Tennessee Does Not Tax Social Security Benefits

Tennessee does not tax Social Security income at the state level. If you receive Social Security benefits and live in Tennessee, you will not owe state income tax on those benefits, regardless of how much you receive or what other income you have.

This is one of the most favorable tax treatments in the country. Some states tax Social Security under certain conditions — usually when your total income exceeds a threshold — but Tennessee has no such tax. Your Social Security check is yours to keep without a state tax bite.

However, this does not mean Social Security is completely tax-free. The federal government may tax your benefits depending on your total income, and you may owe federal income tax even if Tennessee takes nothing. Understanding the difference between state and federal taxation is important for planning your finances.

Key Takeaways

  • Tennessee imposes no state income tax on Social Security benefits, no matter your age or income level.
  • The federal government may still tax your Social Security benefits if your combined income exceeds certain thresholds.
  • Combined income includes your Social Security, wages, interest, dividends, and half of your Social Security benefits.
  • You can request that the Social Security Administration withhold federal taxes from your monthly check to avoid a tax bill later.

How Federal Taxation of Social Security Works

Even though Tennessee does not tax Social Security, the IRS does — but only if your income is high enough. The federal government uses a measure called combined income to determine whether your benefits are taxable. Combined income is the sum of your adjusted gross income, nontaxable interest, and half of your Social Security benefits.

If you are single and your combined income exceeds $25,000, you may owe federal tax on up to 50 percent of your benefits. If your combined income exceeds $34,000, you may owe tax on up to 85 percent of your benefits. For married couples filing jointly, these thresholds are $32,000 and $44,000.

These thresholds have not changed since 1984, so more retirees cross them each year as wages and investment income rise. If you have a pension, rental income, or significant savings, you are more likely to reach these limits than someone living on Social Security alone.

What Income Counts Toward the Federal Tax Threshold

Combined income includes more than just your Social Security check. It includes wages from work, interest from savings accounts and bonds, dividends from stocks, capital gains from selling investments, rental income, and income from self-employment. It also includes half of your Social Security benefits themselves.

Certain types of income do not count. Supplemental Security Income (SSI) does not count. Veterans benefits do not count. Some municipal bond interest does not count. But most common sources of retirement income do count, which is why many retirees find themselves subject to federal taxation even if they think they have modest income.

If you are still working and receiving Social Security before your full retirement age, your wages will push you over the threshold. This is one reason some people delay claiming Social Security until they stop working or reach full retirement age.

How to Handle Federal Withholding on Your Social Security Check

If you know you will owe federal income tax on your Social Security benefits, you can ask the Social Security Administration to withhold taxes from your monthly payment. This prevents a large tax bill when you file your return in April.

To request withholding, you fill out Form W-4V and submit it to your local Social Security office or mail it to the address listed on the form. You can choose to have 7 percent, 10 percent, 15 percent, or 22 percent of your benefit withheld each month. You can also request a flat dollar amount.

Changing your withholding is straightforward. You can increase it, decrease it, or stop it altogether by submitting a new Form W-4V. Many people adjust their withholding after they file their tax return and see whether they owed money or received a refund.

Other Tennessee Tax Considerations for Retirees

Tennessee has no state income tax at all — not just on Social Security, but on wages, pensions, and investment income either. This makes Tennessee one of nine states with no income tax. If you move to Tennessee from a state that taxes Social Security or other retirement income, your state tax burden will drop significantly.

Tennessee does have a sales tax of 9.55 percent statewide, though some counties add local sales tax on top of that. Groceries are not taxed, but most other purchases are. Property taxes vary by county and are generally moderate compared to other states.

If you own a home in Tennessee, you may be may be able to access for the Homestead Property Tax Deferral program, which allows you to defer property taxes if you are 65 or older and meet income limits. This is a separate benefit from Social Security taxation but can help reduce your overall tax burden in retirement.

When You Should File a Federal Tax Return

Even if Tennessee does not tax your Social Security, you may still need to file a federal tax return. The IRS requires you to file if your gross income exceeds certain thresholds, which vary by age and filing status.

For 2024, a single person age 65 or older must file if their gross income is $15,000 or more. A married couple filing jointly, where at least one spouse is 65 or older, must file if their combined gross income is $30,000 or more. These thresholds include your Social Security benefits as part of gross income.

Even if you are not required to file, you may want to file anyway. If you had federal taxes withheld from your Social Security check or from other income, filing allows you to claim a refund if you overpaid. You may also be able to claim the Earned Income Tax Credit or other credits that reduce your tax bill.

Frequently Asked Questions

Will I owe Tennessee state tax if I move there after receiving Social Security in another state?

No. Tennessee does not tax Social Security income regardless of where you received it or where you lived before. Once you move to Tennessee, your Social Security benefits are not subject to state income tax. You may still owe federal income tax depending on your total income.

Does Tennessee tax my pension or retirement account withdrawals?

Tennessee does not tax income from pensions, 401(k) withdrawals, IRA distributions, or other retirement accounts. Like Social Security, these are not subject to state income tax in Tennessee. However, the federal government may tax them depending on your total income.

What if I work part-time and receive Social Security at the same time?

Your wages will count toward your combined income for federal tax purposes, which may push you over the threshold where your Social Security becomes taxable to the IRS. Tennessee will not tax either your wages or your Social Security, but the federal government may tax your benefits.

Can I reduce my federal tax bill by not taking my full Social Security benefit?

Yes. If you have not yet reached full retirement age and are still working, you can delay claiming Social Security. This reduces your combined income and may keep you below the federal tax threshold. Once you stop working or reach full retirement age, you can claim your full benefit.

Do I need to report my Social Security income to Tennessee when I file my state return?

Tennessee has no state income tax, so there is no state tax return to file. You only file a federal return with the IRS. You do not need to report your Social Security income to any Tennessee tax agency.