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Tennessee Personal Income Tax Laws

Tennessee Income Tax Laws at a Glance

Most states levy a personal income tax on their residents, the proceeds of which are used to pay for schools, law enforcement, state parks, and other public resources. States that lack an income tax typically collect revenue from other sources, such as sales tax and special excise taxes on items such as liquor and tobacco, while some other states that collect income tax don't collect sales tax. Tennessee is one of a handful of states that has no personal income tax.

Instead, the state levies what is called a "hall tax" of 6 percent on earned interest and dividends, as the following chart highlights. See FindLaw's Tax Law section for a broad range of articles and resources related to both federal and state taxes.

Code Section 67-2-101, et seq.
Who is Required to File Resident persons, partnerships, associations, trusts, estates, and corporations
Rate 6%, limited to interest and dividends, not including ordinary commercial paper, trade acceptances and CD's, and certificates of deposit
Federal Income Tax Deductible No
Federal Income Used as Basis No

Note: State laws are always subject to change through the passage of new legislation, rulings in the higher courts (including federal decisions), ballot initiatives, and other means. While we strive to provide the most current information available, please consult an attorney or conduct your own legal research to verify the state law(s) you are researching.

How Does the Hall Tax Work?

The hall tax is not the same as a general income tax, but it is paid in a similar fashion. For instance, anyone under the age of 65 (eligible filers over the age of 65 are exempt) who received interest or dividends during the tax year must file a return with the state. As with federal taxes and in states that levy a personal income tax, hall tax returns must also be filed by mid-April (usually April 15, depending on where it falls on the calendar).

If you are 65 or older and have a total annual income below $33,000 ($59,000 for joint filers), you are exempt from paying hall taxes.

Current legislation is on track to repeal the hall tax altogether. It would reduce the 2016 hall tax liability to 5 percent and continue stepped reductions until the tax is eliminated altogether in 2022. However, the state of Tennessee may have second thoughts and change their course, be sure to consult with a professional to be certain about the current status of this law.

You can file your hall tax return through the Tennessee Department of Revenue Website or download forms (PDF).

Research the Law

Tennessee Personal Income Tax Laws: Related Resources

Let a Tennessee Tax Professional Help You 

Income taxes trip up the most sophisticated people, with changing deductions and tax brackets to be aware of. Errors can be costly, whether in late fees, fines, or lost savings. Contact a local tax law attorney and learn how they can help ensure that you avoid tax problems or resolve the ones you have.

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