How Tennessee's Property Taxes Compare to California & Illinois

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How Tennessee's Property Taxes Compare to California and Illinois One of the first financial questions out-of-state buyers ask when considering a move to Middle Tennessee is simple: what's it going to cost me? And while home prices, cost of living, and lifestyle all factor into that answer, few things move the needle as dramatically as taxes — specifically property taxes and income taxes. If you're relocating from California or Illinois, the numbers may genuinely surprise you.

The Big Picture: Tennessee's Tax Advantage Tennessee has no state income tax on wages or salaries. That alone is a significant financial shift for anyone moving from California, where state income tax rates top out at 13.3%, or Illinois, which charges a flat 4.95% on all income. But the property tax story is equally compelling — and it's one that doesn't get talked about nearly enough. Let's break it down state by state.

California vs. Tennessee: Property Taxes California's property tax system is governed largely by Proposition 13, passed in 1978, which caps the assessed value of a property at 1% of its purchase price and limits annual increases to no more than 2% per year. On paper, that sounds reasonable — but the reality for new buyers is different. When you purchase a home in California, the property is reassessed at its current market value. In high-cost markets like Orange County, Los Angeles, or the Bay Area, that means you're paying 1% on a $1.2 million, $1.5 million, or $2 million home — resulting in annual property tax bills of $12,000, $15,000, or $20,000 and up, before local assessments and special taxes are added on top. Tennessee, by contrast, has an effective property tax rate that is among the lowest in the country. According to recent data from the Tax Foundation, Tennessee's effective property tax rate sits around 0.66% — well below the national average of approximately 1.1%. In Williamson County specifically — which covers Franklin, Brentwood, Thompson's Station, Nolansville, and College Grove — the effective rate is even more favorable. On a $750,000 home in Franklin, you might expect to pay roughly $2,500–$3,500 in annual property taxes depending on the exact location and any applicable exemptions. Compare that to what you'd pay in a comparable California market, and the annual savings can easily reach $10,000 or more.

Illinois vs. Tennessee: Property Taxes If California's property taxes are high, Illinois's are in a different category altogether. Illinois consistently ranks as one of the highest property tax states in the nation, with an effective rate that hovers around 2.08% according to recent Tax Foundation data — more than three times Tennessee's rate. On a $500,000 home in the Chicago suburbs, a homeowner might pay $10,000–$12,000 or more annually in property taxes. On a $750,000 home, that figure can climb toward $15,000–$18,000 per year. And unlike California, Illinois doesn't have Prop 13-style protections — assessed values can rise more freely with the market, meaning tax bills tend to creep up over time. For Illinois residents who've been watching their property tax bills climb year after year while also paying the state's 4.95% flat income tax, the move to Tennessee can feel like a genuine financial reset.

The Combined Tax Picture Here's where it gets really stark. Let's look at a hypothetical household earning $150,000 a year and owning a $700,000 home: In California:

State income tax (approximate, married filing jointly): ~$10,000–$12,000/year Property tax on $700,000 home: ~$7,000–$8,000/year Combined annual tax burden: $17,000–$20,000+

In Illinois:

State income tax at 4.95% flat: ~$7,425/year Property tax on $700,000 home: ~$14,000–$16,000/year Combined annual tax burden: $21,000–$23,000+

In Tennessee (Williamson County):

State income tax on wages: $0 Property tax on $700,000 home: ~$2,300–$3,200/year Combined annual tax burden: $2,300–$3,200

The difference is not subtle. Many relocating families find they're saving $15,000–$20,000 per year in taxes alone after moving to Middle Tennessee — money that can go toward a larger home, savings, college funds, or simply a better quality of life.

What About Tennessee's Other Taxes? It's worth being transparent here, because no tax picture is entirely one-sided. Sales tax: Tennessee does have one of the higher combined sales tax rates in the country. The state base rate is 7%, and local jurisdictions add on top of that — bringing the total in Williamson County to around 9.75%. Groceries are taxed at a reduced rate of 4%, but this is still higher than many states. For most families, though, the savings on income and property taxes far outweigh the higher sales tax burden. Hall Income Tax: Tennessee used to tax investment income (dividends and interest) through the Hall Income Tax, but that was fully repealed as of January 1, 2021. Tennessee now has zero state income tax of any kind. Estate taxes: Tennessee also repealed its estate tax in 2016, which is relevant for higher-net-worth buyers thinking about long-term wealth transfer.

The Real Estate Angle: What This Means for Buyers The tax environment in Tennessee has a direct impact on what buyers can afford and how they think about the transaction. Several things worth knowing: For buyers coming from California or Illinois, the monthly payment on a $750,000 home in Franklin will often be lower — or very close — to what they were paying on a $500,000–$600,000 home back home, once you factor out state income taxes and the property tax savings. The math tends to work in their favor more than they initially expect. For buyers stretching to a higher price point, the absence of state income tax effectively increases take-home pay, which can meaningfully improve debt-to-income ratios and monthly cash flow. And for retirees in particular, Tennessee's tax environment is exceptional. No income tax means Social Security, pension income, and retirement distributions are not taxed at the state level — a major advantage compared to both California and Illinois.

FAQ: Tennessee vs. California and Illinois Taxes Does Tennessee have a state income tax? No. Tennessee has no state income tax on wages, salaries, or retirement income. The Hall Income Tax on investment income was fully repealed as of January 1, 2021. How do Tennessee property taxes compare to California? Tennessee's effective property tax rate is roughly 0.66%, compared to an effective rate that often lands between 0.7%–1.2% for new buyers in California's major markets — on top of significantly higher home values. The annual savings for most relocators from California can range from $5,000 to $15,000 or more depending on home price. How do Tennessee property taxes compare to Illinois? Illinois has one of the highest property tax rates in the country at approximately 2.08% effective rate — more than three times Tennessee's rate. A family moving from a $600,000 Illinois home to a comparable home in Williamson County could save $8,000–$12,000 per year in property taxes alone. Is Tennessee a good state for retirees from a tax perspective? Yes — Tennessee is consistently ranked among the most tax-friendly states for retirees. No state income tax means Social Security, pensions, and retirement account withdrawals are not taxed at the state level. What is the property tax rate in Williamson County, TN? Williamson County's effective property tax rate is among the lowest in Tennessee, generally falling in the range of 0.45%–0.65% depending on municipality. Franklin, Brentwood, and surrounding areas all fall within this range.

Ready to run the real numbers on what a move to Middle Tennessee would mean for your household? I'm Billy Larsen, a Franklin-based real estate agent who specializes in helping out-of-state buyers navigate the Middle Tennessee market. Let's talk — visit larsenhomegroup.com to get started.