Do I Need to File a Tax Return in Tennessee?

Some Tennessee residents must file state income or business tax returns in addition to federal tax returns.

Tennessee doesn't tax salaries and wages. It does tax interest and dividend income. You don't need to file a state income tax return if you don't have any interest and dividend income, or if it falls below set amounts. The state relies on sales tax more than income tax. In 2007, 57 percent of Tennessee's tax revenue came from sales tax and only 7 percent from income tax, according to research by the Institute on Taxation and Economic Policy. For comparison, neighboring Kentucky collected 38 percent of its revenue from income tax and 37 percent from sales tax.


Filing Requirements

Tennessee residents, partnerships and fiduciaries must file a state tax return if their interest and dividend income is more than $1,250 for an individual or $2,500 for a married couple filing jointly. The same is true for someone who is a legal resident of another state, but maintained a home in Tennessee for more than six months of the tax year, except for students and members of the military. If you moved into or out of Tennessee during the year, you need to file a return if your interest and dividend income topped $1,250 during the time you lived in the state.


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Tennessee exempts anyone aged 65 or older whose total annual income is $16,200 or less. For a joint return, if either spouse is 65 or older and total income is $27,000 or less, the couple is exempt. Seniors claiming this exemption do have to file a return. They don't have to fill out the complete return, but need to check off a box claiming the exemption and sign the return. Other exemptions apply to legally blind taxpayers and quadriplegics.


Tax Rate

The tax rate is 6 percent on taxable interest and dividends more than the $1,250 individual or $2,500 joint exemptions. All interest and dividend income isn't taxable. For example, interest on Tennessee government bonds and U.S. government bonds isn't taxable, but income from other state bonds is. Income from bank certificates of deposit isn't taxable, but income from money market certificates that aren't bank money market accounts is taxable. Check the rules and consult a Tennessee tax expert to determine what's taxable.


Business Tax

In addition to its income tax, Tennessee allows counties and communities to adopt a business tax. It taxes sales of goods and some services. Anyone subject to the business tax must register with the county or municipal clerk before conducting business and must file a business tax return with the state Department of Revenue. The state law classifies businesses into categories. The tax rate and the due date for the business tax return depends on the category.