Tennessee

Moving from Arizona to Tennessee would LOWER your total state and local tax burden from 8.3% of income to 7.6% of income — a drop of -0.7 pts. On a $100K household budget, that is roughly 700 in annual savings across income, sales, property, and other taxes combined.

Tennessee has NO state income tax on wages, compared to Arizona's top rate of 2.5%. High earners typically save thousands per year on wage income by moving. Note that property tax or sales tax may be higher in Tennessee to offset.

Tennessee state sales tax is 7.00%. With average local add-ons, the combined rate is 9.55%. This applies to most retail purchases but rules on groceries, prescriptions, and services vary.

Tennessee median effective property tax rate is 0.67% of home value. On a $400,000 home, that is roughly $2,680/year. Property tax typically funds schools, municipalities, and county services — rates vary sharply within a state by school district.

Tennessee has NO state estate tax and NO state inheritance tax. Heirs are subject only to federal estate tax (over $13.99M in 2025). This is favorable for wealth transfer.

In Tennessee: Social Security is not taxed. Pensions and 401(k)/IRA withdrawals are not taxed. Since Tennessee has no state income tax, no state-level tax applies to any retirement income.

Tennessee capital gains treatment: No state capital gains tax (no state income tax since Hall Tax repeal 2021). Compare to federal long-term capital gains rates (0%, 15%, or 20%) — some states offer preferential treatment for long-term holdings, while others tax capital gains as ordinary income.

Tennessee gas tax is 26.0¢/gal — 7.0¢/gal higher than Arizona's 19.0¢/gal. For a 15,000 mile/year driver getting 25 mpg, each 1¢/gal of gas tax = about $6/year.

Tennessee residency rules: Domicile + physical presence. No statutory residency rule. To establish residency for tax purposes, typical steps include: update driver's license and vehicle registration, register to vote, file a homestead declaration, close home-state bank accounts where possible, and spend clearly more than 183 days in your new state. If your former state is aggressive (e.g., CA, NY, NJ, OR), keep documentation of every day spent in each state.

Tennessee recent tax law changes: No income tax changes (none exists). Grocery tax remains 4% statewide.

For the most current tax information in Tennessee, visit the official source at https://www.tn.gov/revenue/. Tax laws change annually; verify rates and rules before making a permanent move. Consult a CPA for advice specific to your situation.