Flat-Fee Tax Preparation for Tennessee Residents

Tennessee eliminated its Hall income tax on investment income in 2021 — TN now has no personal income tax of any kind

Tennessee's sales tax is 7% state plus local rates up to 2.75%, for a potential combined rate of 9.75% — one of the highest combined sales tax rates in the US

TN businesses with net earnings from business pay the Tennessee Excise Tax at 6.5% of net earnings — a business income tax that applies to most entities doing business in TN

The TN Franchise Tax (separate from excise tax) is based on the greater of net worth or real/tangible property in TN, at $0.25 per $100 of the tax base

Tennessee does not impose a state estate tax or inheritance tax — making it favorable for wealth transfer

TN real estate transfer tax is $0.37 per $100 of value — one of the lower transfer taxes in the nation

Nashville and other TN metro areas have seen explosive real estate appreciation — federal capital gains planning is essential for long-time owners considering sale

TN short-term rentals (Nashville in particular) are a major market — subject to TN sales tax plus local hotel occupancy taxes on gross rental revenue

Tennessee Real Estate Tax

Tennessee — especially Nashville, Memphis, and Knoxville — has experienced exceptional real estate appreciation. With no state income tax, TN real estate investors owe only federal tax on gains and rental income. Federal optimization through 1031 exchanges, cost segregation, and installment sales is particularly impactful. Short-term rentals in Nashville are subject to TN sales tax and local hotel taxes.

Tennessee Business Tax

Tennessee businesses must navigate the Excise Tax and Franchise Tax despite there being no personal income tax. The combined Excise and Franchise Tax obligation is often overlooked by new TN business owners. Federal tax planning — retirement contributions, entity structure, depreciation — is the primary lever for TN business owners. The high combined sales tax rate requires diligent compliance.

Do I need to file a Tennessee state income tax return?

No. Tennessee eliminated its Hall income tax effective January 1, 2021. TN now has no personal income tax. You file only a federal return for income tax purposes. If you own a business entity in TN, that entity may owe the Tennessee Excise Tax and Franchise Tax — these business-level taxes are separate from personal income tax.

What is the Tennessee Excise Tax?

Tennessee's Excise Tax is a 6.5% tax on the net earnings of entities doing business in TN — LLCs, corporations, and partnerships. It applies regardless of whether the owners pay personal income tax (they don't, since TN has no personal income tax). Net earnings are calculated similarly to federal taxable income. Most TN businesses with more than $10,000 in annual gross receipts are required to file.

What is the Tennessee Franchise Tax?

The TN Franchise Tax is a separate annual tax on the greater of a business's net worth or the value of real and tangible personal property in Tennessee, at $0.25 per $100 of the tax base. The minimum is $100. This is separate from the Excise Tax. TN businesses owe both the Excise Tax on income and the Franchise Tax on net worth/property each year.

I'm selling a Nashville rental property — what taxes do I owe?

Since TN has no personal income tax, you owe no state tax on the gain. Federal capital gains tax applies in full: long-term gains at 0%, 15%, or 20% depending on your income, plus 3.8% NIIT if applicable, plus 25% depreciation recapture. Strategies like a 1031 exchange can defer the federal gain entirely. Nashville's strong appreciation means cost basis documentation and depreciation tracking are especially important.