Updated October 5, 2026. Quick answer: No. Tennessee’s only tax on this income was the Hall income tax, which taxed “interest from bonds and notes and dividends from stock”, and the Department of Revenue says it was “repealed for tax periods that begin on January 1, 2021”. Dividends and interest add no Tennessee income tax.
How Tennessee treats dividends and interest
| Item | What the documents say |
|---|---|
| Treatment | Not taxed by the state |
| Hall income tax | Repealed for tax periods beginning on or after January 1, 2021 |
| Last printed rates | 4% for tax years beginning January 1, 2017, with the schedule stepping down each year to 1% for 2020 |
| Before the repeal | “This tax does not apply to the first $1,250 of income reported”, or $2,500 on a joint return |
| Municipal bond interest | No rule needed: no income tax applies to it |
A $20,000 example
Dividends and interest of $20,000 add $0 of Tennessee income tax. Federal tax on the income still applies.
What changes in 2026
The Hall tax repeal took effect for tax periods beginning on January 1, 2021, so no 2026 change is pending.
Federal rules
The state’s treatment sits on top of the federal one. Qualified dividends and ordinary dividends are sorted out on the Form 1099-DIV, as the site explains in Box 1a and 1b: ordinary versus qualified dividends, and interest is reported as covered in 1099-INT Box 1. The IRS explains the federal side in Topic no. 403, Interest Received and Topic no. 404, Dividends.
Related: whether Tennessee taxes capital gains, whether Tennessee taxes pensions, how Tennessee taxes retirement income, dividends and interest tax by state, and how tax-exempt interest is reported.
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Answer againSources
- Hall Income Tax overview (Tennessee Department of Revenue): https://www.tn.gov/revenue/taxes/hall-income-tax.html
- Hall Income Tax: Due Date and Tax Rates (Tennessee Department of Revenue): https://www.tn.gov/revenue/taxes/hall-income-tax/due-date-and-tax-rates.html
- Hall Income Tax: Exemptions and Deductions (Tennessee Department of Revenue): https://www.tn.gov/revenue/taxes/hall-income-tax/exemptions-and-deductions.html
Sources: the primary documents linked above, read on October 5, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the plan administrator or the agency itself is the right place to confirm anything consequential.