Tennessee offers a below-average cost of living compared to the U.S. national average, with no state income tax on wages and relatively affordable housing.
As of 2026, the cost of living index in Tennessee is approximately 88 to 92 (U.S. average = 100), according to the MERIC (Missouri Economic Research and Information Center) index.
Nashville is the most expensive city in the state and has risen in cost significantly, while Memphis, Knoxville, and Chattanooga remain among the more affordable metro areas in the South.
Those comparing Southern state options should review the cost of living in North Carolina, the cost of living in Georgia, and the cost of living in Texas — all no-income-tax or low-tax states with competitive overall cost profiles.
The cost of living in Florida is also frequently compared to Tennessee for retirees and remote workers seeking warm climates without state income taxes.
Housing Costs in Tennessee
Tennessee housing has appreciated significantly over the past decade, particularly in Nashville and its suburbs. As of 2026, the median home price in Nashville exceeds $450,000. Memphis median home prices are notably lower at approximately $175,000 to $220,000.
Rent for a one-bedroom apartment in Nashville runs $1,400 to $2,200 per month, while Knoxville and Chattanooga average $1,000 to $1,500.
Nashville buyers should evaluate how much house they can afford given recent price appreciation, and understand the full average mortgage payment at current interest rates before entering the market.
Renters should track how much rent they can afford relative to income as Nashville rents continue to rise.
Taxes in Tennessee
Tennessee has no personal income tax on wages and salaries as of 2026, which is a significant financial advantage for residents.
The state's primary revenue source is a 7% sales tax — one of the highest in the U.S. Local counties and municipalities add additional sales tax, bringing total sales tax in many areas to 9.25% to 9.75%.
Property taxes are moderate compared to the national average.
Tennessee residents can capitalize on the no-income-tax advantage by maximizing contributions to a Roth IRA and IRA account for long-term wealth building, and should track progress against average net worth by age benchmarks to ensure the tax savings are being reinvested rather than consumed by the high sales tax burden.
Homeowners can also benefit from the mortgage interest deduction at the federal level.
Food and Everyday Expenses
Grocery costs in Tennessee are near the national average. The BLS Consumer Expenditure Survey indicates food costs in the Southeast region are comparable to or slightly below the national median. Dining out is affordable by national standards, particularly outside Nashville.
Utilities costs are moderate; Tennessee Valley Authority (TVA) electricity rates are competitive, keeping electric bills below the national average for most Tennessee households.
Setting aside a portion of the savings from Tennessee's low cost of living into adequate savings reserves helps build long-term financial resilience.
Healthcare Costs
Tennessee's healthcare costs are mixed. The state has a higher proportion of residents with chronic conditions, affecting insurance costs. TennCare, the state's Medicaid program, covers approximately 1.5 million low-income Tennesseans.
Individual health insurance premium rates on the ACA marketplace vary by county and coverage tier.
Frequently Asked Questions
Is Tennessee a cheap state to live in?
Tennessee has a cost of living index of approximately 88 to 92 (below the U.S. average of 100), making it more affordable than the national median, though Nashville has risen significantly in cost.
Residents relocating from high-cost states should build a disciplined retirement savings plan and maintain a strong emergency fund to take full advantage of Tennessee's lower cost environment.
Does Tennessee have a state income tax?
No. Tennessee has no personal income tax on wages and salaries as of 2026.
The state previously taxed investment income under the Hall Tax, which was fully repealed in 2021.
This places Tennessee alongside Texas, Florida, and Washington State as states with no wage income tax — a meaningful financial advantage particularly for higher earners and retirees.
What is the cost of housing in Nashville?
Nashville's median home price exceeds $450,000 as of 2026. One-bedroom apartment rents average $1,400 to $2,200 per month, making it significantly more expensive than other Tennessee cities.
What is the sales tax rate in Tennessee?
Tennessee's state sales tax is 7%. Most localities add 2.25% to 2.75%, for a typical combined rate of 9.25% to 9.75% — among the highest combined rates in the U.S.
What is the cheapest city to live in Tennessee?
Memphis, Jackson, and Clarksville tend to offer the lowest housing costs in Tennessee. Knoxville and Chattanooga offer a balance of affordability and quality-of-life amenities.
Sources & References
- Missouri Economic Research and Information Center — Cost of Living Data — https://meric.mo.gov/data/cost-living-data-series
- Tennessee Department of Revenue — Sales and Use Tax — https://www.tn.gov/revenue/taxes/sales-and-use-tax.html
- U.S. Bureau of Labor Statistics — Consumer Expenditure Survey, South Region — https://www.bls.gov/cex/
Last updated: April 27, 2026