Tax Planning for Tennessee
Entrepreneurs & Investors.
Tennessee fully eliminated its Hall Income Tax in 2021, making it one of the most tax-friendly states in the country. Now your CPA should be laser-focused on federal strategy — that's our specialty.
The Tennessee Advantage
Tennessee residents enjoy zero state income tax — on wages, business income, and investment income alike. The Hall Income Tax on dividends and interest was fully repealed in 2021, making Tennessee's tax environment as clean as it gets. But "clean" at the state level doesn't mean simple at the federal level.
Nashville's booming entrepreneur scene, Memphis's logistics hub, and Knoxville's growing healthcare sector all create complex federal tax situations. Business owners need S-Corp optimization and entity structuring. Real estate investors across the state — from Nashville STRs to Memphis long-term rentals — need cost segregation and depreciation planning.
We serve Tennessee clients remotely, building federal tax strategies that take full advantage of your state's zero-income-tax environment. No state return complexity, no state credits to navigate — just pure federal tax reduction.
Tennessee Tax Quick Facts
State Income Tax
None
Avg. Property Tax
0.64%
Sales Tax
7.00%+
Excise Tax
6.5%
Notable Tennessee Tax Rules
- Hall Income Tax on dividends and interest was fully repealed in 2021 — no investment income tax at all
- Tennessee has one of the highest combined sales tax rates in the nation (up to 9.75% with local taxes)
- Business excise tax of 6.5% applies to net earnings of most entities doing business in Tennessee
- Franchise tax of 0.25% on net worth (minimum $100) applies to corporations and LLCs
- Property taxes are among the lowest in the nation, averaging just 0.64%
Tennessee vs. National Average
| Category | Tennessee | National Avg. |
|---|---|---|
| State Income Tax | 0% | 4.6% |
| Avg. Property Tax | 0.64% | 1.07% |
| State Sales Tax | 7.00% | 5.09% |
| Business Excise Tax | 6.5% | N/A |
| Investment Income Tax | 0% | 3.5% |
Hall Income Tax on dividends/interest was fully repealed in 2021.
Key Strategies for Tennessee Residents
Who We Serve in Tennessee
Nashville Entrepreneurs
Nashville is one of the fastest-growing startup and small business hubs in the Southeast. We help Tennessee business owners optimize entity structure, S-Corp elections, and retirement funding to minimize federal taxes.
Learn moreReal Estate Investors
From Nashville's hot STR market to Memphis's steady long-term rental demand, Tennessee real estate investors benefit from cost segregation, the STR loophole, and REPS qualification. Low property taxes amplify your cash-on-cash returns.
Learn morePhysicians
Vanderbilt University Medical Center, St. Jude Children's Research Hospital, and HCA Healthcare are all headquartered in Tennessee. We serve physicians at these institutions with high-income tax reduction, locum tenens optimization, and real estate investment strategies.
Learn moreHigh-Income Professionals
Whether you're in healthcare administration, logistics, music industry, or tech, Tennessee's zero income tax means your CPA should be fully focused on reducing your federal burden through Roth conversions, stock compensation planning, and strategic retirement funding.
Learn moreLive in Tennessee? Let's Reduce Your Federal Tax Bill.
Book a free 30-minute strategy call to see how much you could save. We serve Tennessee clients 100% remotely — no travel required.
Schedule Your Free CallHow We Work Together
Free Strategy Call
A 30-minute video call — no cost, no obligation.
Tax Diagnostic & Plan
Custom tax reduction plan with projected savings.
Implementation
Entity formation, elections, retirement plans, cost seg.
Year-Round Advisory
Quarterly planning, mid-year projections, year-end optimization.
Potential Scenarios, Potential Savings
Nashville STR Investor — Airbnb Portfolio
A Nashville resident with 3 short-term rental properties in the downtown/Midtown area used cost segregation across all three properties. With an average guest stay of 3.8 days and documented material participation, the STR loophole generated $275K in accelerated depreciation — offsetting her $310K consulting income almost entirely.
Annual Savings
$82,500+
Memphis Business Owner — S-Corp + DBP
A logistics company owner in Memphis earning $520K in net business income was paying over $30K annually in unnecessary self-employment tax. We elected S-Corp status, established reasonable compensation at $180K, and added a defined benefit plan to shelter an additional $150K annually from federal taxes.
Annual Savings
$76,000
Knoxville Physician — Multi-Strategy Approach
An orthopedic surgeon affiliated with University of Tennessee Medical Center earning $540K in W-2 income plus $80K in 1099 side income. We structured her 1099 income through an S-Corp, funded a Solo 401(k), and coordinated a cost segregation study on her two rental properties to reduce her effective federal rate from 33% to 21%.
Annual Savings
$74,400
Resources for Tennessee Taxpayers
Tennessee Tax Questions
No. The Hall Income Tax, which taxed dividends and interest income at 1-2%, was fully repealed effective January 1, 2021. Tennessee residents now pay zero state tax on all forms of income — wages, business income, investment income, and retirement distributions.
Tennessee imposes a 6.5% excise tax on the net earnings of most businesses operating in the state (corporations, LLCs, partnerships). There's also a franchise tax of 0.25% on net worth or real/tangible property in Tennessee (whichever is greater), with a minimum of $100. These affect your entity structure decisions.
Yes — despite regulatory changes, Nashville STRs remain one of the best tax planning vehicles in the country. The STR loophole allows owners with average guest stays under 7 days (and who materially participate) to use rental losses to offset W-2 and other active income. Combined with cost segregation, the first-year tax savings can be substantial.
Since Tennessee has no state income tax return to file, your CPA's expertise should be in federal tax strategy, not state compliance. We serve Tennessee clients remotely and focus exclusively on reducing your federal tax liability through proven strategies like S-Corp optimization, cost segregation, and retirement plan funding.
Tennessee's average property tax rate of 0.64% is one of the lowest in the nation. This means lower carrying costs on rental properties, which improves cash flow. Combined with cost segregation for accelerated depreciation, Tennessee rental properties can generate strong cash-on-cash returns while also producing significant federal tax deductions.
Ready to Keep More of What You Earn?
Tennessee has no state income tax. Let's make sure your federal strategy is just as optimized. We serve Tennessee clients 100% remotely.