My Military HQ | Fort Campbell
Fort Campbell: Kentucky or Tennessee?
Fort Campbell sits on the state line.The tax answer is not the one you were told.
A decision guide for families choosing a side at Fort Campbell. Every number on this page carries a source.
Start Here
The common answer is wrong
You will hear it at the welcome brief, in the housing office, and from most agents in town. Tennessee has no income tax. Kentucky does. So live on the Tennessee side and keep more of your pay.
That is true in general. It is not true about your military pay.
Kentucky does not tax active duty military pay. It has not since 2010. If your household income is active duty pay, the income tax question is a wash, and it should not be the reason you pick a side.
That single fact undoes most of the advice given at Fort Campbell. It does not mean the two sides are the same. It means the real differences are somewhere else, and almost nobody walks you through them.
The Real Differences
Where the money actually changes
Three places. Which of them applies to you depends on where your household income comes from.
1. Military retirement pay
Tennessee has no income tax, so none of it is taxed. Kentucky excludes up to $31,110 of pension income, and military retirees may be able to exclude more than that.
Pay tied to federal service before January 1, 1998 can qualify for a larger exclusion, worked out on Kentucky Schedule P from the share of your service that falls before that date. So what Kentucky actually taxes depends on your service dates. Have a tax professional run it before this decides anything.
2. A spouse's civilian paycheck
This is the one families miss most. Kentucky taxes civilian wages. Tennessee taxes no wages at all.
But military families have more than one way to set residency for taxes. Federal law now allows a choice among the service member's residence, the spouse's residence, and the service member's permanent duty station. Which one your household elects can decide whether Kentucky touches that paycheck at all. Do not assume it does.
3. What you spend
This one runs the other way. Kentucky charges 6%, and there are no local sales taxes anywhere in the state. Tennessee charges 7% before any local rate is added, and the local rate varies by county and city.
As an illustration only, using Tennessee's statewide average combined rate of 9.61%, $40,000 of taxable spending costs about $1,444 more per year on the Tennessee side. Confirm the actual rate for your address, because Montgomery County's local rate is the one that applies to you, not the state average.
Side By Side
The same household, two addresses
Red marks the side that keeps you more money on that line.
Kentucky
Oak Grove, Hopkinsville, Christian CountyNot taxed
Exempt in full since 2010
At least $31,110 excluded
Service before January 1, 1998 can raise the exclusion, worked out on Schedule P
Taxed
Unless the household's residency election says otherwise
6%
No local sales and use taxes anywhere in Kentucky
Tennessee
Clarksville, Montgomery CountyNot taxed
No state income tax of any kind
Not taxed
No income tax, so no cap, no threshold and no calculation
Not taxed
No wage tax, so no residency question to answer
7% plus local
9.61% statewide average once local rates are counted. Confirm Montgomery County's own rate
Apply It
Which side fits your situation
Active duty, one income, here for three years
It is a wash. Neither state touches your pay. Decide on your commute to the gate, the schools, and how fast each side resells. Do not let a tax difference that does not exist pick your house.
Retiring at Fort Campbell and staying
Tennessee is the simpler treatment. Your retirement pay is untaxed there, with no cap and nothing to calculate. Kentucky excludes at least $31,110 and possibly more depending on your service dates. Have a tax professional work out your Kentucky number before you let this pick your side.
Two incomes, spouse works locally
Lean Tennessee, then verify. A civilian paycheck is taxed on the Kentucky side and not on the Tennessee side. Check your household's residency election first, because it can close the gap entirely.
Buying now, renting it out after you PCS
Neither tax code decides this. Look at rental demand by gate and at property tax, which is set by the county rather than the state. Run both sides as an investment, not as a tax question.
Being Straight With You
What this page does not decide
Taxes are one input, and for most families they are not the biggest one.
Your commute to the gate you actually use, the school district, what your money buys on each side, and how quickly each side resells when orders move you again. Those usually matter more than any line above.
This page will not tell you where to live. It tells you which differences are real, so you stop weighing one that is not.
Nothing here is tax advice or a tax opinion. Tax rules change, and your situation is specific to your household, your state of legal residence, and your orders. Note that your state of legal residence is not the same thing as your home of record, and it is the one that governs how you are taxed. Confirm anything on this page with a tax professional before you make a decision based on it.
Not every agent at Fort Campbell is licensed in both states.Ask yours before they show you a single house.
An agent licensed in one state can only show you half of this decision. If you are still weighing both sides, working with someone licensed in both lets you see the whole market before you narrow it.
Last reviewed August 2026 · Maintained by My Military HQ
Common Questions
Questions families ask
Does Kentucky tax active duty military pay?
No. Kentucky exempts all active duty military pay from state income tax, and has since 2010. No Kentucky withholding is required on it.
Does Tennessee have a state income tax?
No. Tennessee's last income tax, the Hall tax on interest and dividends, was fully repealed for tax years beginning January 1, 2021.
Is military retirement pay taxed in Kentucky?
Partly, and how much depends on your service dates. Kentucky excludes up to 31,110 dollars of pension income. Military retirees may be able to exclude more, because pay tied to federal service before January 1, 1998 can qualify for a larger exclusion calculated on Kentucky Schedule P. Tennessee has no income tax, so retirement pay is not taxed there at all.
Which side of Fort Campbell is cheaper overall?
It depends on where your household income comes from. Active duty pay is a wash, because neither state taxes it. Military retirement pay and a spouse's civilian wages generally favor the Tennessee side. Day to day spending favors the Kentucky side, because Kentucky charges 6 percent with no local sales tax anywhere in the state, while Tennessee charges 7 percent plus a local rate that varies by county and city.
Can one agent show me homes on both sides of the state line?
Only if that agent holds a real estate license in both Kentucky and Tennessee. Many agents at Fort Campbell are licensed on one side only, which quietly limits the homes they are able to show you.
Sources
Where every number came from
Government sources establish every rule on this page. Independent data is used only for comparison between the two states.
Government Sources
- Active duty pay exemption and the statute, KRS 141.019(1)(l): Kentucky Department of Revenue, Military Exemptions
- The $31,110 pension income exclusion and the Schedule P calculation: Kentucky Department of Revenue, Military Tax Issues
- Military spouse residency options and the laws behind them: Military OneSource, Military Spouses Residency Relief Act
- Hall income tax repealed for tax years beginning January 1, 2021: Tennessee Department of Revenue
- Kentucky 6% rate, and "there are no local sales and use taxes in Kentucky": Kentucky Department of Revenue, Sales and Use Tax
- Tennessee 7% general state rate, with local rates varying by county and city: Tennessee Department of Revenue, Sales and Use Tax
Comparative Data Only
- The 9.61% Tennessee statewide average combined rate, used only for the illustration: Tax Foundation, Tennessee
A Clarksville or Montgomery County specific sales tax rate is deliberately not published here. Available sources disagree on the exact combined figure, and the rate that applies to a given address should be confirmed with the Tennessee Department of Revenue rather than taken from this page.
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