Tennessee has no tax on capital gains
Tennessee does not tax capital gains. Its only individual income tax, the Hall tax, reached interest and dividends rather than gains, and it was repealed for tax periods beginning January 1, 2021. A Tennessee resident selling stock, a rental or a business in 2026 owes no state income tax on the profit.
So the number that matters is federal. The worked example below follows a $100,000 long-term stock gain through the 15% bracket and the NIIT to a $15,760 federal total, with a Tennessee component of zero. Tennessee entities can owe franchise and excise taxes on their own gains; that is a business question, not this worksheet.
| Parameter | Value | Effective | Primary source |
|---|---|---|---|
| Tennessee tax on an individual’s capital gain | None | Tax periods beginning on or after January 1, 2021 | Tennessee DOR: Hall income tax |
| Hall income tax return | Not filed for any tax year beginning on or after January 1, 2021 | Same repeal date | Tennessee DOR: do not file |
| Federal 0% long-term ceiling | $49,450 single and separate; $66,200 head of household; $98,900 joint | Tax years beginning in 2026 | Rev. Proc. 2025-32, section 4.03 |
| Federal 15% long-term ceiling | $545,500 single; $579,600 head of household; $613,700 joint; $306,850 separate | Tax years beginning in 2026 | Rev. Proc. 2025-32, section 4.03 |
| Net investment income tax | 3.8% of the smaller of net investment income or MAGI above $200,000 single or head of household, $250,000 joint, $125,000 separate | Current IRS guidance | IRS Topic 559 |
The Hall repeal is tied to the beginning of the tax period
Tennessee’s Department of Revenue states that the Hall Income Tax was repealed for tax periods beginning January 1, 2021 or later and tells taxpayers not to file a return for those periods. An old Hall percentage belongs to a historical return question, not a 2026 individual investment-sale estimate.
The repeal date attaches to the taxable period. If the question concerns reconstruction of an older investment-income return, use the period that actually began before repeal and its applicable instructions. Current-year capital-gain planning should not reuse that historical tax simply because an older calculator or archived guide still contains it.
For a confirmed Tennessee resident individual scenario, the state component below is zero. The federal gain calculation remains sensitive to basis, selling costs, holding period, other preferential income and NIIT. Review any source-income connection with another state before relying on a Tennessee-only figure. The result is tax on the modeled gain, not a calculation of closing cash or a guarantee that an entity owes no Tennessee taxes.
Prepare a Tennessee stock-sale example for the federal worksheet
Suppose a Tennessee resident individual sells an ordinary investment stock held for more than one year in 2026. This illustrative sale has $155,000 of gross proceeds, $50,000 of adjusted basis and $5,000 of approved selling costs not already deducted from reported proceeds or included in basis. Gain before exclusions and offsets is $155,000 − $50,000 − $5,000 = $100,000. Enter zero for the approved exclusion and offsets only after confirming neither applies; this stock example assumes both are zero.
Reconcile brokerage statements and Form 8949 first. The IRS investment-income publication, Form 8949 guidance explains selling expenses not already reflected in the broker's reported figures. Adjusted basis can differ from purchase price. An approved home-sale exclusion, loss carryover or other adjustment belongs to its actual qualifying transaction; residence in Tennessee does not establish one.
Keep annual taxable income and NIIT amounts separate
- Use single filing status, long-term holding period and the ordinary capital-asset category. Collectibles, depreciation recapture and special stock categories require a different worksheet.
- Assume independently prepared ordinary taxable income, excluding this sale and after deductions, is $100,000. Other net long-term gains and qualified dividends are zero. Gross wages and AGI do not replace the ordinary taxable-income input.
- Assume independently prepared NIIT MAGI is $120,000 without the sale and $220,000 with it. Approved annual net investment income is $0 without the sale and $100,000 with it. These are separate supplied annual amounts; changing proceeds does not automatically prepare them.
The IRS 2026 schedules in Revenue Procedure 2025-32, sections 4.01 and 4.03 place this single-filer ordinary capital gain entirely in the 15% band: ordinary income has already used the $49,450 zero-rate room, and total taxable income of $200,000 remains below the $545,500 upper 15% boundary. The modeled federal income-tax change is $100,000 × 15% = $15,000. Short-term gain instead enters the ordinary bands; this example does not apply a flat 15% rate to it.
Under IRS Topic 559, this single individual's NIIT is 3.8% of the smaller of approved net investment income and MAGI above $200,000. NIIT without the sale is $0; with it, 3.8% × min($100,000, $220,000 − $200,000) = $760. The federal modeled subtotal is $15,760. This uses the actual NIIT base, not 3.8% of every dollar of sale gain.
For the confirmed resident individual scenario described by this page, the Tennessee state component is $0 and the combined modeled tax change is $15,760. This worksheet estimates the sale's change in tax with the other supplied items held fixed; it does not prepare the complete return or determine cash received after debt payoff. Review another state's source-income rules separately when its property or business produced the gain.
Tennessee preparation checklist
- Hall tax-period repeal boundary
- Individual rather than entity tax question
- Federal annual gain and NIIT inputs