Tennessee State Income Tax Withholding
Last Updated: January 2026
Overview
Tennessee has no state income tax on wages. Tennessee became fully income tax-free on January 1, 2021, when the Hall Income Tax (which taxed interest and dividend income) was officially repealed.
Tax Status
| Tax Type | Status |
|---|---|
| State Income Tax on Wages | None |
| Hall Income Tax | Repealed (January 1, 2021) |
| Withholding Required | No |
No Withholding Required
Employers with employees working in Tennessee:
- Do NOT withhold state income tax
- Do NOT file state withholding returns
- Do NOT need state withholding accounts
Hall Income Tax History
The Hall Income Tax was Tennessee's tax on interest and dividend income:
- Originally enacted in 1929
- Applied only to interest and dividend income (not wages)
- Phased out from 2016-2020
- Fully repealed January 1, 2021
Note: Even when the Hall Tax was in effect, it was NOT withheld from payroll. It was reported and paid directly by taxpayers.
Special Considerations
- Federal Withholding: Federal income tax withholding still applies to all employees
- FICA Taxes: Social Security and Medicare taxes still apply
- Unemployment Insurance: Tennessee requires employer unemployment insurance contributions
- Business Taxes: Tennessee has a franchise and excise tax on businesses, but this does not affect employee withholding
Multi-State Employees
If employees work in multiple states:
- No Tennessee withholding is required for work performed in Tennessee
- Employees may still owe income tax to their state of residence
- Follow the resident state's withholding rules for days worked in Tennessee
Employer Benefits
Operating in a no-income-tax state provides administrative benefits:
- No state withholding calculations required
- No state withholding deposits or returns
- Simplified payroll processing
- Attractive to employees seeking higher take-home pay