Tennessee Has No Income Tax on Military Retired Pay
Tennessee taxes no income of any kind. The Hall tax on interest and dividends, the last thing that came close, was repealed for tax years beginning January 1, 2021, so there is no military retirement subtraction because there is no return.
Also called: military retirement, retired pay, income tax, Hall income tax, no state income tax, survivor benefit plan, SBP, VA disability taxable.
There is no Tennessee answer to how much of military retired pay the state takes, because Tennessee has no individual income tax.
That deserves an entry rather than silence. A veteran comparing states will search for "Tennessee military retirement exemption," find no exemption statute, and can reasonably conclude the pay is taxed. The opposite is true. There is no exemption because there is nothing to exempt from.
Article II, section 28 of the Tennessee Constitution has long barred a general income tax, and what Tennessee did tax was narrow: the Hall income tax, on interest from bonds and notes and dividends from stock. It never reached wages and never reached retired pay. It was repealed on a schedule, dropping one percentage point a year from 2016, and is fully repealed for tax years beginning on or after January 1, 2021. Tennessee has had no tax return for individuals since.
So: military retired pay, Survivor Benefit Plan annuity payments, VA disability compensation, VA pension, DIC, Thrift Savings Plan withdrawals, IRA and 401(k) distributions, social security, and civilian wages are all untaxed by Tennessee. There is no dollar cap, no age threshold, no phase-out and no residency waiting period, because none of those mechanisms exist here.
Two things this does not mean. It does not mean a veteran owes nothing to Tennessee: the state raises revenue through a sales tax that is among the highest combined state and local rates in the country, and through local property taxes, which is what makes the property tax relief program in 67-5-704 the entry that matters most in this state. And it does not touch federal tax. VA disability compensation is excluded from gross income under federal law; military retired pay is federally taxable whatever Tennessee does.
There is also no Tennessee estate tax and no Tennessee inheritance tax. The inheritance tax was phased out and does not apply to decedents dying in 2016 or later, and the gift tax was repealed for gifts made on or after January 1, 2012.
Thresholds
Thresholds for Tennessee Has No Income Tax on Military Retired Pay
Gate
Rule
No rating, no service test, no residency waiting period
There is no individual income tax to be exempted from, so no eligibility test of any kind attaches. This entry exists to answer the search rather than to gate anything.
The Hall tax is fully repealed
The tax on interest and dividends was phased down a point a year from 2016 and is repealed for tax years beginning on or after January 1, 2021. It never reached wages or retired pay in any event.
Out of date, a broken link, or something else wrong? Say what you found, and an editor checks it against the official source.
Disclaimer
VetTOC is not affiliated with the U.S. Department of Veterans Affairs or the Department of Defense. Information is for reference only and is not an eligibility determination. Verify with VA, the relevant state or territory, or an accredited VSO.