TN · Payroll tax 2026
The true cost of hiring in Tennessee
Estimate what a W-2 employee costs in Tennessee and compare it with a 1099 contract using sourced 2026 payroll-tax defaults that you can adjust to your assigned rate.
Estimate a Tennessee hire
Pre-filled with a 2.7% base new-employer rate. Adjust SUI, salary, benefits, and the 1099 rate to fit your hire.
Results update instantly. Your values stay in this browser.
A W-2 hire in Tennessee costs more than salary. Employers pay federal FICA and FUTA plus state unemployment insurance. For 2026, HiringMath uses a 2.7% base new-employer rate on the first $7,000 of wages, producing up to about $189 of state UI tax per worker before experience-rating or account-specific adjustments. Tennessee does not tax wage income. No state income tax on wages. The calculator below combines those statutory items with editable benefits, workers' compensation, and overhead, then compares the result with a 1099 contract.
Tennessee employer tax facts
| Item | TN |
|---|---|
| Base new-employer SUI rate | 2.7% |
| SUI taxable wage base | $7,000 |
| Federal FICA (employer) | 7.65% |
| FUTA | 0.6% |
| State income tax on wages | None |
| Worker classification test | ABC test |
Extra employer taxes: No state income tax on wages.
Example: a $75,000 hire in Tennessee
At a $75,000 base salary with typical benefits, a W-2 employee in Tennessee costs an employer $99,269 per year — $24,269 above base pay. An equivalent 1099 contract at $75,000 would cost $24,269 less; the breakeven contract rate is $99,269.
Misclassification risk in Tennessee
Test: ABC test
ABC test; back UI taxes; no separate penalty statute.
Penalties by stateCompare nearby rates
Tennessee's 2.7% new-employer SUI rate sits near Alabama (2.7%), District of Columbia (2.7%), Florida (2.7%), Kentucky (2.7%). See the full 51-state comparison or the 2026 employer payroll tax reference.
Common questions
Tennessee hiring-cost FAQ
What SUI rate does HiringMath use for Tennessee?
The calculator starts with a 2.7% base new-employer rate, applied to the first $7,000 of each employee's 2026 wages. Your assigned rate can differ because of industry, surcharges, and claims history, so replace the default with the rate on your state notice when available.
Does Tennessee have a state income tax?
No. Tennessee does not tax wage income, though employers still owe federal payroll taxes and state unemployment insurance.
What should employers know about worker classification in Tennessee?
ABC test; back UI taxes; no separate penalty statute. This is a planning summary, not legal advice; confirm classification decisions with the relevant agency or counsel.