Tennessee does not tax wage income for residents or nonresidents. Travel nurses working in Nashville, Memphis, Knoxville, or Chattanooga pay zero Tennessee state personal income tax on their hourly wages, overtime pay, and travel stipends.
Working in a state without an income tax does not automatically mean your contract earnings escape state taxation. Your home state tax liability dictates how much you actually keep from an assignment in Tennessee.
How your home state taxes your Tennessee earnings
If your permanent tax home is in a state with an individual income tax, such as North Carolina, Georgia, or Ohio, that state taxes your worldwide income. Because Tennessee collects zero income tax from your paychecks, there are no out-of-state income taxes to claim as a credit on your home state tax return.
As a result, your home state will assess its full tax rate on all taxable hourly wages earned in Tennessee. Many travel nurses experience surprise tax bills in April because their agency withheld zero state income tax during their Tennessee assignment.
To prevent an underpayment penalty, you can request that your agency payroll department withhold state income tax for your home state while you work in Tennessee. Alternatively, you can calculate and remit quarterly estimated taxes using our Contract Analyzer to project your home state liability.
Tax-free stipends in Tennessee
Travel nurses in Tennessee receive tax-free housing and meal allowances if they maintain an external tax home under IRS Publication 463. The federal government, not the state of Tennessee, governs the qualification standards for tax-free per diems.
To qualify for tax-free stipends, you must duplicate living expenses by paying for temporary housing in Tennessee while maintaining ongoing financial obligations at your permanent tax home. If you relocate to Tennessee permanently or abandon your home residence, your travel stipends become fully taxable wages subject to federal income tax and FICA.
The Tennessee Department of Revenue oversees state tax administration, focusing primarily on sales tax and business taxes rather than individual wages.
Assignment limits and permanent moves
Travel nurse contracts in Tennessee frequently tempt nurses to stay long term due to the expanding healthcare systems in Nashville and Memphis. Extending your stay past 12 months in the same metropolitan area triggers the IRS one-year rule.
Once your total contract duration in Tennessee exceeds one year, the IRS treats the assignment as indefinite. Your travel allowances lose their tax-free classification, converting all per diem payments into taxable compensation subject to 15.3 percent FICA and federal income tax.
Frequently asked questions
Do travel nurses pay state income tax on earnings in Tennessee?
Tennessee does not impose an individual state personal income tax on wages. Travel nurses pay zero state income tax to Tennessee on hourly pay, overtime, and stipends.
Why did my agency withhold zero state tax during my Nashville assignment?
Because Tennessee has no state wage tax, agencies do not withhold Tennessee income tax. However, if your home state has an income tax, you may owe tax to your home state on those earnings at tax time unless you request home state withholding.
Do I need to maintain a tax home to receive stipends in Tennessee?
Yes. Federal tax law under IRS Publication 463 governs tax-free per diems, not state law. You must maintain a legitimate tax home and duplicate living expenses to receive tax-free housing allowances in Tennessee.