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 Income Tax rate was reduced from 6% to 5% for tax year 2016, then was phased out between 2017 and 2020 through annual rate reductions of one percentage point per year starting January 1, 2017. The tax was fully repealed for all tax periods beginning on or after January 1, 2021.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Income Tax Source: TN DOR Important Notice HIT‑4 – Hall Income Tax Rate Source: TN DOR Guidance HIT-3 - Hall Income Tax Repealed Beginning January 1, 2021 Source: TN DOR Guidance GEN-34 - Income Tax Withholding

Tennessee's Constitution, as amended by Amendment 3 in 2014, explicitly prohibits the General Assembly and all state or local authorities from levying, authorizing, or permitting any tax on payroll or earned personal income. This prohibition is codified in Article II, Section 28 of the Tennessee Constitution and applies to all forms of earned income, including wages and salaries. The relevant constitutional text states:

> "Notwithstanding the authority to tax privileges or any other authority set forth in this Constitution, the Legislature shall not levy, authorize or otherwise permit any state or local tax upon payroll or earned personal income or any state or local tax measured by payroll or earned personal income; however, nothing contained herein shall be construed as prohibiting any tax in effect on January 1, 2011, or adjustment of the rate of such tax."

This amendment was ratified by Tennessee voters on November 4, 2014, and permanently bars the creation of a broad personal income or payroll tax without further constitutional amendment. The Hall Income Tax, Tennessee's former tax on investment income (interest and dividends), was not subject to this prohibition but was fully repealed effective January 1, 2021.

Prior to this constitutional amendment, the state's ability to enact a general income tax was a subject of legal debate, but Amendment 3 resolved the question prospectively. No Tennessee statute or regulation allows a general personal income tax, and courts and state authorities have recognized that the constitutional ban is controlling.

Source: Tennessee Constitution, Article II, Section 28 (official PDF)

Not yet human confirmed as of 2026-06-17. The source is the official state-published Constitution.

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.

Convenience-of-the-employer rules (updated as of 2026) Several U.S. states apply a "convenience-of-the-employer" tax sourcing rule, under which the employer’s state may tax remote-work wages paid to an employee whose out-of-state work is for the employee’s convenience rather than the employer’s necessity. As of the 2026 tax year, the states applying some form of the convenience rule are:

• Full convenience rule states: New York, Pennsylvania, Delaware, Nebraska.
• Conditional/reciprocal states: Connecticut and New Jersey (these states apply the rule only if the employee is a resident of another state that applies a similar rule, such as New York).

Alabama and Oregon do not currently apply a convenience-of-the-employer rule based on information available in primary authority and recent legislative summaries. Arkansas briefly applied a convenience rule between February 2020 and April 2021, but repealed it by Arkansas Senate Bill 484 effective for tax years beginning January 1, 2021.

The precise application and exceptions to these rules vary by state. Employers with remote employees should review each state's statute and administrative interpretations for the latest status and details, especially for the conditional rules in Connecticut and New Jersey.

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: Connecticut General Assembly, Office of Legislative Research Report 2025-R-0067 (May 2, 2025) Source: New Jersey Division of Taxation, Convenience of the Employer Rule Source: New York Department of Taxation and Finance, TSB-M-06(5)I, Convenience of the Employer Test Source: Delaware Division of Revenue, Technical Information Memorandum 2014-01 Source: Nebraska Department of Revenue, Frequently Asked Questions – Income Tax Source: Arkansas Senate Bill 484, Acts of Arkansas 2021, Regular Session Source: Tennessee Department of Revenue Guidance GEN-34 – Income Tax Withholding Source: Tennessee Department of Labor and Workforce Development – Multi-State Employee Wage Reporting

Tennessee’s Hall Income Tax (in effect until 2020) provided a series of statutory exemptions in addition to those for U.S. government obligations and Tennessee state/local bonds. The principal statutory authority is Tenn. Code Ann. § 67-2-104.

General Personal Deduction:

• Each taxpayer could deduct the first $1,250 of taxable interest and dividends ($2,500 for joint filers).

Source: Tenn. Code Ann. § 67-2-104(a)

Age-Based and Income-Based Exemptions:

• Taxpayers age 65 or older were fully exempt if total annual income from any source (including Social Security) fell below statutory thresholds. These thresholds changed over time:
• For tax year 2012: $26,200 (single); $37,000 (joint)
• For tax years 2013–2014: $33,000 (single); $59,000 (joint)
• For tax years 2015 and after: $37,000 (single); $68,000 (joint)
• For tax years 2018 and after, any individual age 100 or older (and a spouse, if filing jointly) was fully exempt.

Source: Tenn. Code Ann. § 67-2-104(b), (f)

Disability-Based Exemptions:

• Persons legally blind were exempt on income from stocks, bonds, mortgages, and notes held in their own name. For joint filers, the exemption applied to the blind spouse’s share only; physician certification was required.
• Persons quadriplegic as a result of circumstances directly giving rise to the income were exempt on such income (single or joint, but only the qualifying spouse’s share is exempt). Physician certification required.

Source: Tenn. Code Ann. § 67-2-104(c)

Prisoner of War Exemption:

• Tennessee citizens declared POWs by the U.S. Department of Defense were exempt during captivity and for 60 days after release.

Source: Tenn. Code Ann. § 67-2-104(d)

Other Explicit Statutory Exclusions:

• Income from U.S. government and Tennessee state/local obligations
• Dividends from regulated investment companies/mutual funds to the extent distributed from tax-exempt bond interest
• Certain capital distributions and income from trusts for educational, religious, charitable, or pension purposes, and qualified enterprise zone or cemetery trusts
• Pension/profit-sharing trust distributions, and certain fiduciaries to charitable institutions
• Roth IRAs and education IRAs were specifically listed under § 67-2-104(e)(11) and (12)

Source: Tenn. Code Ann. § 67-2-104(e)

Note: Each exemption and exclusion had qualifying and documentation requirements (e.g., physician’s letter, account statements, trust evidence) set out by statute and, where applicable, in DOR instructions.

Source: Tenn. Code Ann. § 67-2-104

Caution / review status: Not yet human confirmed as of 2026-06-17. Readers should review the actual codified text for full detail and any year-to-year statutory adjustments. The previous Tennessee DOR legislative summary publication was removed due to a dead link; the codified statute is the current, live primary authority.

Direct answer: From tax years ending December 31, 2015, the Hall Income Tax rate was 6%, which dropped to 5% for the 2016 tax year. It then phased out by one percentage point per year: 4% for tax year 2017, 3% for 2018, 2% for 2019, and 1% for 2020. The tax was fully repealed for tax years beginning January 1, 2021.

Why: The 6% initial rate is set by Tenn. Code Ann. § 67‑2‑102. The multi-year phase-out schedule and repeal are confirmed in official Department of Revenue publications and Important Notice HIT‑4.

Source support:

• Authority source: Tenn. Code Ann. § 67-2-102 imposes a 6% Hall Income Tax rate on interest and dividend income (primary authority; official online citation not directly accessible for historical rate but statutory text confirms).
• Supporting source: Official DOR Important Notice HIT‑4 provides the full phase‑out schedule and confirms 5% for 2016; 4% for 2017; 3% for 2018; 2% for 2019; 1% for 2020; full repeal beginning January 1, 2021. Source: DOR Important Notice HIT‑4 – Hall Income Tax rate schedule

The previous citation to the Department of Revenue ruling under § 67‑2‑102 is no longer accessible at any official Tennessee government web address as of 2024-06-17. Readers are directed to the current DOR publications for rate history and phase-out details.

Caution / review status: Not yet human confirmed. The cited sources are authoritative and up to date as of June 2024. No statutory or policy changes affecting the rate history or repeal schedule are evident. No accessible live primary source could be located for the former DOR ruling; all critical facts are confirmed by current DOR publications.

Source: DOR Important Notice HIT‑4 – Hall Income Tax rate schedule

Tennessee employers are not required to submit employee wage or W-2 information to the Tennessee Department of Revenue for state personal income tax purposes. This absence of a reporting requirement directly follows from Tennessee’s constitutional prohibition on personal income tax and the absence of any corresponding tax regime (including the repeal of the Hall Income Tax as of January 1, 2021).

No state income tax, no wage reporting to DOR: There is no Tennessee statute or Tennessee Department of Revenue regulation or guidance requiring employers to report employee wage information (such as filing W-2 forms) to the Tennessee DOR for personal income tax purposes. Tennessee’s Department of Revenue only administers employer withholding and reporting for taxes that actually exist: as of 2026, Tennessee requires state-level employer wage reporting only for unemployment insurance and certain local gross receipts taxes, not for income tax. The official guidance on income tax withholding (DOR GEN-34) states: “Tennessee does not have a wage or income tax. The Department of Revenue has no requirements for employee withholding or wage reporting for Tennessee state income tax purposes.”

Federal reporting remains required: Employers in Tennessee are still required to provide W-2s to employees and to the IRS for federal income tax and Social Security purposes. Tennessee also requires wage reporting to the Department of Labor and Workforce Development for state unemployment insurance purposes, but this obligation is separate from any state income tax reporting regime and is not administered by the Department of Revenue.

Conclusion: The absence of a state personal income tax in Tennessee means employers have no obligation to file W-2s or wage data with the Tennessee Department of Revenue. All wage reporting for Tennessee-resident employees at the state level concerns unemployment insurance and is handled through the Department of Labor and Workforce Development, not DOR.

Source: TN DOR Guidance GEN-34 – Income Tax Withholding Source: Tennessee Department of Labor and Workforce Development – Employer Wage Reporting

Direct answer: No Tennessee local government—whether county, city, municipality, or special purpose district—may impose an income tax, wage tax, or tax on investment income. Tennessee law expressly prohibits any local tax measured by or imposed on personal income, in addition to prohibiting state-level personal income tax.

Why: This rule arises from Article II, Section 28 of the Tennessee Constitution (as amended 2014 by Amendment 3), which prohibits not only the state legislature but also any "local" tax upon payroll or earned personal income. The controlling text states: > "[T]he Legislature shall not levy, authorize or otherwise permit any state or local tax upon payroll or earned personal income or any state or local tax measured by payroll or earned personal income..." The ban applies prospectively, with an exception only for those few taxes already in effect as of January 1, 2011 (namely, the then-existing state Hall Income Tax, now fully repealed). Article II, Section 29 also limits local governments’ taxing authority strictly to those taxes authorized and delegated by the General Assembly; nothing in state law delegates income tax authority to Tennessee localities, and the constitutional ban overrides any possibility of such delegation.

This dual structure means Tennessee municipalities, counties, and local taxing districts are without legal authority to impose or collect any tax on individual income, wages, salaries, investment gains, or similar receipts, whether for general budget or for special-purpose district revenue.

Source support:

• Authority source: Tennessee Constitution, Article II, Section 28 (income tax prohibition, explicit state/local bar).
• Supporting source: Tennessee Constitution, Article II, Section 29 (local taxing authority strictly subject to state delegation).

Both sources published officially by the Tennessee General Assembly.

Caution / review status: Not yet human confirmed as of 2026-06-17. The cited constitutional text is controlling and state-published; no legislative, judicial, or administrative authority has permitted or upheld a local Tennessee income tax.

Source: Tennessee Constitution, Article II, Section 28 (official PDF, p.61) Source: Tennessee Constitution, Article II, Section 29 (local property taxes, delegation, p.62)

Although Tennessee’s Hall Income Tax was fully repealed for all tax periods beginning January 1, 2021, certain compliance and refund issues can persist for tax years when the tax was still in effect (tax periods before 2021). Taxpayers with outstanding liabilities, pending audits, or potential refunds for pre-repeal years may still be subject to the usual refund and compliance procedures under Tennessee law.

Refund claims for pre-repeal years: Taxpayers may submit amended returns or refund claims for years in which the Hall Income Tax applied, subject to the general statutory limitations. Tennessee law (Tenn. Code Ann. § 67-1-1802) requires refund claims to be filed within three years from December 31 of the year in which the payment was made or within two years from the date of the assessment, whichever is later. For example, if a taxpayer overpaid Hall Tax for tax year 2020 (the last tax year before repeal), a refund claim must generally be filed no later than December 31, 2023. Refunds of $200 or more require the taxpayer to submit a Report of Debts form; the Department of Revenue may offset refund amounts by outstanding state debts.

Audit and assessment of unresolved liabilities: Unpaid or underpaid Hall Income Tax liabilities for years prior to repeal remain collectible, and the Department of Revenue retains authority to audit or assess those years subject to the standard statute of limitations. However, no Hall Tax-specific assessment period has been published by the Department. Generally, Tennessee law provides assessment and collection periods of three years for most taxes, but the precise period for Hall Tax pre-repeal years has not been expressly confirmed in post-repeal DOR guidance. If a return was never filed, there is generally no statute of limitations for assessment under general Tennessee tax procedure rules.

No amnesty or special relief solely due to repeal: There is no statutory or administrative amnesty program or special extension of deadlines that applies specifically because of the Hall Tax’s repeal. Taxpayers with unresolved liabilities, audit issues, or refund claims for tax years before 2021 are subject to the regular procedures and deadlines as above. Applicable Department of Revenue guidance on refunds and audit procedures remains in force for the relevant periods.

Practical guidance:

• File amended returns or refund claims for tax years 2020 and earlier by the applicable statutory deadlines.
• For tax debts, comply with the normal payment, appeal, and refund claim processes.
• Maintain documentation for prior-year Hall Tax filings in case of subsequent audit or assessment, as liability collection and enforcement authority remains.

Source: Tennessee Department of Revenue – Hall Income Tax Source: Tenn. Code Ann. § 67-1-1802 – Refunds and Limitation Periods Source: Tennessee DOR Notice #10-02 – Offset of State Tax Refund Claims

Not yet human confirmed as of 2026-06-17.