Tennessee — Personal Income Tax

Tennessee does not levy a personal income tax on individuals. The state has no tax on wages, salaries, retirement income, Social Security benefits, or other forms of personal income, and individuals are not required to file a Tennessee personal income tax return.

Tennessee previously imposed the "Hall Income Tax," a limited tax on interest and dividend income from investments. The Hall Tax was phased out between 2016 and 2020 through annual rate reductions of one percentage point per year. The tax was fully repealed for all tax periods beginning on or after January 1, 2021.

As of 2021, Tennessee has no state income tax of any kind on individuals and no withholding requirements for personal income.

Source: Tennessee Department of Revenue - Hall Income Tax Source: TN DOR Guidance HIT-3 - Hall Income Tax Repealed Beginning January 1, 2021 Source: TN DOR Guidance GEN-34 - Income Tax Withholding

Unable to confirm as of 2026-05-27.

Tennessee's Hall Income Tax was fully repealed for all tax periods beginning on or after January 1, 2021. The General Assembly phased out the tax between 2016 and 2020 through annual rate reductions of one percentage point per year starting January 1, 2017. By tax year 2020, the rate had been reduced to zero, completing the repeal.

Source: Tennessee DOR - Hall Income Tax Source: Hall Income Tax Manual, August 2022

Tennessee's Hall Income Tax, in effect from 1929 until January 1, 2021, applied only to interest and dividend income from investments. The tax was codified at Tenn. Code Ann. § 67-2-101 et seq. and did not apply to earned income such as salaries, wages, or commissions. Taxable income included dividends from corporations, investment trusts, and mutual funds, and interest on bonds, mortgages, and commercial paper. Income from U.S. government obligations and Tennessee state or local government bonds was exempt.

Source: Tennessee DOR - Hall Income Tax Source: Hall Income Tax Manual, August 2022

Tennessee residency does not create a personal income tax filing obligation or liability within Tennessee. Because Tennessee imposes no personal income tax on wages, salaries, retirement income, Social Security benefits, or other forms of individual income, neither Tennessee domicile nor physical presence in the state triggers a state income tax return requirement or tax liability.

Under the Hall Income Tax (repealed effective January 1, 2021), Tennessee did distinguish between residents and nonresidents for tax purposes. A person whose legal domicile was in Tennessee was subject to the Hall Tax if their taxable interest and dividend income exceeded $1,250 ($2,500 if married filing jointly). A person whose legal domicile was in another state but who maintained a residence in Tennessee for more than six months of the year was also subject to the Hall Tax under the same income thresholds. The Tennessee Department of Revenue instructed taxpayers to consider where they were registered to vote, where they maintained their driver's license, and where they maintained their permanent or principal residence (as opposed to a vacation home) when determining legal domicile.

With the repeal of the Hall Tax, Tennessee no longer applies any residency-based income tax test. Individuals who establish Tennessee domicile or who spend the majority of the year in Tennessee face no Tennessee personal income tax consequences from their residency status.

Residency in Tennessee does not end tax obligations to other states. Establishing Tennessee residency does not automatically sever domicile or statutory residency in a former state of residence. States with personal income taxes (such as California, New York, Illinois, or Georgia) may continue to assert resident-based jurisdiction over a taxpayer's worldwide income unless the taxpayer affirmatively demonstrates abandonment of domicile in the former state and establishment of domicile in Tennessee. Common indicia of domicile change include obtaining a Tennessee driver's license, registering to vote in Tennessee, registering vehicles in Tennessee, maintaining a principal residence in Tennessee, changing banking and financial account addresses to Tennessee, and reducing or eliminating ties to the former state.

Taxpayers who reside in Tennessee but perform services in another state with a personal income tax may owe nonresident income tax to that state on income sourced to that state, even though Tennessee does not tax the same income. Similarly, individuals who are domiciled in Tennessee but retain real property or business interests in states with income taxes may owe tax on income sourced to those states under nonresident filing rules.

Source: Tennessee Department of Revenue - Hall Income Tax Source: TN DOR Form INC-250 Instructions (2017 edition), pages 1–2 (PDF)

Tennessee employers have no state income tax withholding obligation for wages paid to employees, regardless of where the employee performs services or resides. Tennessee imposes no state income tax on earned income and therefore maintains no withholding requirements. This rule applies equally to Tennessee-resident employees, out-of-state resident employees working in Tennessee, and employees working remotely from Tennessee for out-of-state employers.

Tennessee employers with employees working in other states face no Tennessee withholding obligation, but they may be required to register for withholding in the state(s) where the employee performs services if those states impose income tax. The general rule is that an employer must withhold state income tax for the state in which the employee performs services, unless a reciprocity agreement allows withholding for the employee's resident state instead. Because Tennessee has no income tax, Tennessee cannot be a party to any state income tax reciprocity agreement—there is no Tennessee tax to reciprocate.

For a Tennessee employer with an employee who works in Illinois, for example, the employer must register for Illinois withholding and withhold Illinois state income tax from that employee's wages, even if the employee resides in Tennessee. The employee will file an Illinois nonresident income tax return reporting the Illinois-source wages. Because Tennessee imposes no personal income tax, the Tennessee-resident employee owes no Tennessee tax on the same wages and therefore receives no Tennessee credit for the Illinois tax paid. The Illinois tax is simply the cost of earning income in a taxing state while residing in a non-taxing state.

Out-of-state employers with Tennessee-resident employees are not required to withhold Tennessee state income tax because Tennessee has no such tax. If the employee performs services remotely from Tennessee (that is, the employee's work location is Tennessee), many states follow the general rule that withholding is required only for the state in which services are performed. Under this rule, the out-of-state employer would have no withholding obligation to the employer's home state for a Tennessee-remote employee, because the services are not performed in the employer's state.

However, some states apply a "convenience of the employer" rule that asserts resident-state jurisdiction over wages paid to the state's residents even when the employee works remotely from another state for the employer's convenience (rather than the employer's requirement). Under these rules—applied by states such as New York, Arkansas, Connecticut, Delaware, Nebraska, and Pennsylvania—the employer may be required to withhold the employer's home-state income tax for a Tennessee-resident employee, even though the employee performs all services from Tennessee. The employee would then file a nonresident return in the employer's state and a resident return in Tennessee (which would report zero tax). Whether the convenience rule applies depends on the specific facts, the employer's state law, and whether the employer's state has a reciprocity agreement with Tennessee (which it cannot, as explained above).

Reciprocity agreements and Tennessee. Tennessee is not a party to any state income tax reciprocity agreement. Sixteen states and the District of Columbia maintain income tax reciprocity agreements with one another, under which a resident of one state who works in the reciprocal state can request that the employer withhold only for the employee's resident state, not the work state. These agreements require both states to have an income tax. Tennessee, as a no-income-tax state, has no tax to exempt a nonresident from and no tax to impose on its own residents in exchange. Accordingly:

• A Tennessee resident who works in a state that has reciprocity agreements with other states (such as Illinois, Pennsylvania, or Virginia) cannot claim the benefit of reciprocity, because Tennessee is not a party to any such agreement. The employer must withhold tax for the state in which the Tennessee resident performs services.

• An out-of-state resident who works in Tennessee and whose home state has reciprocity agreements with other states likewise cannot claim reciprocity with Tennessee. Because Tennessee imposes no income tax, the employer withholds nothing for Tennessee; the employee's home state will tax the employee as a resident on all income, including Tennessee-source wages, and no reciprocity mechanism is needed.

Multi-state allocation for unemployment insurance. Although Tennessee has no income tax withholding, Tennessee employers with employees working in multiple states must determine which state's unemployment insurance system covers each employee. The Tennessee Department of Labor and Workforce Development applies a four-part test, in order: (1) the localization of services test (services performed entirely, or primarily with only incidental out-of-state work, in one state); (2) the base of operations test; (3) the direction and control test; and (4) the place of residence test (wages reported to the state where the employee resides, if some service is performed there). These rules determine the state to which the employer reports wages and pays unemployment insurance premiums, not income tax withholding.

Practical guidance. Employers should implement the following withholding practices for multi-state workers:

• Tennessee employer, Tennessee-resident employee working in Tennessee: No state income tax withholding. Federal income tax (and FICA) withholding applies as usual.

• Tennessee employer, Tennessee-resident employee working in another state (e.g., Georgia): No Tennessee withholding. Register for and withhold Georgia (or other work-state) income tax if the employee performs services in Georgia. The employee will file a Georgia nonresident return.

• Tennessee employer, out-of-state resident employee working in Tennessee: No Tennessee withholding (Tennessee has no tax). Determine whether the employee's resident state requires withholding for its residents working out of state; if so, register and withhold for the resident state. If not, the employee will owe estimated tax to their home state.

• Out-of-state employer, Tennessee-resident employee working remotely from Tennessee: No Tennessee withholding. Determine whether the employer's state applies a convenience-of-the-employer rule or other basis to require withholding. If the employer's state does not require withholding and the employee performs all services in Tennessee, no state income tax withholding is required. The employee should verify that no estimated tax obligation arises in the employer's state.

Source: Tennessee Department of Revenue Guidance GEN-34 – Income Tax Withholding Source: Tennessee Department of Labor and Workforce Development – Multi-State Employee Wage Reporting