On the final day of the 2016 legislative session, Tennessee lawmakers voted to reduce and ultimately repeal the Hall Income Tax over a period of six years. Senate Bill 47 / House Bill 813, approved Friday, April 22nd, will reduce the Tennessee’s income tax on stock dividends and bond interest from its current level of 6% to 5% for the 2016 tax year, with plans repeal the tax altogether by 2022.
The bill calls for further reductions to the Hall Tax rate in the coming years, contingent upon at least 3% annual growth in state tax revenues. The rate will be reduced by an additional 1% per year in until the tax rate reaches 3%, at which point the annual reduction will be 0.75% until the tax rate reaches 0%, and the tax is taken off the books in 2022.
Under the current law, there is an annual exemption for taxpayers over the age of 65 of $68,000 for joint filers and $37,000 for single filers.
The Hall Tax generated roughly $300 million in revenue during the state’s last fiscal year that ended in June 2015. Tennessee had a projected budget surplus of $600 million during the same period. As of March 2016, Tennessee’s budget surplus for the current year is on pace to meet or exceed the prior year’s surplus.
The bill now heads to Governor Haslam’s desk, where he is expected to sign it into law.
If you have any questions, please contact Mason Barrick, CPA, at firstname.lastname@example.org or Andrew E. Hill, JD, at email@example.com.