Tennessee for retirees: nothing taxed, and the property tax breaks that start at 65

A retired Tennessean owes the state nothing on income of any kind. There is no return, so there is no pension exclusion to compute, no Social Security subtraction, no age-based credit and no question of whether a 401(k) rollover or a Roth conversion is taxable here. The IRS taxes the same income exactly as it taxes it anywhere else: up to 85% of Social Security by the provisional-income formula, pensions and IRA withdrawals as ordinary income, Roth conversions in the year converted. The one state tax that used to reach retirees, the Hall tax on interest and dividends, was phased out from 5% in 2016 to 1% in 2020 and repealed for 2021, so a portfolio that pays $20,000 a year in dividends, which cost its owner close to $1,000 in Hall tax in 2016, costs nothing now. Where age matters in Tennessee is the property tax: at 65, a homeowner with household income of $38,470 or less can have the tax on the first $33,600 of the home’s value paid by the state, and in the 28 counties and 37 cities that have adopted it, a homeowner under the county’s income limit, $63,470 in most of the large counties, can have the dollar amount of the bill frozen for life.

Because there is no state return, the mistakes retirees make in Tennessee are federal ones made more likely by the missing state machinery. Nothing is withheld for a state, so a retiree used to a state refund covering a federal shortfall has no cushion. The SALT deduction has no state income tax in it, so itemizing rarely pays. And the property tax programs, which are the only age-based breaks Tennessee offers, are applied for at the county trustee’s office with a stack of income documents, not claimed on a return where software would catch them.

What is not taxed

The one Tennessee tax a retiree’s income can meet is the franchise and excise tax, and only if the income is earned inside an LLC or other registered entity: a rental house held in a single-member LLC owes a $100 minimum and an annual filing unless the family-owned exemption is claimed on Form FAE 183 each year. Consulting receipts of $100,000 or more in a county bring the business tax. Both are in No income tax in Tennessee.

Roth conversions while a Tennessee resident

A Roth conversion costs federal tax in the year it is done and nothing in Tennessee. For a retiree who moved here from a taxing state, the conversions that were put off because the state would have taken 4% or 5% can now be done at the federal cost alone, and the federal cost is unchanged by the move. The planning is the same as anywhere: fill the 12% or 22% bracket in the years between retirement and age 73, when required minimum distributions begin, and watch the two federal cliffs that a conversion can trip. The first is the taxation of Social Security, where every dollar of conversion can pull 85 cents of benefits into taxable income until the 85% ceiling is reached. The second is IRMAA, the Medicare premium surcharge, which looks at modified adjusted gross income from two years earlier; a $60,000 conversion in 2026 can raise a couple’s 2028 Part B and Part D premiums by several hundred dollars a month if it carries them over the first threshold. Neither cliff has a Tennessee component, but both are easier to see when there is no state tax to distract from them.

Interest and dividends deserve a word of their own, because the Hall tax made Tennessee an awkward place to hold a taxable portfolio for ninety years. A retiree who moved municipal bonds, dividend stocks and CDs into tax-deferred accounts to avoid the Hall tax, or who held Tennessee municipal bonds for the Hall exemption, has had no reason to since 2021. The federal rules alone now decide where each asset sits.

The federal return is the whole return

With no state return there is one set of estimated payments, one deadline and one calculation. Federal estimated payments are owed when the balance after withholding will be $1,000 or more, and the safe harbors, 100% of last year’s tax or 90% of this year’s, with 110% of last year’s for higher incomes, apply in Tennessee as everywhere. A retiree living on Social Security, a pension and an IRA with no federal withholding on any of them meets the underpayment penalty in April. The simplest fix is withholding on the IRA: a December withdrawal with enough federal tax withheld counts as paid evenly through the year. Form W-4P sets withholding on a pension and Form W-4R on a one-time withdrawal; a retiree newly arrived from a taxing state should make sure the state election on each is set to none, and that the old state’s withholding has stopped.

The 2026 federal figures that matter most to a Tennessee retiree are the standard deduction, $16,100 single and $32,200 joint, the additional amount for age 65 and older, and the $6,000-per-person senior deduction that runs through 2028. The senior deduction is taken below the AGI line and has no state counterpart to worry about; in Tennessee it is simply a federal deduction. Against those, the SALT line for a Tennessee retiree is property tax plus the sales tax from the IRS tables, with the actual tax on a car added, and the $40,400 cap for 2026 is almost never in reach. A couple both over 65 would need more than $40,000 of property tax, sales tax, mortgage interest and charitable gifts before itemizing beat the standard deduction and the senior deduction together. Most do not, and the standard deduction is the answer.

What Tennessee gives at 65: two property tax programs

Tennessee has no homestead exemption and no cap on assessments. Its age-based relief is two programs run by the Comptroller of the Treasury and applied for through the county trustee, or the city collecting official for a home inside city limits. Both are decided on the household’s income from all sources, including Social Security, and the income of the spouse counts whether or not the spouse is on the deed or lives in the house. Both have to be applied for every year, when the tax bill arrives, by 35 days after the delinquency date, and the tax itself must be paid by then.

Property Tax Relief is a state-funded credit on the bill for a homeowner who is 65 by December 31 of the tax year, or disabled, who owns and lives in the home as the principal residence, and whose 2025 income from all sources, counting everyone with an ownership interest and anyone else living in the home, is $38,470 or less for the 2026 tax year. The relief is the tax on the first $33,600 of the home’s market value, so the dollar amount depends on the local rate: $33,600 assessed at 25% is $8,400, and at a combined rate of $2.50 per $100 the credit is $210 (verify computation). Knox County’s trustee quotes a maximum of $85 at the county rate for elderly and disabled homeowners. Disabled veterans with a qualifying rating, and their unremarried surviving spouses, get the tax on the first $175,000 of market value with no income test; Knox County quotes up to $444. The program is funded by legislative appropriation, about $41 million a year for more than 100,000 recipients, and it has been running close to its appropriation (verify 2026 funding).

Property Tax Freeze is a local option. In the 28 counties and 37 cities that have adopted it, a homeowner 65 or older by year end whose household income is under the county’s limit has the dollar amount of tax on the principal residence, up to five acres, frozen at the amount owed in the first year of eligibility. The bill does not rise with reappraisals or rate increases; it rises only for improvements that add value or if the owner moves, and it falls if the computed tax falls. The income limit is set county by county. Counties that adopted the 2023 local option, which include Davidson, Knox, Shelby, Rutherford, Montgomery, Wilson, Blount and Robertson (verify list), use $63,470 for 2026; Williamson County is $69,150; several smaller counties sit at the $38,470 floor. The freeze is in addition to the relief credit, with its own application. Neither program follows a survivor automatically: when the qualifying owner dies, the surviving spouse must qualify alone, on his or her own age and the household’s income without the decedent’s. Both programs, with the application mechanics, are in Property tax relief in Tennessee.

If you moved here to retire

Tennessee does not care when you arrived; the state you left does. The old state gets a part-year return for the year of the move, covering income received while you lived there plus anything with a source there afterward: rent from a house kept back home, a business, wages for days worked there. It cannot tax your pension or IRA withdrawals once you are no longer its resident, under a 1996 federal law, 4 U.S.C. §114, however many years you worked there to earn them. The protection depends on actually ceasing to be a resident under the old state’s rules, and the evidence for that, the Tennessee driver license within 30 days, the vehicle registration within 30 days, the voter registration, the old house sold or rented, is in Moving to Tennessee.

Check the state boxes on every 1099-R and the SSA-1099 for the move year. Custodians change the state of record when the address changes, or when they get to it, and old-state withholding that continues after the move comes back only on the old state’s part-year return. A car you already owned comes into Tennessee without use tax when titled in your name; one bought shortly before the move, or titled to someone else, pays the difference between the other state’s tax and Tennessee’s at the county clerk’s window.