Updated October 7, 2026. Quick answer: No. The Department of Revenue’s Hall income tax page, the state’s only income tax page read, says the Hall income tax “was repealed for tax periods that begin on January 1, 2021”, so there is no Tennessee income tax for a payer to withhold on an IRA or 401(k) withdrawal.
Tennessee withholding at a glance
| Item | What the documents say |
|---|---|
| Is it required? | No. The only Tennessee income tax the Department’s page describes, the Hall tax, is repealed |
| Rate or amount | No rate: the Hall income tax is repealed |
| How to start or stop it | Nothing to file: the page read tells filers not to file a Hall income tax return for later years |
| Direct rollover | The page read is silent on it; with no Tennessee income tax described, there is no Tennessee withholding to avoid |
| Changed for 2026? | The Hall income tax applies to no period beginning on or after January 1, 2021 |
What the Tennessee documents say
The Department of Revenue’s Hall income tax page says the tax was imposed only on people and entities “receiving interest from bonds and notes and dividends from stock”. It adds that the Hall income tax “was repealed for tax periods that begin on January 1, 2021” or later, and asks filers not to file for later years.
The Hall tax reached interest and dividends, not wages, pensions or retirement-plan withdrawals, and the page names no other Tennessee income tax.
A $50,000 withdrawal: cash in hand or a direct rollover
Take a $50,000 401(k) withdrawal paid to you. The IRS says a taxable eligible rollover distribution paid to you from an employer plan is subject to “mandatory income tax withholding (generally at a rate of 20%)”, which on $50,000 is $10,000 (computed as $50,000 times 20%) held back for federal tax. Tennessee’s Hall income tax is repealed, so nothing is held back for Tennessee: the Tennessee amount withheld is $0.
The other path is a direct rollover to an IRA or another plan. For federal tax the IRS says “The mandatory withholding doesn’t apply in a direct rollover”. A direct rollover therefore has no Tennessee withholding to avoid.
What the documents do not say
- The Department of Revenue’s withholding pages could not be archived, so the page rests on its Hall income tax page, which describes the tax as repealed and names no other income tax. The documents read say nothing on withholding forms, rollovers or any change for 2026.
Common mistakes
- Filing a Hall income tax return for a period beginning in 2021 or later; the Department’s page says not to.
- Assuming interest and dividends are still taxed by Tennessee because the repealed tax is still described on the Department’s site.
Related: how Tennessee taxes 401(k) and IRA withdrawals, Tennessee retirement taxes, retirement withholding calculator, and retirement taxes by state.
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Answer againSources
- Hall Income Tax: https://www.tn.gov/revenue/taxes/hall-income-tax.html
- IRS Tax Topic 413, Rollovers from retirement plans: https://www.irs.gov/taxtopics/tc413
Sources: the primary documents linked above, read on October 7, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.