Updated October 5, 2026. Quick answer: No. Tennessee has no individual income tax on wages, so a payroll HSA contribution has nothing to be taxed under. The Department of Revenue’s Hall income tax manual says of the Hall tax that “it does not apply to salaries, wages, and commissions”, and the tax was “repealed for tax periods that begin on January 1, 2021”. The 2026 federal HSA limits are $4,400 for self-only coverage and $8,750 for family coverage.
Tennessee HSA tax treatment at a glance
| Item | What the documents say |
|---|---|
| Contributions | No state tax: the Hall income tax never applied to salaries or wages and was repealed from 2021 |
| Earnings | The Hall manual lists HSA earnings received on or after July 1, 2006 as not taxable under the Hall tax, which is repealed from 2021 |
| Distributions | The Hall manual lists HSA distributions received on or after July 1, 2006 as not taxable under the Hall tax, which is repealed from 2021 |
| Where it is reported | No Tennessee individual return for income tax |
| Federal HSA limits, 2026 | $4,400 self-only; $8,750 family |
| Source | Tennessee Department of Revenue; IRS Revenue Procedure 2025-19 |
What the Tennessee documents say
The Department of Revenue’s Hall Income Tax page says the tax was “repealed for tax periods that begin on January 1, 2021”. The August 2022 Hall Income Tax Manual describes what the tax had covered: “it does not apply to salaries, wages, and commissions”.
The manual also lists, among amounts the tax did not reach, “distributions received on or after July 1, 2006, from health savings accounts”, with a note that earnings received before that date were taxable to the extent they came from taxable sources. That list describes the repealed tax, not a rule in force for 2026.
Earnings, distributions and the rest
With the Hall tax repealed, the documents read show no Tennessee individual income tax that could apply to an HSA contribution, earning or distribution for 2026. Federal rules still decide whether a contribution is excluded or deductible and whether a nonqualified distribution is taxed or penalized.
A worked example at the 2026 family limit
An illustration: a Tennessee resident with family coverage who contributes the 2026 federal family limit of $8,750 owes $0 of Tennessee individual income tax on it, because the only such tax, the Hall tax, was repealed and never applied to wages. The federal limit for self-only coverage is $4,400, so the family contribution is $4,350 larger.
What a mover should know
Every figure on this page is Tennessee’s own rule. If you moved during the year, or live in one state and work in another, check each state’s page and return, because the documents read here describe only Tennessee and none of them settles a part-year or two-state case. The federal side is the same everywhere: see CMG’s 2026 HSA contribution limits page, and state tax on HSA contributions for the other states checked.
What the documents do not say
- The Hall manual read is from 2022, before the repeal took effect, and its HSA line describes the repealed tax. No Tennessee document read addresses HSAs for 2026 directly.
Common mistakes
- Using the old Hall tax manual as a current rule; the Department’s page says the tax was repealed for periods beginning on January 1, 2021.
- Assuming the answer for one state applies to another, or that the state answer changes the federal limits.
Related: 2026 HSA contribution limits, state tax on HSA contributions, Tennessee retirement taxes, and how Tennessee taxes 401(k) and IRA withdrawals.
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Answer againSources
- Hall Income Tax: https://www.tn.gov/revenue/taxes/hall-income-tax.html
- Hall Income Tax Manual August 2022: https://www.tn.gov/content/dam/tn/revenue/documents/tax_manuals/august-2022/Hall-Income-Tax.pdf
- Revenue Procedure 2025-19 (Internal Revenue Service): https://www.irs.gov/pub/irs-drop/rp-25-19.pdf
Sources: the primary documents linked above, read on October 5, 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.