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Tennessee’s Income Tax-Free Status

Posted on: September 29th, 2016
hall taxTennessee is one of less than ten states that imposes no income tax on wages. The state also has a reputation for offering some of the more progressive and beneficial provisions for asset protection, in both domestic asset protection trusts and captive planning

However, there is a caveat to Tennessee’s income tax-free position: The Hall Tax. 

The Hall income tax applies to dividend and interest income from investments. The Hall tax is not new. The tax has been imposed on individuals and entities since being enacted in 1929. 

In May 2016, the governor signed off on a repeal of the Hall tax that goes into effect in 2022. The new law also minimizes the tax for the 2016 calendar year, and further reduces the tax rate by one percent annually until its full repeal. The Hall tax for the 2016 calendar year is now 5 percent.

Tennessee remains a tax-friendly environment. In addition to favorable income tax legislation and the asset protection benefits noted above, Tennessee’s estate tax was fully repealed on January 1, 2016. Prior to this, the state gift tax was repealed in 2012. 
Individuals and entities receiving income from stock dividends or note and bond interest must file their tax return by “the 15th day of the fourth month following the end of [their] fiscal year,” according to the Tennessee Department of Revenue. Taxpayers can file their Hall income tax return online or print and mail completed Hall income tax forms.

Executors in Tennessee settling estates involving investment income might benefit from the counsel of a tax attorney to ensure that state and federal tax requirements are satisfied. Probate counsel helps to identify new and pending legislative changes that affect estate administration and to ensure that filing and payment deadlines are met. 
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