Updated October 7, 2026. Quick answer: No. The only Tennessee income tax was the Hall tax on interest and dividends, and the Department of Revenue says “Hall Income tax was repealed for tax periods that begin on” January 1, 2021. The Department’s manual says the tax “does not apply to salaries, wages, and commissions”, so a TSP withdrawal is not taxed by the state.
Tennessee TSP withdrawal tax treatment at a glance
| Item | What the documents say |
|---|---|
| TSP withdrawals | Not taxed by Tennessee: the documents read describe no individual income tax that applies to a withdrawal |
| FERS annuity | The documents read do not treat a FERS annuity differently from a TSP withdrawal; with no individual income tax, neither is taxed by Tennessee |
| Rate or limit printed | No rate: no individual income tax |
| Where it is reported | Nothing to report on a Tennessee return |
| Source | Tennessee Department of Revenue |
What the Tennessee documents say
The Hall income tax page says the tax applied to “receiving interest from bonds and notes and dividends from stock” and that it “Hall Income tax was repealed for tax periods that begin on” January 1, 2021. The rates page labels the same change “Repeal beginning January 1, 2021”.
The August 2022 Hall manual, written while the tax still applied to 2020 and earlier periods, says it “does not apply to salaries, wages, and commissions”. None of the documents names the Thrift Savings Plan or a retirement withdrawal; the conclusion follows from the repeal.
A worked example at $30,000 of withdrawals
An illustration, not a return: a Tennessee resident who takes $30,000 from the TSP in 2026 owes $0 of Tennessee individual income tax on it, on the documents read. Federal income tax still applies and is outside this page.
If you moved to Tennessee or left it
The rules above are Tennessee’s own, for a resident. Federal law limits what a state you have left may do: “No State may impose an income tax on any retirement income” of someone who is not a resident or domiciliary of that state, as 4 U.S.C. 114(a) puts it. The statute defines retirement income by reference to plans described in the Internal Revenue Code; this page does not decide whether a particular TSP payment meets that definition. If you moved during the year, check each state’s page and return. See CMG’s TSP withdrawal options and FERS, TSP and Social Security sequencing pages for the federal side.
What changes in 2026
Tennessee: no change for 2026; the Hall tax repeal took effect in 2021.
What the documents do not say
- The 2022 manual describes the repealed tax and is not a current rule. No document read names the TSP.
Common mistakes
- Assuming the absence of a Tennessee income tax removes the federal tax on a TSP withdrawal; it does not.
- Using an 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 tax on the withdrawal.
Related: TSP withdrawal options, state tax on TSP withdrawals, Tennessee retirement taxes, how Tennessee taxes pensions, 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
- Hall Income Tax: Due Date and Tax Rates: https://www.tn.gov/revenue/taxes/hall-income-tax/due-date-and-tax-rates.html
- 4 U.S.C. 114, Limitation on State income taxation of certain pension income (U.S. Code, GovInfo): https://www.govinfo.gov/content/pkg/USCODE-2023-title4/html/USCODE-2023-title4-chap4-sec114.htm
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.