Military Retirement in Tennessee: Complete 2026 Tax Guide
NO state income tax on retirement pay or any income
🎯 Quick Summary: Tennessee Military Retirement Taxes (2026)
- ✓ Military retirement pay: NO state income tax
- ✓ VA disability payments: Tax-free (federal and state)
- ✓ Survivor Benefit Plan (SBP): NO state income tax
- ✓ Property tax: Relief programs for disabled veterans
- ✓ Overall ranking: Top-tier tax-friendly state for military retirees
Why Tennessee Is One of the Best States for Military Retirement
Tennessee is one of only nine states with no state income tax, making it an exceptional destination for military retirees. Your entire military pension, VA disability, and any civilian income are completely free from state income tax.
Beyond the tax benefits, Tennessee offers a low cost of living (10% below national average), beautiful scenery from the Smoky Mountains to the rolling hills of middle Tennessee, and a growing veteran community with over 470,000 veterans calling the Volunteer State home.
2026 Tennessee Military Retirement Tax Breakdown
State Income Tax on Military Retirement Pay
🎉 ZERO State Income Tax!
Tennessee does not have a state income tax on wages, salaries, or retirement income. This applies to ALL income including military retirement pay, pensions, Social Security, investments, and civilian wages. Your military pension is only subject to federal income tax.
VA Disability Compensation
✓ Completely Tax-Free
VA disability payments are tax-exempt at both the federal and Tennessee state levels. Whether you receive 10%, 100%, or any rating in between, you keep every dollar.
Other Tax Benefits for Tennessee Veterans (2026)
| Benefit | Details |
|---|---|
| Property Tax Relief |
|
| Sales Tax | 7% state sales tax (local taxes add 1.5-2.75%). Groceries taxed at reduced 4% rate. Higher than average but offset by no income tax. |
| Vehicle Registration | Disabled veterans with specially adapted vehicles qualify for exemptions. Specialty plates available. |
| State Park Access | Disabled veterans receive free lifetime pass to Tennessee State Parks. |
Real Example: How Much You'll Save in Tennessee (2026)
Let's compare a military retiree in Tennessee vs. California to see the tax savings:
Example Scenario: E-7 Retired After 20 Years
- • Military retirement pay: $2,800/month ($33,600/year)
- • VA disability (70%): $1,916/month ($22,992/year)
- • Part-time civilian job: $25,000/year
- • Total annual income: $81,592
Tennessee (NO State Income Tax)
All income: Tax-free at state level
State tax: $0
California (9.3% Tax Bracket)
Partial exemption, but still pays on income
State tax: ~$2,100
Annual Tennessee Savings: $2,100+
Over 20 years of retirement: $42,000+ saved
Cost of Living in Tennessee for Military Retirees (2026)
Tennessee offers a cost of living 10% below the national average, making your retirement dollars stretch further:
| Category | Tennessee vs. National Average | Notes |
|---|---|---|
| Housing | -15% cheaper | Median home price: $330,000 Nashville area, $250,000 Clarksville (2026) |
| Groceries | -8% cheaper | Publix, Kroger, Walmart widely available. Note: 4% grocery tax. |
| Healthcare | -5% cheaper | Nashville is a healthcare hub. Multiple VA facilities. TRICARE accepted. |
| Transportation | -10% cheaper | Lower gas prices than coastal states. Car-dependent culture. |
| Utilities | -5% cheaper | TVA provides affordable electricity. Moderate heating/cooling needs. |
Major Military Installations in Tennessee
Tennessee hosts several military installations providing strong veteran communities:
🏰 Army
- Fort Campbell - Clarksville (TN/KY border) - Home of 101st Airborne "Screaming Eagles"
- One of the largest Army installations
- Strong veteran transition community
✈️ Air Force
- Arnold Air Force Base - Tullahoma - Aerospace testing facility
- Arnold Engineering Development Complex
- High-tech research environment
⚓ Navy
- Naval Support Activity Mid-South - Millington (near Memphis)
- Navy Personnel Command headquarters
- Major administrative center
🎖️ National Guard
- Tennessee National Guard - Facilities statewide
- 164th Airlift Wing - Memphis
- 134th Air Refueling Wing - Knoxville
Best Cities in Tennessee for Military Retirees (2026)
| City | Nearby Base | Median Home Price | Why It's Great |
|---|---|---|---|
| Clarksville | Fort Campbell | $250,000 | Most military-friendly, affordable, large veteran community, growing city |
| Nashville | TN NG HQ | $450,000 | State capital, healthcare hub, music scene, job opportunities |
| Knoxville | 134th ARW | $310,000 | Gateway to Smokies, university town, affordable, outdoor recreation |
| Memphis | NSA Mid-South | $220,000 | Most affordable major city, rich culture, BBQ capital, VA medical center |
| Chattanooga | TN NG | $330,000 | Scenic river city, outdoor activities, tech growth, moderate size |
VA Healthcare & Resources in Tennessee
Tennessee has 4 major VA medical centers and numerous outpatient clinics serving 470,000+ veterans:
- Tennessee Valley Healthcare System (Nashville & Murfreesboro) - Comprehensive care, research hospital
- Memphis VA Medical Center - Full-service facility serving West Tennessee
- Mountain Home VA Medical Center (Johnson City) - Serves East Tennessee
- Community-Based Outpatient Clinics - Located throughout the state including Clarksville, Chattanooga, Knoxville, and more
🎓 Education Benefits for Veterans & Families in Tennessee
Tennessee provides several education benefits for veterans and their families, including the Helping Heroes Grant, in-state tuition for all veterans, and participation in the Yellow Ribbon Program.
Tennessee Helping Heroes Grant
Up to $1,000 Per Semester for Veterans
The Helping Heroes Grant provides financial assistance to Tennessee veterans attending Tennessee public colleges and universities. Combined with federal GI Bill benefits, this can significantly reduce education costs.
Helping Heroes Grant Eligibility
| Requirement | Details |
|---|---|
| Service | Honorably discharged veteran of the U.S. Armed Forces |
| Residency | Tennessee resident OR using Post-9/11 GI Bill in Tennessee |
| Enrollment | Enrolled in a Tennessee public college or university |
| Award Amount | Up to $1,000 per semester (subject to funding availability) |
In-State Tuition for Veterans
Tennessee offers immediate in-state tuition to all veterans using GI Bill benefits, regardless of how long they've lived in the state.
Tennessee University Tuition Rates (2026)
| Institution | In-State Tuition | Out-of-State | Savings |
|---|---|---|---|
| University of Tennessee - Knoxville | ~$13,500 | ~$31,500 | $18,000/yr |
| University of Memphis | ~$10,000 | ~$22,000 | $12,000/yr |
| Tennessee State University | ~$9,000 | ~$21,000 | $12,000/yr |
| Austin Peay State University | ~$8,500 | ~$20,000 | $11,500/yr |
Yellow Ribbon Program Schools in Tennessee
For veterans using the Post-9/11 GI Bill at private universities, the Yellow Ribbon Program can cover costs above the GI Bill cap:
Top Yellow Ribbon Schools
- Vanderbilt University - Full tuition coverage
- University of Tennessee - Various programs
- Belmont University - Nashville, music/business
- Lipscomb University - Multiple programs
- Rhodes College - Memphis liberal arts
How Yellow Ribbon Works
- School contributes a portion
- VA matches the school's contribution
- Combined with GI Bill = reduced/free tuition
- Must have 100% Post-9/11 GI Bill
- Contact school's VA office to apply
Education Benefits for Military Dependents
Tennessee Dependent Tuition Discount
- Children of 100% permanently disabled veterans may qualify for tuition discounts
- Dependents of veterans killed in action may receive tuition waivers
- Spouses and children can use transferred GI Bill benefits
- Contact individual schools for specific dependent programs
Tennessee Promise & Reconnect
Free Community College Programs
- Tennessee Promise: Free community college for recent high school graduates
- Tennessee Reconnect: Free community college for adults without a degree
- Both can be combined with GI Bill for additional benefits
- Available to Tennessee residents, including veteran families
How to Apply for Tennessee Education Benefits
- Helping Heroes Grant: Apply through TSAC (Tennessee Student Assistance Corporation) at tn.gov/thec.
- In-State Tuition: Submit DD-214 to school's registrar when enrolling.
- Yellow Ribbon: Contact each school's VA office directly.
- Questions? Contact Tennessee Department of Veterans Services: 615-741-2931
Official Resources: Tennessee Dept of Veterans Services | VA Yellow Ribbon Search
Pros and Cons of Retiring in Tennessee
✅ Pros
- • NO state income tax (saves $1,000-$5,000+/year)
- • Low cost of living (10% below average)
- • Helping Heroes Grant for veteran students
- • Yellow Ribbon schools including Vanderbilt
- • Strong veteran community (470K+ vets)
- • Fort Campbell nearby (101st Airborne)
- • Nashville healthcare hub
- • Beautiful scenery (Smokies, rolling hills)
- • No estate or inheritance tax
- • Four seasons without extreme cold
⚠️ Cons
- • Higher sales tax (7% + local = up to 9.75%)
- • Groceries taxed at 4%
- • Nashville housing prices rising fast
- • Humid summers (especially west TN)
- • Tornado risk in spring
- • Limited public transportation
- • Some rural areas lack services
Frequently Asked Questions
Does Tennessee tax military retirement pay?
No. Tennessee has no state income tax on wages, salaries, or retirement income. Military retirement pay is completely tax-free at the state level. You only pay federal income tax on your military pension.
Does Tennessee tax VA disability payments?
No. VA disability compensation is tax-free at both the federal and state levels nationwide, including Tennessee.
What is the cost of living in Tennessee for military retirees?
Tennessee has a cost of living approximately 10% below the national average in 2026. Cities like Clarksville (near Fort Campbell), Memphis, and Knoxville offer particularly affordable housing. Nashville is more expensive but still below coastal city averages.
What major military bases are in Tennessee?
Tennessee's primary installation is Fort Campbell (shared with Kentucky), home of the 101st Airborne Division. The state also has Arnold Air Force Base, Naval Support Activity Mid-South in Millington, and Tennessee National Guard facilities throughout the state.
Does Tennessee offer free college tuition for veterans?
Tennessee offers the Helping Heroes Grant providing up to $1,000 per semester for veterans at public colleges. Combined with GI Bill benefits, this can make education very affordable. Yellow Ribbon Program schools like Vanderbilt offer additional tuition assistance.
What education benefits do Tennessee veterans receive?
Tennessee veterans receive the Helping Heroes Grant (up to $1,000/semester), immediate in-state tuition regardless of residency, access to Tennessee Promise/Reconnect free community college programs, and Yellow Ribbon Program participation at many schools. Dependents of 100% disabled veterans may qualify for tuition discounts.
Calculate Your Tennessee Retirement Income
Use our free calculator to see exactly how much you'll keep after taxes when retiring in Tennessee. Factor in your military pension, VA disability, and any civilian income to plan your retirement with confidence.
Ready to Calculate Your Tennessee Retirement Income?
See exactly what civilian salary you need based on your retirement pay, VA disability, and Tennessee's zero state income tax
Use the Free Calculator →Additional Resources for Tennessee Veterans
- Tennessee Department of Veterans Services - tn.gov/veteran - State benefits, claims assistance
- Tennessee Veterans Business Association - Support for veteran entrepreneurs
- Tennessee Hiring Programs - Jobs4TN veteran employment services
- Tennessee State Parks - Free passes for disabled veterans
- VA Yellow Ribbon Schools in Tennessee - Search participating schools
🎖️ Bottom Line for Tennessee Military Retirement
Tennessee offers exceptional tax advantages for military retirees with zero state income tax, saving you thousands annually. The Helping Heroes Grant provides up to $1,000 per semester for veteran students, and multiple Yellow Ribbon schools (including Vanderbilt) make higher education accessible. Combined with a low cost of living (10% below average), strong veteran community around Fort Campbell, beautiful scenery, and the vibrant Nashville area, Tennessee is one of the best states for military retirement. Use our calculator above to see your exact financial picture in the Volunteer State.
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