Question?:What exactly is "dividend and interest income" for tax purposes, is it capital gains, or income not taxed away (sales)

[FlyDrive100b]

Dear fellow Tennesseans, My family had recently asked about moving to a state about no income tax, and I am aware Tennessee taxes "dividend and interest income"

Of course I went to the Tennessee web site, and they give me a lot of jargon, which is hard to understand in human terms, what exactly is "dividend and interest" income, one of my family members deals mostly with stocks and bonds, but gets paid by short-term capital gains, I've heard that Tennessee has no tax on capital gains.

Have any of you been affected by this, I am aware that Tennessee has estate taxes which is very unusual for a republican state, no other state in the south that is republican has estate taxes, whether it be Alabama, Mississippi , Louisiana , Arkansas , Texas, South Carolina, Georgia, or Florida has estate taxes.

So I understand these two items, dividend and interest income keep the state with money along with the high sales tax, which has many exempted items of special interest.


If anyone can give me a more human explanation and whether capital gains is taxes, and any relevant experiences, it would be of tremendous help.

[yarddawg]

Originally Posted by tech2enable

If anyone can give me a more human explanation and whether capital gains is taxes, and any relevant experiences, it would be of tremendous help.

You need to talk to someone who specializes in this (local accountant, tax lawyer, etc.) but I can give you a real life example of someone who got bit by it. A few years ago a friend cashed in some mutual funds for the down payment on a house. He had done well with them and had a substantial amount of capital gains. It was taxable under the Hall Income Tax.

Once while researching my own complex tax situation (I'm a self-employed environmental geologist and an artist so I fall under multiple sections of the business tax code) I ran across a notation that in some years more than half of the Hall Income Tax collections are from capital gains even though the tax was not originally intended to be a tax on capital gains.

[FlyDrive100b]

They should repeal the hall tax its confusing to say the least, because if a person derives income from a company investing in stocks, he may get paid in short term capital gains or wages from the commission of the company, thus not paying the hall tax.

I understand Tennessee property taxes are low, which is why I wanted to see if I could couple to two together with low insurance and electric bills, I am not sure how much gas bills are there in Tennessee

[hiknapster]

Is estate tax the same as inheritance tax?

[FlyDrive100b]

Good question, yes except usually the term estate refers to a much larger property, for instance a family business or the entire estate that is being inherited, the principals are largely the same however in that its a tax based on transfer of wealth, often to descendants, ie family dies and their kids inherit property and get taxed on that.

[RSMTN]

I can't explain it to you but I can tell you how Turbo Tax calculates on my tax return.

Gross Taxable Income on the TN form is taken from Line 9a Ordinary Dividends of my 1040.

It then subtracts a $2500 exemption (married filing jointly).

Six per cent of the remainder is the tax I owe TN.

[FlyDrive100b]

Originally Posted by RSMTN

I can't explain it to you but I can tell you how Turbo Tax calculates on my tax return.

Gross Taxable Income on the TN form is taken from Line 9a Ordinary Dividends of my 1040.

It then subtracts a $2500 exemption (married filing jointly).

Six per cent of the remainder is the tax I owe TN.

Is that from capital gains or from specific dividend and interest income, I understood that short term capital gains that you earn right away may or may not be taxed but long term holdings in which you are paid interest are taxed, including municipal bonds, I wonder that companies and cpa can structure their income to avoid this tax?

[RSMTN]

Turbo Tax only only picks the total from Schedule B Part II - Interest and Ordinary Dividends. The only thing in that part of my return is anything I received a 1099-DIV for which is investment accounts.

It does not pick anything from Part I Interest which is anything I received a 1099-INT for.

[FlyDrive100b]

Its a bit confusing , dividend and interest income, the tn website lists several different categories as to what qualifies and what doesn't making it more difficult to understand.

Any input from turbotax greatly appreciated

[creeksitter]

I've not been taxed by TN on long term real estate gains - don't know if stocks are different. I had the impression it was just interest & dividends.