Updated July 2026 · 8 min read
Part of the Travel Nurse Tax Hub — browse every related guide in one place.
Tennessee is one of the friendliest states on a travel nurse's paycheck: it has no state income tax on wages, no city income tax, and (since 2021) no tax on investment income either. A Nashville, Memphis, or Knoxville contract means the only income tax you'll deal with is your home state's — and if your home state is also tax-free, your assignment wages face zero state income tax anywhere. But "no state tax" doesn't mean "no tax planning." Your tax home still decides whether your stipends stay tax-free, and a careless move can hand the benefit back.
Tennessee is one of a small group of states with no broad-based personal income tax. For a travel nurse that means your hourly taxable wages earned on a Tennessee assignment are not subject to any Tennessee state or local income tax withholding. You won't see a state line item eating your paycheck, and there's no state return to file for the wages you earned there.
Until recently Tennessee did tax certain investment income — interest and dividends — through the Hall income tax. That tax was gradually reduced and then eliminated; for tax years 2021 and later it no longer exists. So a nurse building a taxable brokerage account or living partly off dividends gets a clean break in Tennessee too. What Tennessee does lean on instead is a relatively high sales tax (state plus local combined often around 9.5%), so the state gets its revenue at the register rather than the paycheck — worth remembering when you budget cost of living, not just take-home.
| Tax | Tennessee 2026 | Effect on a travel nurse |
|---|---|---|
| State income tax (wages) | None | No withholding, no state return |
| Local/city income tax | None | Same in Nashville, Memphis, Knoxville, Chattanooga |
| Hall tax (interest/dividends) | Repealed (gone since 2021) | Investment income untaxed by TN |
| Sales tax | ~9.5% combined (high) | Higher day-to-day cost of living |
The single biggest misconception is that working in a no-income-tax state makes your whole package tax-free. It doesn't. The tax-free portion of a travel package — the housing stipend and the meals-and-incidentals per diem — is tax-free under federal rules, and those rules don't care which state you're in. They care whether you are genuinely working away from a legitimate tax home and duplicating living expenses.
A real tax home means a permanent residence you maintain and return to, real ties there (license, registration, a home you pay for), and not staying in one work area so long that it becomes your new tax home — the rough guideline is no more than about 12 months in the same area. If you don't have a real tax home, the IRS treats you as an "itinerant," your stipends become taxable wages, and Tennessee's lack of a state tax does nothing to save the federal tax you'd then owe on that money. So the planning that matters in Tennessee is federal, not state.
For a nurse whose tax home is in a no-income-tax state, a Tennessee assignment is close to the ideal setup: no state tax where you live, no state tax where you work, and a solid non-taxable stipend on top of taxable wages. Your only income tax is federal. That's why pairing a tax-free domicile with tax-free assignment states is one of the cleanest ways travelers maximize take-home — the same logic behind chasing contracts in Texas, Florida, and Washington.
Even if your home state does tax you, a Tennessee contract still simplifies life: there's no second state return to file, no reciprocity forms, no local city tax to untangle like you'd face in Ohio or Pennsylvania. You just report the wages on your home-state resident return (if applicable) and your federal return.
For your Tennessee wages: nothing at the state level — there's no personal income tax return. Federally, you file your usual Form 1040, reporting your taxable wages (your stipends, if properly qualified, aren't wages). If your domicile is a taxing state, you file that state's resident return and include the Tennessee-earned wages there, since no Tennessee tax was withheld to credit against it. Keep your contract, paystubs, and proof of your permanent home — the documentation that protects your stipends is the same whether or not the assignment state taxes income.
Related: Texas travel nurse taxes · Florida travel nurse taxes · Travel nurse tax home guide · Washington travel nurse taxes
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