On Friday, May 20, 2016, Tennessee Governor Bill Haslam signed into law a bill that reduces Tennessee’s Hall income tax from 6% to 5% for the 2016 tax year, expresses legislative intent that the tax be reduced by 1% annually starting next year, and eliminates the tax altogether by 2022. The Hall tax applies to certain types of investment income, but it is not levied on interest earned from bank accounts and credit unions, CDs, bonds of the state of Tennessee and its municipalities, bonds of the U.S. government, and certain other types of investment income.
If future legislation does not change course for the Hall tax before 2022, then at that time Tennessee will join seven other states (Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming) with no personal income tax.
Many retired individuals (those ages 65 or older, with total annual income of $68,000 or less for joint filers and $37,000 or less for single filers) were already exempt from having to pay the Hall income tax. And for all taxpayers regardless of age or income levels, the first $2,500 of investment income subject to the Hall tax is exempt for joint filers, while the first $1,250 is exempt for single filers.
If you have questions about how this new law may affect you, please contact us at (901) 761-3003.
Click below for a link to the full story in The Tennessean: