What Tennessee residents actually pay
Tennessee has no state income tax on wages. That removes a layer — but federal AMT, federal capital gains, and the 3.8% Net Investment Income Tax still apply, and a prior state may still have a claim.
No state income tax as of 2021.
Establishing the break
Tennessee has no state income tax to break from. The relevant question on a move out is whether your new state will try to claim you as a resident for the year of a big equity sale. Keep move-date documentation: lease or purchase agreements, utility start dates, voter registration, DMV records.
Trailing-grant rules
Even after a clean break, most high-tax states claim a workday-sourced share of equity that vested after you moved but was earned while you were a resident. Plan the move timing around known vesting and exercise events; moving in January before a year of vesting is cleaner than moving in June mid-vest.
Records to keep
Three years of records, minimum. Calendar (for day-count defense), payroll history (showing work location each pay period), real estate transactions, travel receipts, medical and professional records. If audited, the burden is on you to prove the new residency.
Frequently asked
- Does Tennessee tax RSU income the same as wages?
- Tennessee has no state income tax on wages, so RSU ordinary income is federal-only. Note that Washington residents still owe the 7% state long-term capital gains tax on sales above the threshold, and other states may claw back some income if your grant pre-dated your move.
- What happens if I exercise ISOs while living in Tennessee?
- Tennessee does not run a separate state AMT, so only federal AMT applies. You still need to model the bargain element carefully if you plan a cashless exercise-and-sell.
- I moved to Tennessee from another state. Who taxes my vesting RSUs?
- Most high-tax states (CA, NY, MA) source RSU ordinary income to workdays between grant and vest. If your grant pre-dates your Tennessee move, expect the old state to tax the portion of each tranche attributable to workdays earned there. Tennessee taxes the remainder.
- Can I reduce Tennessee taxes by timing my RSU sales?
- Tennessee has no state income tax, so sale timing affects only your federal bill. NIIT and federal capital-gains brackets are still in play.
Related
- RSU taxes — Tennessee
- ISO exercises and AMT — Tennessee
- Capital gains tax — Tennessee
- QSBS — Tennessee
- Moving to or from Tennessee with unvested equity: trailing nexus rules — Tennessee
- RSU vesting schedules — Tennessee
- ESPP taxation — Tennessee
- NSO exercises and state tax — Tennessee
- 401(k) and retirement accounts — Tennessee
- Tennessee equity-comp overview