Tennessee Capital Gains Tax Rate (2026)
Tennessee capital gains tax overview
Tennessee eliminated its Hall Tax on investment income as of January 1, 2021. Capital gains are not taxed.
Federal + Tennessee combined rates
Your total capital gains tax bill includes both layers — federal and state. Here is what a Tennessee investor pays in 2026 for long-term gains:
| Federal Long-Term Rate | Tennessee State Rate | Combined Rate | Plus NIIT (if applicable) |
|---|---|---|---|
| 0% | 0% | 0% | 3.8% |
| 15% | 0% | 15% | 18.8% |
| 20% | 0% | 20% | 23.8% |
The NIIT (Net Investment Income Tax) adds an extra 3.8% for taxpayers whose MAGI exceeds $200,000 (single) or $250,000 (married filing jointly). It is a federal tax only — Tennessee does not have an equivalent.
How Tennessee compares to other states
Tennessee is one of 8 states with no individual income tax. This group includes: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Wyoming. Residents of these states pay only federal capital gains tax — a significant advantage for investors with large unrealized gains who have flexibility on where they live.
Tax-reduction strategies for Tennessee residents
With no state income tax, Tennessee residents already benefit from one of the most favorable environments for capital gains in the country. The primary levers are federal:
- Hold over 1 year for long-term federal rates (0/15/20%).
- Tax-loss harvesting: Offset your gains with losses realized in the same year. A $20,000 loss offsets $20,000 of gains dollar-for-dollar, saving $4,000 in federal tax at top rates.
- 0% bracket planning: In lower-income years (retirement, sabbatical, between jobs), realize gains at the federal 0% rate. With no state tax, this means zero total capital gains tax.
- Donate appreciated stock directly to charity or a donor-advised fund to avoid capital gains tax entirely while generating a charitable deduction for the full fair market value.
Frequently asked questions — Tennessee
Does Tennessee tax short-term and long-term gains differently?
No — Tennessee has no income tax, so neither type of gain is taxed at the state level. The difference between short-term and long-term only matters for federal purposes.
Do I need to file a Tennessee tax return if I only have capital gains?
No. Tennessee has no income tax, so there is no state return to file for investment income.
What if I moved to Tennessee mid-year?
Moving to Tennessee eliminates future state capital gains taxes, but gains realized while you were a resident of your prior state are taxable by that state. Most states use a prorated approach for part-year residents.