wage Income Tax
No Tennessee city or county withholds a local wage income tax from employees. A worker in Nashville, Memphis, Knoxville, Chattanooga, Clarksville, or anywhere else in the state pays no municipal or county income tax line.
This matters because several of the states National Tax Tools covers do have local wage taxes: Ohio and Pennsylvania have city income taxes, and Michigan has cities like Detroit that levy their own tax. Tennessee has none. So even in its largest cities, a Tennessee pay stub shows only the three federal taxes and no local line at all.
How Take-Home Pay Works in Tennessee
The calculation sequence runs from gross pay down to net pay, and it is shorter in Tennessee than almost anywhere else because there are no state lines to subtract.
- Start with gross wages for the pay period.
- Apply federal income tax withholding using the Form W-4 and IRS Publication 15-T.
- Subtract Social Security (6.2%, up to the annual wage base) and Medicare (1.45%) on FICA wages.
- There is no state income tax, no local tax, and no employee premium to subtract.
- The remainder is net pay.
To see exact figures for a specific salary or hourly rate and pay frequency, use the Tennessee paycheck calculator or the general take-home pay calculator for a full pre-tax benefits stack.
Tennessee Supplemental Wage Withholding
Supplemental wages are payments outside regular salary: bonuses, commissions, overtime, sales awards, and back pay. Tennessee has no state income tax, so there is no state supplemental rate to apply.
- No Tennessee income tax on supplemental wages, because there is no state income tax at all.
- Federal income tax withholding on supplemental wages is a separate calculation set by the IRS, typically a flat 22% on amounts under $1 million, and Social Security and Medicare still apply under their own rules.
- Because there is no state layer, a Tennessee bonus keeps more of its value than the same bonus paid in an income-tax state.
For the federal supplemental math on a bonus, use the Bonus Tax Calculator and see the Bonus Tax Withholding Guide.
Tennessee Reporting and Payment
Tennessee employers report wages and pay unemployment premiums to the Department of Labor and Workforce Development on a quarterly schedule. Because there is no state income tax, there is no state withholding return to file at all, so the state-level compliance burden is limited to unemployment reporting. The federal deposit schedule for income tax withholding and FICA is covered separately in the payroll tax deadlines guide.
New employees must be reported to the Tennessee new hire reporting program shortly after the hire date, as in every state.
Tennessee Payroll Quick Facts (2025-2026)
| State income tax | None (Hall tax repealed 2021) |
| Local wage tax | None anywhere in the state |
| Employee disability / paid leave | None |
| Employee unemployment | None (employer-funded) |
| Employer unemployment base | $7,000 per employee |
| Employer UI rate basis | Reserve-ratio experience rating |
| Social Security wage base | $176,100 (2025) / $184,500 (2026) |
| Withheld from a TN paycheck | Federal income tax, Social Security, Medicare only |
| Agencies | Dept. of Revenue (taxes); Dept. of Labor and Workforce Development (UI) |
At LMN Tax Inc, the Tennessee conversation is almost the opposite of the Washington one. Where Washington clients are surprised to see extra deductions, Tennessee clients are surprised there are so few, and they occasionally assume the missing state line means payroll made an error or that they are under-withheld. They are not: Tennessee simply does not levy a state income tax, so there is nothing to withhold. The real risk in a no-income-tax state is the flip side of that simplicity: there is no state refund to fall back on, and no state withholding cushioning a federal shortfall, so getting the federal W-4 right matters more, not less. We see this most with dual-income households, where each employer withholds at the married rate assuming its salary is the only income, and the couple lands in a higher federal bracket than either employer expected. In an income-tax state a state refund sometimes softens that; in Tennessee the entire adjustment lands on the federal return in April. The fix is the Multiple Jobs Worksheet on Form W-4, and it takes fifteen minutes. The other recurring topic is the Hall income tax: older clients who remember paying it on their investment income are relieved to learn it was fully repealed in 2021, so a Tennessee retiree living on interest and dividends now owes no state income tax at all.
Real-World Example: A Tennessee Biweekly Paycheck
Priya earns $65,000 per year and works in Nashville. She is paid biweekly (26 pay periods), files Single on her W-4, and has no pre-tax contributions. The federal figures below follow the 2025 Publication 15-T percentage method.
Gross pay per period: $65,000 / 26 = $2,500.00
| Line | Amount |
|---|---|
| Gross wages | $2,500.00 |
| Federal income tax withholding | −$227.46 |
| Social Security (6.2%) | −$155.00 |
| Medicare (1.45%) | −$36.25 |
| Tennessee state income tax | $0.00 |
| Net pay | $2,081.29 |
There is no state or local income tax line, so the only deductions are the three federal taxes. The federal withholding of $227.46 comes from annualizing the $2,500 biweekly gross to $65,000, subtracting the $8,600 Single allowance to reach a $56,400 adjusted annual wage, applying the Publication 15-T Single schedule ($5,578.50 plus 22% of the amount over $54,875), and dividing the $5,914.00 annual result by 26. The same worker in a state with a 5% flat income tax would lose roughly another $104 per check to state withholding, so the Tennessee paycheck is about $104 larger. Run your own numbers with the Tennessee paycheck calculator.
When Tennessee Payroll Logic Does Not Apply
- Working across state lines: If you live in Tennessee but physically work for an employer in a neighboring state that has an income tax, that state may require nonresident withholding on the wages earned there. Tennessee itself still withholds nothing.
- Remote workers for out-of-state employers: A worker living and working in Tennessee for an out-of-state company generally owes no state income tax, but the employer must still register for Tennessee unemployment and report the wages.
- Pre-tax deductions: Traditional 401(k) deferrals and Section 125 medical premiums reduce the wages subject to federal income tax withholding, so actual federal withholding is lower than a gross-only estimate. FICA still rides on most of those wages.
- High earners and the caps: Once wages pass the Social Security wage base, Social Security stops for the year while Medicare continues, and the 0.9% Additional Medicare Tax begins above $200,000. Late-year paychecks for high earners look different from early-year ones even without any state tax.
- Self-employed and 1099 workers: Independent contractors are not subject to Tennessee payroll withholding and handle federal tax through estimated payments, as in the self-employment tax guide.
Frequently Asked Questions
If you are a Tennessee employee, use the Tennessee paycheck calculator to see federal withholding and FICA for your salary and pay frequency, then confirm the lines on your stub. Because there is no state refund to fall back on, make sure your federal W-4 is right, and complete the Multiple Jobs Worksheet if you or your spouse hold more than one job.
If you are a Tennessee employer, confirm your Department of Labor and Workforce Development unemployment account is active, check your annual unemployment rate notice, and remember there is no state income tax withholding return to file. Model your full cost-to-hire with the employer payroll tax calculator and review the employer payroll tax obligations guide.
- Tennessee Department of Revenue: Taxes (Hall income tax listed among archived taxes; no personal income tax on wages)
- Tennessee Department of Labor and Workforce Development: Unemployment Insurance Tax Rates (employer-funded, $7,000 taxable wage base, reserve-ratio experience rating)
- IRS Publication 15 (Employer's Tax Guide)
- IRS Publication 15-T: Federal Income Tax Withholding Methods
- IRS Topic 751: Social Security and Medicare Withholding Rates
- IRS Topic 560: Additional Medicare Tax