Construction & Trades in Tennessee: taxes and retirement for 2026

For construction workers, electricians, plumbers, HVAC techs, painters and handymen in Tennessee. Tennessee has no state income tax on wages or self-employment income. Here are the 2026 rules, a worked example and the official sources.

Tennessee rules for construction & trades

State income tax (2026): Tennessee has no state income tax on wages or self-employment income. Tennessee does not tax wages or self-employment income. Its only individual income tax, the Hall tax on interest and dividends, was repealed for tax periods beginning on or after January 1, 2021.
Tennessee business tax (gross receipts): A tax on gross receipts, owed per county and city where you have $100,000 or more in sales; you then need a standard business license and must file returns. Between $3,000 and $100,000 you only need a $15 minimal activity license and do not pay the tax. The rate depends on the business classification and is a fraction of 1%: for example, 0.1875% for Classification 3 retailers (which includes many service businesses), 0.1% for Classification 4 contractors, and lower rates for wholesalers. The minimum is $22 per location ($44 inside a city that also levies the tax).
Tennessee franchise and excise tax: Applies to corporations, LLCs, LPs and business trusts, not to unincorporated sole proprietors. A single-member LLC owned by an individual is taxed as its own entity, because Tennessee only disregards SMLLCs owned by a corporation. Excise tax is 6.5% of net earnings and franchise tax is 0.25% of net worth, with a $100 minimum franchise tax for registered entities.
Tennessee professional privilege tax: A flat $400 a year, due June 1, for people licensed in Tennessee as attorneys, securities agents, broker-dealers, investment advisers or lobbyists. You pay it only once even if you hold more than one of these licenses.
Marketplace contractor law (Public Chapter 648, 2018): Effective July 1, 2018, people who find work through an app or online marketplace are independent contractors, not employees, if the platform meets set conditions. The conditions include a written contractor agreement, no required hours, freedom to use other platforms and take other work, no required supplies or equipment, and no control over how the work is done. It does not cover rideshare (TNC) drivers or construction services.
IRS 20-factor worker classification test (Public Chapter 337, 2019): Since January 1, 2020, Tennessee uses the 20 factors in IRS Revenue Ruling 87-41 to decide whether a worker is an employee or a contractor. This applies to state wage and hour law, unemployment insurance, workplace safety (OSHA) and drug-free workplace programs. Workers' compensation keeps its own existing factors.
Voluntary Portable Benefit Plan Act (Public Chapter 131, 2025): Lets companies, including app-based companies, voluntarily pay into portable benefit accounts for independent contractors without that counting toward employee status. The accounts can fund health insurance, income replacement insurance, life insurance and retirement benefits. Any withholding from the worker's pay must be in a clear written agreement, and the worker must opt in and can opt out at any time.

Federal rules for 2026

W-2 or 1099 changes everything

On a W-2 your employer withholds tax and may offer a retirement plan. As a 1099 subcontractor you pay self-employment tax and quarterly estimates, but you can deduct tools, materials and job-site driving.

Tools and equipment

Tools, equipment, safety gear and work vehicles used for business are deductible; larger purchases can often be written off in the year you buy them.

Overtime deduction for W-2 workers

Non-exempt W-2 workers can deduct the overtime premium they are paid, up to $12,500 a year ($25,000 joint) from 2025 through 2028, subject to an income phase-out.

Quarterly estimated taxes

No one withholds tax from self-employment income, so you generally pay estimates four times a year if you expect to owe $1,000 or more. For 2026 income the federal dates are April 15, June 15 and September 15, 2026, and January 15, 2027. Paying 100% of last year's tax (110% if your AGI was over $150,000) in four equal installments avoids the underpayment penalty.

A worked example

A 1099 subcontractor with $70,000 of net profit in 2026
Self-employment tax	$9,891
Self-employment tax per quarter	$2,473
SEP IRA maximum	$13,011
Solo 401(k) maximum	$37,511

Federal figures only, before income tax and state or local taxes. Computed from 2026 IRS limits (Notice 2025-67, Rev. Proc. 2025-32) and the SSA wage base.

Free tools

Self-employment tax calculator Mileage deduction calculator SEP IRA vs Solo 401(k) calculator

Guides by job and platform

Construction Contractors Construction workers Electricians Plumbers HVAC technicians Handymans House painters

Thumbtack Angi Handy (pro platform now Angi Services) Bark.com

Questions

Do construction & trades in Tennessee pay state income tax?

Tennessee has no state income tax on wages or self-employment income. Tennessee does not tax wages or self-employment income. Its only individual income tax, the Hall tax on interest and dividends, was repealed for tax periods beginning on or after January 1, 2021.

Are there other Tennessee taxes for self-employed construction & trades?

Tennessee business tax (gross receipts): A tax on gross receipts, owed per county and city where you have $100,000 or more in sales; you then need a standard business license and must file returns. Between $3,000 and $100,000 you only need a $15 minimal activity license and do not pay the tax. The rate depends on the business classification and is a fraction of 1%: for example, 0.1875% for Classification 3 retailers (which includes many service businesses), 0.1% for Classification 4 contractors, and lower rates for wholesalers. The minimum is $22 per location ($44 inside a city that also levies the tax). Tennessee franchise and excise tax: Applies to corporations, LLCs, LPs and business trusts, not to unincorporated sole proprietors. A single-member LLC owned by an individual is taxed as its own entity, because Tennessee only disregards SMLLCs owned by a corporation. Excise tax is 6.5% of net earnings and franchise tax is 0.25% of net worth, with a $100 minimum franchise tax for registered entities. Tennessee professional privilege tax: A flat $400 a year, due June 1, for people licensed in Tennessee as attorneys, securities agents, broker-dealers, investment advisers or lobbyists. You pay it only once even if you hold more than one of these licenses.

What Tennessee laws affect independent contractors and gig workers?

Marketplace contractor law (Public Chapter 648, 2018): Effective July 1, 2018, people who find work through an app or online marketplace are independent contractors, not employees, if the platform meets set conditions. The conditions include a written contractor agreement, no required hours, freedom to use other platforms and take other work, no required supplies or equipment, and no control over how the work is done. It does not cover rideshare (TNC) drivers or construction services. IRS 20-factor worker classification test (Public Chapter 337, 2019): Since January 1, 2020, Tennessee uses the 20 factors in IRS Revenue Ruling 87-41 to decide whether a worker is an employee or a contractor. This applies to state wage and hour law, unemployment insurance, workplace safety (OSHA) and drug-free workplace programs. Workers' compensation keeps its own existing factors. Voluntary Portable Benefit Plan Act (Public Chapter 131, 2025): Lets companies, including app-based companies, voluntarily pay into portable benefit accounts for independent contractors without that counting toward employee status. The accounts can fund health insurance, income replacement insurance, life insurance and retirement benefits. Any withholding from the worker's pay must be in a clear written agreement, and the worker must opt in and can opt out at any time.

Track it in one place

Gigaverse estimates your quarterly taxes from what you actually earn, logs business trips, categorizes expenses from your bank and answers money questions with your own numbers. Retirement accounts are coming soon.

Free · Takes 10 seconds · First 1,000 in line get launch perks

On Android? Get the app on Google Play

Get it onGoogle Play On iPhone? Use it on the web

More in Tennessee

Consultants Freelancers Content Creators Entrepreneurs Gig Workers Bartenders & Servers

Nashville Memphis

Sources

State and local facts researched from official sources and independently re-checked; last verified October 2026, next scheduled review 2027-01-02. Educational information for 2026, not tax, legal or investment advice. Rules change; check the official sources listed and a tax professional for your situation. Gigaverse AI, Inc. is a financial technology company, not a bank, and not itself a registered investment adviser or broker-dealer.