Alabama has progressive income tax rates from 2% to 5%, while Tennessee has no state income tax (0%). Moving to Tennessee saves $4,667/year on $100k income. Alabama has lower property taxes (0.41% lowest in US vs TN's 0.67%). However, both states have extremely high sales taxes (AL 9.29%, TN 9.55% highest). Overall, Tennessee offers significant tax savings for wage earners. The AL-TN border sees migration to Nashville for jobs and zero income tax.

By Daniel, Founder of CountryTaxCalc

Daniel has spent 5+ years researching tax systems across 95+ countries and all US states to make tax comparison accessible to everyone. For corrections, contact us.

Last Updated: April 2026

The Big Picture

🏈 Alabama

2-5%

Progressive

3 brackets, up to 5%

🎸 Tennessee

0%

No Income Tax

Constitutional prohibition

Typical Annual Savings

At $100,000 income:

$4,667

That is $389/month back in your pocket!

Tax Savings by Income Level

IncomeAL TaxTN TaxSavings10-Year
$50,000 $2,167$0$2,167$21,670
$100,000 $4,667$0$4,667$46,670
$200,000 $9,667$0$9,667$96,670
$500,000 $24,667$0$24,667$246,670
💡

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Alabama Pros and Cons

✅ Pros

  • Lowest property tax: 0.41% (lowest in US) vs TN 0.67% saves $650-$2,600/year
  • Slightly lower sales tax: 9.29% (vs TN 9.55%) saves $26/year
  • Very cheap housing: Birmingham median $225k (vs Nashville $425k, 47% cheaper)
  • College football: Alabama/Auburn rivalry, SEC culture
  • Lower cost of living: 18% cheaper than Tennessee overall

❌ Cons

  • Income tax: 2-5% progressive costs $4,667 on $100k, $24,667 on $500k
  • Limited jobs: Birmingham 1.1M vs Nashville 2.0M metro
  • Worst schools: AL ranks #47 vs TN #32 in K-12 education
  • Brain drain: Young professionals leave for Nashville/Atlanta
  • Slow economy: AL ranks #44 for economic opportunity

Tennessee Pros and Cons

✅ Pros

  • Zero income tax: Save $4,667/year on $100k, $24,667 on $500k
  • Nashville boom: Music City tech hub, healthcare (HCA), tourism
  • Better jobs: 2.0M metro (vs Birmingham 1.1M), diverse economy
  • Better schools: TN ranks #32 vs AL #47 in K-12 education
  • No retirement tax: $0 on Social Security, pensions, withdrawals

❌ Cons

  • Higher property tax: 0.67% (vs AL 0.41%) costs $650-$2,600 more/year
  • Highest sales tax: 9.55% (highest in US) vs AL 9.29% costs $26 more/year
  • Expensive: Nashville median $425k (vs Birmingham $225k, 47% more)
  • Hot/humid summers: 90°F+ regularly (similar to AL)
  • Traffic: I-24, I-65 congestion, limited transit

Frequently Asked Questions

Q: How much will I save moving from Alabama to Tennessee?

On $100,000 income, Tennessee saves $4,667/year in income tax (AL 4.67% vs TN 0%). However, TN property tax is higher (0.67% vs AL 0.41% lowest in US). On a $400k home, TN pays $2,680/year vs AL $1,640/year—difference of $1,040/year. Net savings: $3,627/year. Over 10 years: $36,270. Plus Nashville has better job market and salaries are 15-25% higher.

Q: Why does Alabama have such low property taxes?

Alabama has lowest property tax in US (0.41%) due to: constitutional limits on property assessment increases, strong anti-tax culture, agricultural exemptions. Schools funded more by sales/income taxes. However, this means AL has 5% income tax while neighboring TN has 0%. For homeowners, AL property tax advantage partially offsets income tax disadvantage.

Q: Is there significant Alabama to Tennessee migration?

Yes, heavy AL → TN migration. In 2023, 16,204 people moved AL → TN (vs 8,472 TN → AL), net gain of 7,732 for Tennessee. Migration drivers AL → TN: no income tax (save $4,667+ annually), Nashville boom (better jobs), better schools (#32 vs #47). Reverse migration (TN → AL) driven by: cheaper housing (Birmingham 47% cheaper), lowest property tax in US (0.41%), college football culture.

Q: Birmingham vs Nashville: which city is better economically?

Nashville wins economically: no income tax (save $3,627 annually), larger job market (2M vs 1.1M), tech/healthcare boom, better schools (#32 vs #47). Birmingham wins for: cheaper housing (47% cheaper), lowest property tax in US (0.41%), lower cost of living (18% cheaper). Choose Nashville for career opportunities. Choose Birmingham for maximum affordability.

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