Does tennessee have a capital gains tax

Is there a TN capital gains tax, and what is it? The capital gain tax is a tax on the profit realized when an asset is sold – and is the difference between the selling price and the original purchase price of an asset. There is a federal capital gains tax rate – and a separate state capital gains tax. So how much is the capital gains tax in Tennessee?

• What is The Capital Gains Tax Rate in TN?
  • Why Does Tennessee Not Have a Capital Gains Tax?
• How To: Capital Gains Tax Calculated
  • Do States Tax Capital Gains?  Do You Have To Pay State Taxes On Capital Gains?
  • Short Term Capital Gains Tax in TN Tennessee
  • Tennessee TN Long Term Capital Gains Tax
• Hot To Avoid TN Capital Gains Tax?
• Articles That May Interest You

What is The Capital Gains Tax Rate in TN?

The TN capital gains tax rate is 0%. This means that if you sell an asset for more than you paid for it, you will not owe any capital gains tax to the state of Tennessee. You may owe a federal capital gains tax – which I will explain shortly. But in the state of Tennessee, you will not owe a TN capital gains tax.

Tennessee is one of only nine states that do not have a capital gains tax on the state level. And funny enough, TN is surrounded by states that DO tax capital gains – led by Arkansas and South Carolina at 7% each.

Related Reading: Which States Have the Highest Capital Gains Tax?

Why Does Tennessee Not Have a Capital Gains Tax?

Tennessee does not have a capital gains tax. This is a good thing for TN residents because it means they can keep more of your money when you sell investments such as stocks, bonds, and real estate.

There are a few reasons why TN doesn’t have a capital gains tax.

• One reason is that the state relies heavily on sales taxes and income taxes, so adding a capital gains tax would be burdensome for taxpayers.
• Another reason is that Tennessee wants to encourage investment in the state. By not taxing capital gains, Tennessee makes it more attractive for people to invest in businesses and property here.

Overall, not having a capital gains tax is a positive for Tennessee. It helps residents keep more of their money, and it encourages investment in the state.

How To: Capital Gains Tax Calculated

First, we have a federal capital gains tax to worry about.  There is a Federal capital gains tax of 

• 0% (if you are in the 15% tax bracket or less)
• 15% (if you are in the 35% tax bracket or less)
• 20% (if you are in the 35% tax bracket or higher)
• and these are based upon your current income tax bracket.  

Do States Tax Capital Gains?  Do You Have To Pay State Taxes On Capital Gains?

Are capital gains taxed by state? In most cases, yes. State taxes on capital gains are calculated as a percentage of the total capital gains earned in a year. The exact percentage varies from state to state, but is typically between 5 and 7 percent. 

• So, if an investor earns $100,000 in capital gains in a year, they would owe approximately $5,000 to $7,000 in state taxes on those gains.
• The amount of state taxes you will pay on your capital gains will depend on the state in which you reside. Each state has its own tax laws, so you will need to consult with a tax professional in your state to determine the exact amount you will owe. 
• Again, in general, you can expect to pay between 5 and 7 percent of your capital gains in state taxes. I will provide a detailed, state by state break down below.

But there is no TN capital gains tax – so no worries here…

Related Reading: State Capital Gains Tax – Listed by State

This is a constantly evolving situation, with the state of Washington capital gains tax likely to eventually be decided by the State Supreme Court.  Currently, there is no  capital gains tax in the State of Washington, but you are still required to deal with federal capital gains taxes on your federal income tax return.

Short Term Capital Gains Tax in TN Tennessee

As of this writing, there is still no short term capital gains tax in TN.

Tennessee TN Long Term Capital Gains Tax

As of this writing, there is still no short term capital gains tax in Tennessee.

• There is the TN Hall Income Tax. This is a 6% Hall Income Tax on mutual fund capital gains distributions

Related: 

• Learn more about Short Term Capital Gains and Long Term Capital Gains 
• Capital Gains Tax Calculator
• Tennessee TN Capital Gains Tax Calculator 

Hot To Avoid TN Capital Gains Tax?

That is the goal of virtually everyone – how can I pay less taxes. Let’s first take a quick look at how capital gains taxes work, and what your capital gains tax depends on:

1. How long have you held an asset? Typically if you have held an asset for over a year, you are reward with a lower, long term capital gains tax rate. If you have held your asset for less than a year, you will typically have to pay taxes based on your income tax bracket.
2. Your Income Tax Bracket. If you are in the 15% tax bracket or less, your long term capital gains tax will usually be 0%. If you are in the 25-35% tax bracket, your long term capital gains tax bracket will be 15%. And if you are in the income tax bracket of 35% and up – you will usually pay the 20% long term care capital gains tax.
3. State capital gains tax. How much is the TN capital gains tax? That’s right – it is 0%, unlike most states. Since TN does not have a capital gains tax – you are in luck.
4. Offsetting gains if you have losses, you can offset your gains with the losses. This helps minimize or avoid capital gains taxes.
5. Exceptions – there are some exceptions that may allow you to minimize or eliminate your capital gains tax. A common one is when you sell your primary residence.

Further Reading:

• What Is a Capital Gain and How You Can Minimize the Capital Gains Tax?
• 15 Ways To Avoid Paying Capital Gains Tax On Stocks!
• How To Avoid Capital Gains Tax on Home Sale and more…
• How To Avoid Paying Capital Gains Tax On Inherited Property?

Historical Tennessee tax policy information

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A former stockbroker, financial planner, and owner of my own financial planning practice and then a property & casualty agency. I have since retired and decided I want to help individuals and business owners by offering personal financial coaching. And now, I have started my blog - www.michaelryanmoney.com - to bring financial literacy to everyone. In a short time I have already been quoted and featured in US News & World Report, Business Insider, Yahoo Finance, and more (https://michaelryanmoney.com/home/press/) As a financial planner, I helped people from all walks of life. If you have questions about money, I will help you find the answers at www.MichaelRyanMoney.com

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