The University of Tennessee, Knoxville

Tennessee County Municipal Advisory Service

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State-Shared Income Tax (Hall Income Tax)

Reference Number: MTAS-1876
Tennessee Code Annotated
Reviewed Date: August 11, 2015
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Revenue Class: Intergovernmental Revenue

Fund: General

Account No.: 33520

Description: State taxes levied on the earnings of stock dividends and interest on bonds earned by individuals, partnerships, associations, trusts and corporations. The municipality’s share depends upon the residence of taxpayers; i.e., if he/she resides within the corporate limits of the municipality.

Authorization: T.C.A. § 67-2-101 et seq.

Requirements or Restrictions: N/A

Current Rate: Earnings are taxed at 6 percent with 37.5 percent of the earnings going to the municipality in which the taxpayer resides.  Recent legislation reduced the tax rate from 6% to 5% for tax years begunning January 1, 2016.  It also provides that it is the legislative intent that the tax be reduced by 1% each year through enactments of legislation until the tax is eliminated in January 2022.

Frequency of Payment: Annually on or on or before the fifteenth day of the fourth month commencing after the end of the taxpayer's tax year. Armed forces personnel have 180 days in which to file in certain circumstances.

Late Pay Penalty: N/A

Exemptions: Exemptions are listed in T.C.A. § 67-2-104. The most common exemptions include the first $1,250 of an individual’s return and the first $2,500 of income for a joint return; people 65 or older whose income is not more than $37,000 ($68,000/couple); blind people; pension trusts; profit-sharing trusts; and all income derived from government bonds and securities.

Collection: State forwards municipalities’ share annually.

Use Restrictions: None.