Composite Index
89.7
US average = 100.0
Tennessee (TN) | Composite 89.7
Tennessee Cost of Living 2026
Tennessee sits at 89.7 on the 2026 C2ER cost of living index, about 10 percent below the US average. The state has no income tax (the Hall tax on interest and dividends was fully repealed in 2021), making it among the most tax-favourable states for wage earners. Nashville housing has risen sharply since 2018; Memphis and Knoxville remain substantially cheaper.
Composite 89.7No state income taxHousing index 75.8
Median Home
$298,500
2BR rent $1,180/mo
Median Income
$59,695
Household, Census ACS
Category breakdown
All 6 categories vs national average
| Category | TN index | National avg | Difference |
|---|---|---|---|
| Housing | 75.8 | 100.0 | -24.2% |
| Groceries | 94.2 | 100.0 | -5.8% |
| Utilities | 97.8 | 100.0 | -2.2% |
| Transportation | 95.2 | 100.0 | -4.8% |
| Healthcare | 92.8 | 100.0 | -7.2% |
| Miscellaneous | 96.5 | 100.0 | -3.5% |
Sources: BEA Regional Price Parities, C2ER Cost of Living Index, Census ACS 5-year (median income, home value), Tennessee Department of Revenue (sales and excise tax), EIA (electricity rates), KFF (uninsured rate), Zillow ZHVI, Tennessee Comptroller of the Treasury.
Pros / offsets
What works in Tennessee.
No state income tax (and no Hall tax). Tennessee is one of nine no-state-income-tax states. The Hall income tax (a separate 6 percent tax on interest and dividends) was fully repealed effective 2021. Wage income, retirement income, and investment income are all free of state tax. The Tennessee Department of Revenue funds the state through sales tax, business taxes, and excise taxes.
Housing 25 percent below national average outside Nashville. Housing sub-index 75.8 statewide. Median home statewide $298,500, but the rural and small-city housing market remains under $200,000 in much of the state. Memphis median home around $180,000; Knoxville around $310,000.
Cheap energy. Average residential electricity rate 12.52 cents per kWh per EIA, well below the national average. Most of Tennessee is served by TVA (Tennessee Valley Authority) and member distributors, which historically have held rates down relative to investor-owned utilities. Natural gas heating is modest because winters are mild.
Below-average grocery cost. Grocery sub-index 94.2. Tennessee taxes groceries at 4 percent (reduced from 4 percent of the 7 percent general rate), and combined with low food-supply chain costs in the region, monthly grocery spend runs below the national average.
Cons / drivers
Where Tennessee costs more.
Highest combined sales tax in the country. 7 percent state plus local can push combined rates to 9.75 percent in Nashville and Memphis. The Tennessee Department of Revenue lists the local rates. Groceries are taxed at the lower 4 percent state rate but local add-ons still apply. The high sales tax is the offset to no income tax, and it makes Tennessee mildly regressive: lower-income households pay a larger share of income in sales tax.
Nashville housing has run. Nashville MSA median home around $475,000 per Zillow ZHVI, up roughly 70 percent since 2018. Tourism (Music City), corporate relocation (Oracle, Amazon Operations Center, AllianceBernstein), and remote-worker in-migration drove the price run. Rent has followed.
Healthcare access uneven. Uninsured rate 9.8 percent per KFF, above the US average. Tennessee has not expanded Medicaid under the ACA. The state has lost more rural hospitals than most peers since 2010. Nashville (Vanderbilt) and Memphis (Methodist, Baptist, St. Jude) have strong urban networks; rural East Tennessee and West Tennessee have access gaps.
Property tax moderate but local variation is wide. Effective rate 0.56 percent per the Tax Foundation, below the national average. On the $298,500 median home, the typical annual bill is around $1,670. Nashville-Davidson and Memphis-Shelby county rates run materially higher than the rural-county average. Always check the county.
Tax + benefit signals
Tennessee tax and access overview
State income tax
0%
No state income tax
Property tax effective
0.56%
Of assessed value, annual
Sales tax (state)
7.00%
Local can add 1-4% more
Uninsured rate
9.8%
Medicaid: not expanded
Metro variation
State averages mask city variation.
Tennessee state composite 89.7 averages substantial regional variation:
Nashville MSA: Roughly 100-110 on the Regional Price Parity scale, above the national average. Median home Nashville MSA $475,000. Williamson County (Franklin, Brentwood) is the affluent suburb belt; median home there often exceeds $700,000.
Memphis MSA: Roughly 82-88. Median home around $180,000. The cheapest major city in Tennessee by a wide margin. FedEx headquarters, the Port of Memphis, and St. Jude Children's Research Hospital anchor major employment.
Knoxville MSA: Roughly 90-95. Median home around $310,000. University of Tennessee and Oak Ridge National Laboratory drive demand. East Tennessee outdoor recreation (Great Smoky Mountains National Park) attracts retirees and remote workers.
Chattanooga: Roughly 88-93. Median home around $280,000. Volkswagen plant, Tennessee Aquarium, and the country's first municipal gigabit fiber network (EPB Fiber Optics) have powered a steady economic recovery.
Tri-Cities (Johnson City, Kingsport, Bristol): Roughly 82-88. Median home around $235,000. Healthcare (Ballad Health) and manufacturing economies.
Clarksville: Roughly 85-90. Median home around $295,000. Fort Campbell (Army, 101st Airborne) and Austin Peay State University drive the economy. The fastest-growing Tennessee MSA over 2015-2024.
Frequently Asked
Tennessee cost of living, answered
Does Tennessee really have no state income tax at all?
Yes, on all forms of income. Tennessee never taxed wage income, and the Hall income tax (a separate 6 percent state tax on interest and dividends that had been in place since 1929) was phased out gradually and fully repealed effective 2021. As of 2026, Tennessee has no state tax on wages, interest, dividends, capital gains, retirement income, or Social Security. Federal income tax still applies normally.
Why is the Tennessee sales tax so high?
7 percent state plus local rates of up to 2.75 percent push combined rates to as high as 9.75 percent. This is the highest average combined sales tax rate in the country, per the Tax Foundation's annual ranking. The high sales tax is the explicit offset to no state income tax. Groceries are taxed at a reduced 4 percent state rate (plus local), which is still meaningful. The structure is mildly regressive: lower-income households pay a larger share of income in sales tax than higher-income households.
Is Nashville still affordable?
Less so than it was. Nashville median home around $475,000 vs roughly $280,000 in 2018, a roughly 70 percent run over six years. Williamson County (Franklin, Brentwood) is among the most expensive in the South. For a buyer relocating from a coastal metro, Nashville still pencils, but for someone coming from Memphis or Knoxville the price shock is real. Rent has followed home prices upward.
How does Memphis compare to Nashville for cost of living?
Memphis is roughly 20 percent cheaper than Nashville on the C2ER composite. Median home Memphis $180,000 vs Nashville $475,000, a $300,000 gap. Memphis wages are lower (median household income around $52,000 vs Nashville $72,000), so for someone earning a Nashville salary while living in Memphis or working remote, the arbitrage is substantial. Healthcare and education networks differ meaningfully; Memphis has higher crime statistics.
Is Tennessee good for retirement?
Among the most retirement-friendly states. No state income tax on retirement distributions, Social Security, pension income, or investment income. Property tax effective rate 0.56 percent is below the national average. Healthcare cost is below average. The trade-offs are summer heat and humidity, hurricane-edge weather risk in West Tennessee, and uneven rural healthcare access. Many retirees split time between Tennessee and a cooler northern second home.
What is the deal with the Tennessee Valley Authority and electricity?
TVA is the federal corporation that generates and sells wholesale electricity to local distributors covering most of Tennessee and parts of six neighboring states. It was created in 1933 as part of the New Deal. TVA-region electricity rates have historically tracked below investor-owned utilities in the Southeast, partly because TVA is a federal entity exempt from state property and franchise taxes and partly because its generation mix is diversified (hydroelectric, nuclear, gas, coal). Local distributor markups add modestly on top of the TVA wholesale rate.
Should I move to Tennessee from California or New York?
For high earners, yes on net. The no-income-tax saving on $200,000 of salary is roughly $10,000-26,000 per year vs CA or NY. Add a 40-50 percent housing cost reduction (vs Bay Area, LA, or NYC metro) and the cumulative annual saving can exceed $50,000. The trade-offs are weather, distance from family for many relocators, and a different cultural and educational environment than coastal metros. The /calculator page lets you run the math both ways.
What is the job market depth like outside Nashville?
Memphis has FedEx, AutoZone, International Paper, and ServiceMaster as Fortune 500 headquarters; St. Jude Children's Research Hospital is a major employer. Knoxville has Oak Ridge National Laboratory (federal R&D, Department of Energy) and the University of Tennessee system. Chattanooga has Volkswagen North American assembly, BlueCross BlueShield of Tennessee, and a tech corridor that grew up around the country's first municipal gigabit fiber rollout. For knowledge workers, Nashville offers the deepest market, but Memphis, Knoxville, and Chattanooga all have viable industry concentrations. Remote workers benefit equally everywhere from the no-income-tax structure.