Bank Gap by State

The Bank Gap in Tennessee

Tennessee fully repealed its historic tax on interest and dividend income (the 'Hall Tax') in 2021, making it now a complete no-income-tax state — a change worth knowing if you remember Tennessee taxing savings interest specifically in years past.

Big-bank average0.38%

Best available4.40%

$1,005/yrlost on a $25k balance · 4.02 pp spread

Last reviewed August 7, 2026 · SwitchWize Research Desk

Best savings APY

4.40%

high-yield

National average

0.38%

big-bank avg

APY gap

4.02 pp

spread

TN tax on interest

None

no income tax

No state tax — full gap is yours

$1,005/yr

on a $25,000 balance

On a $25,000 balance, the gap is about $1,005 a year. Tennessee has no state income tax, so you keep the full amount.

Estimated Bank Gap by balance

Estimated annual Bank Gap by balance at 0.38% current APY versus 4.40% better-fit APY
Balance	Current earnings	Better-fit earnings	Estimated Bank Gap
$5,000	$19	$220	$201
$10,000	$38	$440	$402
$25,000	$95	$1,100	$1,005
$50,000	$190	$2,200	$2,010
$100,000	$380	$4,400	$4,020

Estimates over 12 months at 0.38% current APY and 4.40% better-fit APY. Example only — your result depends on your balance, rates, and time horizon.

Why Tennessee changes the math

As of 2021, Tennessee no longer taxes interest or dividend income at all, having phased out the Hall Tax that used to apply specifically to that category of income. Savings interest is now taxed only at the federal level, removing the Treasury-exemption advantage that used to matter here.

Living costs across most of Tennessee sit near the national average, though Nashville has seen some of the fastest cost growth in the South, gradually raising local emergency-fund targets.

Cost of living in Tennessee is near the national average, rising quickly in Nashville, which shapes how large an emergency fund needs to be and therefore how many dollars the Bank Gap quietly costs on idle cash.

After-tax tip

Because Tennessee has no state income tax, the Treasury state-tax advantage does not apply. The simplest high-value move is to put liquid cash in the highest-yielding FDIC-insured savings account.

Open the short-term savings tool

Frequently asked questions

Does Tennessee tax high-yield savings account interest?

No. Tennessee has no state income tax, so savings account interest is taxed only at the federal level. There is no state tax drag on the extra interest you earn by switching to a better account.

Is a high-yield savings account worth it in Tennessee?

Yes. With no state income tax, the after-tax case is simple: moving cash from a national-average account to a top high-yield savings account keeps more in your pocket, and there is no state-tax wrinkle to weigh.

Are T-Bills better than a HYSA for Tennessee savers?

Usually not on tax grounds. The main edge T-Bills have elsewhere is exemption from state income tax, and Tennessee has none. For most Tennessee savers the highest-yielding FDIC-insured savings account is the cleaner choice for liquid cash.

Your personal Bank Gap

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Enter your balance and current rate. The Rate Gap Calculator shows the gap per year and over five years.

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Educational information, not tax or financial advice. State tax rules are summarized at a high level and depend on your full situation. Rates are illustrative of current market conditions and should be confirmed with the provider. Confirm tax treatment with a qualified professional.