North Carolina vs Tennessee taxes

Where the difference comes from

Neither state takes anything from wages beyond income tax, and Tennessee takes no income tax, so the whole gap is North Carolina’s income tax. It is about as simple as a state tax gets: a flat 3.99% on salary above a standard deduction of $12,750 for a single filer, with no brackets, no credits and no payroll levy.

On $75,000 that is $2,484, and since nothing else on the two payslips differs, a single filer keeps exactly that much more in Tennessee. Because the rate is flat, the gap tracks the salary almost exactly: $1,486 on $50,000, $5,476 on $150,000 and $9,466 on $250,000. As a share of pay it creeps toward 3.99% but never reaches it, because the deduction shelters the same fixed sum at every income.

No marriage penalty and no bonus

North Carolina’s joint deduction is exactly twice the single one, and a single rate applies to everyone. So a couple filing jointly on $150,000 pays $4,968, exactly what two single people on $75,000 each would pay between them. Tennessee has nothing to split, and the couple keeps $4,968 more there.

Why the gap creeps up

North Carolina’s rate has been falling, from 5.25% down to 3.99% for 2026. Its standard deduction has not moved with it. The $12,750 is written as a fixed sum into the statute and is not indexed to inflation, unlike the federal standard deduction of $16,100. As pay rises with prices, the same deduction shelters a little less of it each year, and the gap with Tennessee grows even when your real income does not.

Tennessee’s zero is more permanent than a low rate. The constitutional amendment voters approved in 2014 means an income tax on wages would need another amendment, not a bill.

Retirement income

The gap for a retiree is much smaller than for a worker. North Carolina fully deducts Social Security, and military retirement pay for anyone who served at least 20 years or was medically retired, and some older government pensions are exempt under the Bailey settlement. Tennessee taxes no personal income of any kind, investment income included, since the Hall tax ended with the 2021 tax year. These figures model wages only.

What the take-home figure does not count

Tennessee raises its money at the till, through sales tax, and it taxes groceries at a reduced rate rather than exempting them. A household that spends most of what it earns hands back part of the income tax saving as it shops; one that saves a large share keeps more of it. Property tax and housing costs are not in these figures either. They also assume you live and work in the same state.

Questions people ask

Do you take home more in North Carolina or Tennessee on $75,000?

Tennessee, by $2,484 a year, or $207 a month, for a single filer in 2026. That counts federal tax, Social Security, Medicare, state income tax and every state payroll deduction.

Is the difference the same at every salary?

No, but the same side stays ahead. The gap is $688 a year at $30,000 and $9,466 at $250,000, for a single filer.

Does any city in North Carolina or Tennessee add a local income tax?

No. No North Carolina city or county levies an income tax, and none does in Tennessee either. The figures here hold in Charlotte, Raleigh and Asheville as they do in Nashville, Knoxville and Memphis.

Will North Carolina's rate keep falling?

Possibly. The 3.99% for 2026 is the last step of a phasedown written into law, and further cuts have been legislated only if revenue conditions are met. Tennessee's position is fixed more firmly: a 2014 constitutional amendment prohibits a tax on earned income.

Is either state's payroll deduction part of the gap?

No. Neither state takes a payroll levy from employees. Unemployment insurance is paid by employers in both, and neither runs a disability or paid family leave program, so the gap is North Carolina's income tax and nothing else.

What this comparison covers

Income tax and payroll deductions on wages: federal income tax, Social Security, Medicare, state income tax, every state payroll deduction. It does not compare sales tax, property tax, housing or the cost of living, which can outweigh the difference in take-home pay. Figures assume the standard deduction, no dependents and no pre-tax retirement contributions. See how we calculate.