Updated October 5, 2026. Quick answer: No. Tennessee’s only income tax was the Hall tax on interest and dividends, and the Department of Revenue says it was “repealed for tax periods that begin on January 1, 2021”, or later. No Hall income tax applies for a tax year that begins on or after that date, and the Department says not to file a return for those years.
How Tennessee treats trust income
| Item | What the documents say |
|---|---|
| Treatment | Tennessee has no tax on trust income for periods beginning on or after January 1, 2021. The source says: “was repealed for tax periods that begin on January 1, 2021”. The Hall income tax had applied to interest and dividends only. |
| Where the no-tax rule is written | The Department of Revenue states that the Hall tax reached only interest from bonds and notes and dividends from stock. The source says: “receiving interest from bonds and notes and dividends from stock”. The Department’s Hall pages do not name trusts or estates specifically. |
| Rate on trust income | No rate applies now. The last printed rate was 1% for tax years beginning January 1, 2020. The source says: “Repeal beginning January 1, 2021”. The earlier rates were 4% for 2017, 3% for 2018 and 2% for 2019. |
| Return to file | No Hall return is due for a tax year that begins on or after January 1, 2021. |
| Not stated in the documents read | The Department pages read do not address a residency test for trusts, a distribution deduction, or what a nonresident trust owes. |
A $10,000 example
A trust with $10,000 of taxable income owes $0 of Tennessee income tax on it. Federal tax on the trust’s income still applies.
Where a trust is administered does not by itself settle the question: other states tax a trust by who created it or who benefits from it, as the by-state table on state taxation of trust income shows.
What changes in 2026
The latest documents read print no 2026 change to how trust income is taxed.
Federal rules
The state’s treatment sits on top of the federal one. The federal brackets a trust faces are laid out in trust tax brackets versus individual brackets, and capital gains that a trust keeps are covered in capital gains stay in the trust. The IRS explains the federal return in the About Form 1041 page.
Related: how Tennessee taxes retirement income, whether Tennessee taxes pensions, what a living trust costs in Tennessee, trust income tax by state, and federal trust tax brackets.
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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.