A number of our clients have already changed their residency to a state with no income taxes – most often Florida, or have been considering making such a change. They have moved to avoid paying the Tennessee Hall Income Tax which applies to dividends and certain interest.
If you have already moved, you can start making plans to move back in the year 2021. The Tennessee legislature has just passed the Improve Act, which will permanently eliminate the Hall Income Tax in the year 2021. The rate will also ratchet down by 1% per year every year between now and 2021. The rate will be 4% in 2017, 3% in 2018, 2% in 2019, and 1% in 2020.
Unlike prior legislation which made these gradual decreases discretionary, these rate changes will not require any further action from the legislature.