No state income tax
How Tennessee taxes retirement income
Tennessee has no personal income tax, so the state takes nothing from your Social Security, your pension or your withdrawals from a 401(k), 403(b), 457(b) or IRA. That holds no matter where the pension comes from: a Tennessee plan, another state’s teacher system, a company pension or the federal government.
Tennessee once taxed interest and dividends through the Hall income tax. That tax was fully repealed starting in 2021, so investment income is now free of state tax as well. Sales taxes in Tennessee are among the highest in the country once local taxes are added.
Federal income tax still applies everywhere. Your pension and traditional retirement account withdrawals are taxed by the IRS as ordinary income, and up to 85% of your Social Security can be taxable federally depending on your other income.
Questions
Does Tennessee tax pensions?
No. Tennessee has no personal income tax, so pensions of every kind are free of state tax.
Does Tennessee tax Social Security?
No. With no income tax, Social Security benefits are not taxed by the state.
If I move to Tennessee, can my old state still tax my pension?
No. Federal law (4 U.S.C. 114) bars states from taxing the pension income of people who no longer live there, including government pensions and most retirement plan payments.