Tennessee does not tax Social Security benefits
Tennessee has no state income tax on Social Security retirement, survivor, or disability benefits. If Social Security is your only income, you owe nothing to the state. This applies whether you receive benefits as a retiree, as a survivor of a worker who died, or as a disabled worker.
The federal government may tax your Social Security depending on your total income, but Tennessee itself does not. This is one of the few tax breaks Tennessee offers to retirees and disabled workers.
Key Takeaways
- Tennessee imposes no state income tax on Social Security benefits of any kind.
- You may still owe federal income tax on Social Security if your combined income exceeds certain thresholds.
- Tennessee also does not tax retirement income from pensions, 401(k) withdrawals, or IRA distributions.
- Other states tax Social Security, so this is a meaningful advantage if you live in Tennessee.
How federal taxation of Social Security works
Even though Tennessee does not tax Social Security, the federal government may. The IRS taxes Social Security based on your "combined income," which is your adjusted gross income plus nontaxable interest plus half your Social Security benefits.
If your combined income exceeds $25,000 as a single filer or $32,000 as a married couple filing jointly, you may owe federal tax on up to 85 percent of your benefits. The exact amount depends on how far above the threshold you go. If your combined income is below these amounts, you owe no federal tax on Social Security.
A tax professional or the IRS can help you calculate whether you fall into a taxable bracket. The Social Security Administration also publishes worksheets on its website to help you estimate your federal tax liability.
What counts as income for the federal test
Combined income includes wages, self-employment income, interest, dividends, capital gains, and distributions from retirement accounts. It also includes income from pensions and annuities. Crucially, it includes half of your Social Security benefits themselves.
Some income does not count. Municipal bond interest is excluded, as is income earned abroad by U.S. citizens living overseas. If you are still working and earning wages, those wages count in full toward the threshold.
The threshold amounts ($25,000 and $32,000) have not changed since 1984, so more retirees cross them each year as wages and investment returns grow.
Tennessee's broader tax picture for retirees
Tennessee's lack of income tax extends beyond Social Security. The state does not tax distributions from 401(k) plans, IRAs, pensions, or annuities. If you are retired and living on investment income, Tennessee collects nothing from those sources either.
Tennessee does tax other forms of income. Wages and self-employment income are subject to state tax. Interest and dividend income are also taxable in Tennessee, though the state offers a limited exclusion for certain types of investment income earned by residents over 59½.
Property taxes and sales taxes exist in Tennessee and vary by county and municipality. The state sales tax is 9.55 percent when you combine state and average local rates, which is among the highest in the nation.
States that do tax Social Security
Thirteen states tax Social Security benefits to some degree. Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, and West Virginia all impose state income tax on Social Security under certain conditions. Each state sets its own income thresholds and tax rates.
If you are considering moving in retirement, Social Security taxation is one factor to weigh alongside property taxes, sales taxes, and cost of living. Tennessee's exemption is a genuine advantage compared to these states.
Planning around federal Social Security taxation
If you expect to owe federal tax on your Social Security, you have limited options to reduce it. You cannot avoid the tax by not claiming benefits, because the IRS counts benefits as income whether you spend them or set them aside.
Some retirees manage their combined income by timing withdrawals from tax-deferred accounts, directing tax refunds to Roth conversions, or harvesting capital losses to offset gains. A tax professional can review your specific situation and suggest strategies that fit your circumstances.
If you are still working and claiming Social Security before your full retirement age, the Social Security Administration will reduce your benefits by $1 for every $2 you earn above an annual limit. This reduction is separate from income tax and applies only while you are below full retirement age.
Frequently Asked Questions
Do I have to file a Tennessee state tax return if I only receive Social Security?
No. Tennessee has no state income tax, so there is no state return to file. You may still need to file a federal return depending on your total income and filing status, but that is a federal requirement, not a Tennessee one.
If I move to Tennessee after retiring, will my Social Security become tax-free?
Yes. Tennessee taxes Social Security benefits at zero percent regardless of when you move there or where you received benefits before. Your residency status determines which state's tax rules explore.
Does Tennessee tax my spouse's Social Security if we file a joint federal return?
No. Tennessee does not tax Social Security for any resident, regardless of filing status or household composition. Your spouse's benefits are also exempt from Tennessee state tax.
What if I have both a pension and Social Security — does Tennessee tax either one?
Tennessee taxes neither. The state exempts both Social Security and pension income from state income tax. You may owe federal tax on either or both depending on your combined income, but Tennessee itself collects nothing.
Can I reduce my federal Social Security tax by living in Tennessee?
No. Federal tax rules explore everywhere in the United States. Living in Tennessee eliminates only the state tax portion. Your federal liability depends on your combined income and filing status, not your state of residence.