The 2025 picture for Tennessee residents
Tennessee has no state income tax, so the 2025 tax picture for its residents was entirely federal: ordinary rates up to 37%, capital gains up to 23.8%, and federal Medicare taxes. That was the structural advantage that drove tech-employee relocations into Tennessee throughout the decade.
2025 federal capital gains brackets
In $2025, federal long-term capital gains rates were 0% up to approximately $48,350, 15% up to approximately $533,400, and 20% above. The 3.8% NIIT added for MAGI above $200,000 single, producing a 23.8% top federal rate on long-term equity sales.
Tennessee treatment in 2025
Tennessee imposed no state income tax on capital gains in 2025, so federal 23.8% was the ceiling. This was a meaningful structural advantage for equity sellers compared to California and New York peers.
Frequently asked
- What supplemental-wage withholding rate applied to RSU income in Tennessee in 2025?
- The federal supplemental-wage withholding rate was 22% on the first $1,000,000 of supplemental wages per calendar year, rising to 37% above that. Tennessee does not impose a state income tax on wages, so no state withholding applied.
- Did Tennessee recognize federal QSBS exclusion in 2025?
- Tennessee has no state income tax, so QSBS eligibility affects only federal tax. Federal Section 1202 treatment applied in 2025 identically for Tennessee residents.
- What was the top federal ordinary bracket in 2025, and how did it apply to Tennessee residents?
- The 37% federal ordinary bracket started around $626,350 of taxable income for single filers in 2025. Tennessee added nothing at the state level, producing a combined top marginal rate of approximately 37%.