Taxes are one of the biggest financial considerations for buyers relocating to a new area. The good news for many people considering Knoxville and East Tennessee is that the region tends to be very tax-friendly compared with much of the country.
Like most places, taxes in Knoxville operate at several different levels:
• State taxes
• County property taxes
• City property taxes (if applicable)
• Sales taxes
Understanding how each of these layers works can help buyers better estimate the long-term cost of owning a home in the area.
Tennessee State Taxes
One of the biggest reasons people relocate to Tennessee is simple: there is no state income tax.
Tennessee previously taxed certain investment income through what was known as the Hall Income Tax, but that tax was fully eliminated in 2021. Today, residents do not pay state income tax on wages, retirement income, or investment income.
Source: Tennessee Department of Revenue
Because of this structure, Tennessee consistently ranks as one of the more tax-friendly states in the country. According to national comparisons, Tennessee ranks among the states with the lowest overall state and local tax burdens.
Source: Tax Foundation
For many households relocating from states such as California, New York, Illinois, or New Jersey, the absence of a state income tax can significantly increase take-home income.
Property Taxes in East Tennessee
Property taxes in Tennessee are also relatively low compared with national averages.
Across the state, the average effective property tax rate is around 0.49%, well below the U.S. average.
Source: Tax Foundation
Property taxes are administered at the county level, which means the exact rate varies depending on where you buy a home.
Below are examples from three counties commonly considered by buyers looking in the greater Knoxville area.
Knox County Property Taxes
Knox County includes the city of Knoxville along with surrounding communities such as Farragut and Hardin Valley.
Tennessee uses a specific formula to calculate property taxes. Residential property is assessed at 25% of the appraised value, and the tax rate is then applied to that assessed value.
In Knox County, the county property tax rate is currently $1.33 per $100 of assessed value.
Source: Knox County Trustee
Example Calculation
Let's walk through a simple example.
Home value: $700,000
Step 1 — Determine assessed value
25% × $700,000 = $175,000
Step 2 — Apply the tax rate
$1.33 per $100 of assessed value
$175,000 ÷ 100 = 1,750
1,750 × $1.33 = $2,327.50 per year
This illustrates why property taxes in the Knoxville area are generally considered relatively low compared with many parts of the country.
Comparing Property Taxes Across Knoxville-Area Counties
Example based on a $700,000 home value
| County | Tax Rate (per $100 assessed value) | Assessed Value (25%) | Estimated Annual Property Tax |
|---|---|---|---|
| Knox County | $1.33 | $175,000 | $2,327 |
| Loudon County | $1.72 | $175,000 | $3,010 |
| Blount County | $2.47 | $175,000 | $4,323 |
Even though the counties have sdifferent rates, property taxes throughout the Knoxville region remain relatively modest compared with many parts of the United States.
City Property Taxes
Another important distinction in Knoxville is whether a home is located inside or outside city limits.
Homes located inside the City of Knoxville pay both:
• Knox County property taxes
• City of Knoxville property taxes
Homes located outside city limits pay county taxes only.
City taxes help fund municipal services such as:
• city police departments
• city fire departments
• municipal trash pickup
• certain infrastructure and road services
If you're interested in understanding how services differ between city and county areas, including how fire protection works in some parts of the county, you can read our detailed guide:
City vs County Living in Knoxville: Taxes, Services, and Fire Protection
Sales Tax in Knoxville
Where Tennessee collects more tax revenue is through sales tax.
The statewide sales tax rate is 7%, and local governments can add additional taxes of up to 2.75%.
In Knoxville, the combined state and local sales tax rate is currently 9.25%.
Source: Tennessee Department of Revenue
Because of this structure, Tennessee ranks among the states with the highest sales tax rates in the country.
However, for many residents the higher sales tax is offset by the absence of a state income tax and relatively low property taxes.
Example: Total Annual Taxes for a Knoxville Homeowner
To understand how taxes work in practice, it can help to look at a simple example.
Let’s assume a homeowner purchases a $700,000 home in Knox County and spends approximately $30,000 per year on taxable purchases such as dining, clothing, household goods, and other taxable items.
Property Taxes
Using the Knox County formula:
Home value: $700,000
Assessed value (25%): $175,000
Tax rate: $1.33 per $100 of assessed value
Estimated annual property tax:
$2,327
Sales Tax
The combined sales tax rate in Knoxville is 9.25%.
If a household spends about $30,000 annually on taxable purchases:
$30,000 × 9.25% = $2,775 in sales tax
Source: Tennessee Department of Revenue
State Income Tax
Tennessee has no state income tax, meaning homeowners do not pay state taxes on:
• wages
• retirement income
• investment income
Source: Tennessee Department of Revenue
Estimated Total Annual Taxes
Using this example:
| Tax Type | Estimated Annual Cost |
|---|---|
| Property tax | $2,327 |
| Sales tax (estimated) | $2,775 |
| State income tax | $0 |
Estimated total: $5,102 per year
How This Compares to Other States
Many buyers relocating to Tennessee come from states where property taxes and income taxes are significantly higher.
States such as:
• New York
• New Jersey
• Illinois
• California
often have both higher property taxes and state income taxes.
According to the Tax Foundation, Tennessee consistently ranks among the states with the lowest overall tax burdens in the United States.
Source: Tax Foundation
For many relocation buyers, this difference in taxes is one of the factors that makes East Tennessee an attractive place to live.
Thinking About Buying a Home in Knoxville?
Taxes are just one factor to consider when evaluating a home purchase in Knoxville. Property characteristics, neighborhood design, insurance considerations, and local services can all influence the long-term cost of owning a home.
The best way to fully understand these details is to walk through them with someone who knows the local market well.
If you're considering buying a home in Knoxville or East Tennessee, feel free to reach out to Sold With Sinclair. We’re always happy to answer questions, evaluate properties with you, and help you make confident decisions during your home search.
