Capital Gains Tax in Tennessee (2026)
Good news: Tennessee has no state income tax, so it does not tax capital gains at all. Your Tennessee state tax is $0 — you owe federal only (0/15/20% plus the 3.8% NIIT). Run the federal-only number below.
Reviewed & updated · 2026 tax-year figures · Federal only (Tennessee: $0 state)
Tennessee does not tax capital gains. There is no Tennessee personal income tax, so there is nothing at the state level to tax a gain — your Tennessee state capital gains tax is $0, whether the gain is short-term or long-term. You still owe federal capital gains tax — 0/15/20% on long-term gains under IRC §1(h), plus the 3.8% NIIT (§1411) for high earners — but nothing to the State of Tennessee. Compared with a state like California (up to 13.3%), a Tennessee resident can keep thousands more on the same sale.
Net proceeds $185,000$15,000
Show our work federal only, step by step
Estimates only, for the 2026 tax year. Not tax advice. Tennessee imposes no state income tax, so the state figure is $0 with no thresholds to index; the federal figures used here are marked est. as projected 2026 amounts, owner-verifiable against the final IRS release.
Does Tennessee tax capital gains?
No. Tennessee is one of the handful of states with no personal income tax at all, and a capital gain is simply a form of income. With no income tax on the books, there is no mechanism — and no rate — for the state to tax a gain. Whether you sell stock you held for a week or a home you held for a decade, Tennessee collects $0 on the gain. That is true for short-term and long-term gains alike, because the distinction only matters federally.
This is not an exemption buried in the tax code; it is structural. Tennessee funds its government largely through one of the nation’s highest combined sales taxes, plus business taxes, rather than any tax on individual income. For an individual selling an appreciated asset, the only capital gains tax that applies is the federal one.
Why doesn't Tennessee tax capital gains?
Tennessee never taxed wages or capital gains. Its only income tax was the narrow Hall tax on interest and dividends — which did not reach capital gains — and that was phased out and fully repealed effective January 1, 2021. Tennessee now has no individual income tax at all, so a capital gain, short-term or long-term, is taxed only federally. The state collects $0 on the gain. Tennessee Department of Revenue — Hall income tax repealed.
Because capital gains ride on the income-tax system, no income tax means no capital gains tax. There is no separate "capital gains" line for the state to fill in.
You still owe federal capital gains tax
Living in Tennessee removes the state tax, not the federal one. The IRS taxes a capital gain no matter which state you live in. For a long-term gain (asset held more than a year), you owe:
- Federal: 0%, 15%, or 20% depending on where the gain stacks on your taxable income, under IRC §1(h);
- Federal NIIT: an extra 3.8% on net investment income once MAGI passes $200,000 (single) / $250,000 (joint), under IRC §1411; and
- Tennessee: $0 — no state income tax.
A short-term gain (held one year or less) is worse federally, because the federal side taxes it as ordinary income (up to 37%) instead of at the 0/15/20% long-term rate. But even then, Tennessee adds nothing. The calculator above computes the federal layers and shows the exact bands used.
The one caveat people ask about: the federal tax on a home, stock, or crypto sale
The most common Tennessee question is some version of "I sold my house / my Tesla stock / my Bitcoin — do I owe capital gains tax?" The honest answer is: not to Tennessee, but yes to the IRS. Each of those is a federal taxable event:
- Home sale: the federal IRC §121 exclusion lets you exclude up to $250,000 of gain ($500,000 married filing jointly) on a primary residence you owned and used for two of the last five years — only gain above that is federally taxable. See our home-sale hub.
- Stocks: long-term gains at 0/15/20%; short-term as ordinary income.
- Crypto: the IRS treats crypto as property, so a sale or swap is a taxable disposal — see our crypto hub.
How this calculator works & where the numbers come from
No black box. The federal side uses the same unit-tested engine as our main calculator: net gain = proceeds − basis; classify by holding period; for long-term gains, subtract the standard deduction and stack the gain across the 0/15/20% bands per IRC §1(h); add 3.8% NIIT where modified AGI crosses the §1411 threshold; short-term gains are computed as the true marginal difference in ordinary tax. The Tennessee side is simple: Tennessee has no personal income tax, so the state tax is $0 with no brackets, thresholds, or deductions to apply. The total is therefore the federal amount alone.
CHECK
Primary sources (linked, not just named)
- Tennessee Department of Revenue — individual income tax guidance
- 26 U.S.C. §1(h) — federal capital gains rates
- 26 U.S.C. §1411 — 3.8% NIIT
- 26 U.S.C. §121 — home-sale exclusion
- IRS Topic No. 409 — Capital Gains and Losses
- IRS Publication 550 — Investment Income
- IRS Publication 523 — Selling Your Home
Tennessee capital gains tax, answered
Does Tennessee have a capital gains tax?
No. Tennessee has no state income tax, so it does not tax capital gains. The state tax on your gain is $0, short-term or long-term. You still owe federal capital gains tax — 0/15/20% on long-term gains under IRC §1(h), plus 3.8% NIIT (§1411) for high earners — but nothing to the State of Tennessee.
Why doesn't Tennessee tax capital gains?
Because Tennessee has no individual income tax. It never taxed wages or capital gains; its narrow Hall tax on interest and dividends (which did not reach capital gains) was fully repealed effective January 1, 2021. No income tax means no capital gains tax.
How much is capital gains tax in Tennessee for 2026?
Your total equals the federal tax only. A long-term gain is taxed federally at 0/15/20% under IRC §1(h), plus 3.8% NIIT if your MAGI exceeds $200,000 (single) or $250,000 (joint). The Tennessee state figure is $0, so a mid-income Tennessean might pay roughly 15% federal and nothing more. Use the calculator above for your exact federal figure.
Do I still owe federal tax on a home, stock, or crypto sale in Tennessee?
Yes — living in Tennessee removes the state tax, not the federal one. Selling a home, stocks, or crypto at a profit is a federal taxable event. Long-term gains are taxed at 0/15/20%; short-term as ordinary income; the 3.8% NIIT applies for high earners. The federal §121 exclusion still shelters up to $250,000 ($500,000 joint) of gain on a primary residence.
Does the 3.8% federal NIIT apply to Tennesseans?
Yes — the NIIT is federal and applies in every state. Once modified AGI exceeds $200,000 (single) or $250,000 (married filing jointly), the 3.8% surtax under IRC §1411 hits the lesser of your net investment income or the amount over the threshold. Tennessee having no income tax does not exempt you from this federal surtax.
How does Tennessee compare to California on capital gains?
They are opposite extremes. Tennessee taxes gains at 0% at the state level — you pay federal only. California taxes gains as ordinary income from 1% up to 13.3% on top of the same federal tax. On a large gain, a California resident can pay well over 13% more than a Tennessean on the identical sale. See our California hub for the contrast.
More state hubs
Tennessee is one of our no-income-tax state hubs — the same unit-tested federal engine, with the state layer set to its true value of $0. Every state page combines the federal number with that state's own rules, so you always see the full combined figure, not just half of it. Compare the extremes: California and New York tax gains heavily as ordinary income, while Florida, like Tennessee, adds nothing. Until your state's page is live, the main Capital Gains Tax Calculator lets you fold any state's top marginal rate into your federal receipt.