New Hampshire Has No State Income Tax on Wages

New Hampshire does not tax wages, salaries, or most other forms of income that come from work. If you earn money through a job, you pay federal income tax but not a state income tax on those earnings. This is one of nine states in the United States with no tax on wages.

However, New Hampshire does tax two specific types of income: interest and dividends. If you earn money from savings accounts, bonds, stocks, or investment accounts, you owe New Hampshire state tax on that income. The tax rate on interest and dividends is 5 percent as of 2024, though this rate can change when the state legislature passes new laws.

Key Takeaways

  • New Hampshire does not tax income from wages, salaries, or self-employment work.
  • Interest income from savings accounts and dividend income from investments are taxed at 5 percent by the state.
  • You still file a federal income tax return even though New Hampshire has no wage tax.
  • New Hampshire funds state services through sales tax, property tax, and other revenue sources instead of income tax.
  • If you move to New Hampshire from another state, you do not owe back taxes on wages you earned before moving.

What Income Is Taxed in New Hampshire

The state's 5 percent tax applies to interest income and dividend income. Interest includes money earned from savings accounts, money market accounts, certificates of deposit (CDs), bonds, and any other investment that pays you interest. Dividends are payments made to you by companies or mutual funds when you own shares of stock.

Some types of interest and dividend income are exempt from the tax. For example, interest from U.S. Treasury bonds and notes is not taxed by New Hampshire (though it is still taxed federally). Interest from municipal bonds issued by New Hampshire municipalities is also exempt. If you receive Social Security benefits, those are not subject to the state tax either.

Capital gains—the profit you make when you sell an investment for more than you paid for it—are not taxed by New Hampshire. This means if you buy a stock for $100 and sell it for $150, the $50 gain is not subject to state tax.

How to Report Interest and Dividend Income

If you have interest or dividend income, you report it on the New Hampshire Form LS-1, which is the state's return for interest and dividend income. You file this form with the New Hampshire Department of Revenue Administration, separate from your federal tax return.

Most financial institutions send you a Form 1099-INT (for interest) or Form 1099-DIV (for dividends) by January 31 each year. These forms show how much interest or dividend income you earned. You use these forms to fill out your New Hampshire return. The important date to file is typically April 15, the same as the federal important date, though you can request an extension.

If your total interest and dividend income is below a certain threshold—which changes yearly—you may not need to file. For 2024, you generally do not need to file if your interest and dividend income is less than $2,400. Check the New Hampshire Department of Revenue Administration website or your tax forms to confirm the current threshold.

Why New Hampshire Has No Wage Tax

New Hampshire's lack of a wage tax is a deliberate policy choice. The state constitution and state law both protect the absence of income tax on wages. This policy has been in place for decades and remains popular with residents and lawmakers.

Instead of relying on income tax, New Hampshire funds state services through other revenue sources. The state collects a 9 percent sales tax (one of the highest in the nation), property taxes, and taxes on business profits. The state also receives federal funding for programs like education and transportation.

What This Means If You Move to New Hampshire

If you relocate to New Hampshire from a state that has income tax, you do not owe New Hampshire tax on wages you earned before you moved. Your tax obligation to your previous state ends when you establish residency in New Hampshire. However, you may still owe taxes to your former state for the portion of the year you lived there—that state's rules determine this.

Once you are a New Hampshire resident, you only pay state tax on interest and dividend income if you have it. You still file a federal income tax return every year, just like residents of all other states.

Federal Taxes Still explore

Even though New Hampshire has no state income tax on wages, you still owe federal income tax on all your earnings. The federal government taxes wages, self-employment income, interest, dividends, and many other types of income. You file your federal return with the IRS by April 15 each year, and federal tax is withheld from your paychecks if you are an employee.

The fact that New Hampshire does not tax your wages does not change your federal tax obligation. Your employer withholds federal tax based on the W-4 form you complete, and you report your income to the IRS the same way you would if you lived in any other state.

Frequently Asked Questions

Do I have to file a New Hampshire tax return if I only have wage income?

No. If your only income is from wages or salary, you do not file a New Hampshire state return. You only file a federal return with the IRS. You only file a New Hampshire return if you have interest or dividend income above the annual threshold.

Is Social Security taxed by New Hampshire?

No. New Hampshire does not tax Social Security benefits. However, the federal government may tax your Social Security depending on your total income, so you still need to report it on your federal return.

What if I work in New Hampshire but live in another state?

You do not owe New Hampshire tax on your wages, even if you work there. New Hampshire does not tax wages earned by non-residents. You owe income tax to the state where you live. Some states have reciprocal agreements with New Hampshire, so check your home state's rules.

Are retirement account withdrawals taxed by New Hampshire?

Withdrawals from traditional IRAs and 401(k) accounts are treated as income by the federal government but not by New Hampshire. You pay federal tax on the withdrawal but no New Hampshire state tax, even if the withdrawal includes interest or earnings.

Can the New Hampshire income tax rate change?

Yes. The 5 percent rate on interest and dividends can be changed by the state legislature. The rate has been adjusted in the past and could change again. Check the New Hampshire Department of Revenue Administration website for the current rate before filing.