Tennessee Capital Gains Tax (2026)
Tennessee capital gains tax rate: No state capital gains tax (Hall Tax repeal removed the last income-related tax)
Tennessee has no state capital gains tax. Investors pay only federal rates. Tennessee's lack of income and capital gains taxes makes it attractive to retirees and investors who receive significant investment income.
Federal Capital Gains Rates Still Apply to Tennessee Residents
All Tennessee residents also owe federal capital gains tax. Federal long-term capital gains rates are 0% (income up to ~$47,025 single), 15% (income up to ~$518,900 single), or 20% (above). High earners may also owe the 3.8% Net Investment Income Tax (NIIT).
Short-Term vs. Long-Term Capital Gains in Tennessee
Assets held less than one year are taxed as ordinary income at federal rates (10%–37%). Assets held over one year qualify for the preferential 0%/15%/20% federal rates. Tennessee has no state capital gains tax. Investors pay only federal rates. Tennessee's lack of income and capital gains taxes makes it attractive to retirees and investors who receive significant investment income.
Planning Considerations for Tennessee Investors
- Tax-loss harvesting can offset gains at both state and federal levels
- Timing asset sales to control income year and bracket placement
- Tennessee has no capital gains tax — only federal rates apply, simplifying planning
- Qualified Opportunity Zone investments can defer federal and potentially state gains
Frequently Asked Questions
What is the capital gains tax rate in Tennessee?
Tennessee has no state capital gains tax. Investors pay only federal rates. Tennessee's lack of income and capital gains taxes makes it attractive to retirees and investors who receive significant investment income. Federal rates (0%, 15%, 20% for long-term gains) also apply regardless of state.
Does Tennessee have a different rate for long-term vs. short-term capital gains?
Tennessee has no capital gains tax. The distinction between short- and long-term gains only matters for federal tax purposes, where short-term gains are taxed as ordinary income and long-term gains at 0%/15%/20%.
How do I reduce capital gains tax in Tennessee?
Strategies include: holding assets over one year for federal long-term rates, tax-loss harvesting to offset gains, contributing to retirement accounts (401k, IRA), investing in Qualified Opportunity Zones, and timing sales across tax years. Since Tennessee has no capital gains tax, federal planning is the primary focus.
Is this capital gains tax calculator free for Tennessee?
Yes. Enter your gain amount, holding period, and annual income. The calculator applies both federal rates (0%/15%/20% long-term) and Tennessee's zero state rate to estimate your total tax owed.