Does Tennessee have state income tax?
No, Tennessee does not have an individual income tax on wages or other personal income. Tennessee is one of nine states that does not have individual income tax.
Its former tax on certain interest and dividend income, known as the Hall income tax, was fully repealed for tax periods beginning January 1, 2021, or later.
Here’s what individuals and business owners should know about Tennessee state tax, including rates and filing requirements.
Tennessee income tax
The answer to whether you pay Tennessee income tax depends on whether you’re filing as an individual or a business.
Tennessee individual income tax
Tennessee does not currently impose an individual income tax. Its previous Hall income tax applied to certain interest from bonds and notes and dividends from stock, but that tax was phased out and fully repealed beginning January 1, 2021. The Tennessee Department of Revenue now instructs taxpayers not to file a Hall income tax return for any tax year beginning on or after that date.
The phaseout happened gradually:
| Tax year beginning | Tennessee Hall income tax rate |
| 2017 | 4% |
| 2018 | 3% |
| 2019 | 2% |
| 2020 | 1% |
| 2021 | Repealed |
So, does Tennessee have state income tax on wages, interest, or dividends today? No.
Tennessee does impose other taxes, however. Depending on your situation, you may encounter taxes such as sales and use tax, property taxes, and other state or locally administered taxes.
Tennessee business income tax
Businesses are different. Although Tennessee doesn’t have an individual Tennessee income tax, many businesses operating in the state are subject to franchise and excise taxes.
Generally, corporations, limited partnerships, limited liability companies, and business trusts that are chartered, qualified or registered in Tennessee or doing business in the state must register for and pay franchise and excise taxes.
These are two different taxes:
- Excise tax: Based on a business’s Tennessee taxable income
- Franchise tax: Based on a business’s Tennessee net worth
Some businesses may also owe Tennessee business tax. Business tax rates vary based on the taxpayer’s classification and whether the business is a retailer or wholesaler.
Who pays Tennessee state tax?
Individuals don’t pay Tennessee state income tax, but they may pay other state and local taxes. Businesses may also owe franchise, excise, business, and sales and use taxes.
Individuals
Individuals don’t pay Tennessee state income tax on their wages or other personal income.
That doesn’t mean Tennessee residents pay no state or local taxes. Tennessee administers a variety of other taxes and fees, including sales and use taxes and several other tax types, while property tax and certain other taxes are administered locally.
Businesses
Many businesses operating in Tennessee have state tax obligations even though individuals don’t pay a state income tax.
Corporations, limited partnerships, LLCs, and business trusts that are chartered, qualified or registered in Tennessee or doing business in the state generally must register for and pay Tennessee franchise and excise taxes.
Depending on the business, other Tennessee state tax requirements may apply as well, including business tax and sales and use tax.
What is the Tennessee income tax rate?
There is no Tennessee individual income tax rate because the state does not impose an individual income tax.
Businesses may face the following Tennessee franchise and excise tax rates:
| Tax | Rate |
| Individual Tennessee state income tax | None |
| Excise tax | 6.5% of Tennessee taxable income |
| Franchise tax | 0.25% of Tennessee net worth |
The minimum franchise tax is $100 for a business that is incorporated, domesticated, qualified or otherwise registered through the Tennessee Secretary of State to do business in the state, whether the company is active or inactive.
Tennessee business tax is separate from the franchise and excise taxes. Its rates vary based on the business’s classification and whether it operates as a retailer or wholesaler.
When are Tennessee tax returns due?
Because individuals don’t pay Tennessee income tax, they generally don’t file a Tennessee individual income tax return. The state specifically instructs taxpayers not to file a Hall income tax return for tax years beginning on or after January 1, 2021.
Business deadlines depend on the tax:
- Franchise and excise tax: The annual return is due on the 15th day of the fourth month following the close of the business’s books and records. For a calendar-year business, that’s April 15 of the following year.
- Business tax: The return is due on the 15th day of the fourth month following the end of the business’s fiscal year. A calendar-year business generally has an April 15 due date.
- Other Tennessee taxes: Filing and payment schedules vary by tax type. The Tennessee Department of Revenue provides tax-specific requirements and due dates.
If a business has a combined franchise and excise tax liability of $5,000 or more in both the prior and current years, quarterly estimated payments apply.
Get help filing your taxes with H&R Block
Even without an individual Tennessee state income tax, you may still need to file a federal income tax return. Business owners may also have Tennessee state tax obligations to consider.
Whether you choose to file with a tax pro or file with H&R Block Free Online, we can help you make sense of your options and get your maximum refund.*
* All tax situations are different. Not everyone gets a refund. See hrblock.com/guarantees for complete details.
Was this topic helpful?