New Hampshire Does Not Tax Wages or Salaries
New Hampshire has no state income tax on wages, salaries, or self-employment income. This means if you work in New Hampshire or live there and earn money from a job, you will not owe state income tax on those earnings. Federal income tax still applies — that is separate and required by the U.S. government — but the state itself does not collect income tax from workers.
This is one of nine states in the country with no income tax on wages. It is a defining feature of New Hampshire's tax system and affects how residents and workers plan their finances differently than people in states that do collect income tax.
Key Takeaways
- New Hampshire does not tax wages, salaries, or self-employment income at the state level.
- New Hampshire does tax interest and dividend income at 5 percent, though certain accounts and amounts are exempt.
- The state makes up lost income tax revenue through property taxes, which tend to be higher than in states with income tax.
- You still owe federal income tax even though New Hampshire has no state income tax.
- If you move to New Hampshire from another state, you may see changes in your overall tax burden depending on what types of income you have.
What Income New Hampshire Does Tax
Although New Hampshire does not tax wages, it does tax interest and dividend income at a rate of 5 percent. This applies to money you earn from savings accounts, bonds, stocks, and similar investments. However, there are exemptions: the first $2,400 of interest and dividend income per person per year is exempt from this tax, and certain retirement accounts are protected.
Retirement income from sources like Social Security, pensions, and 401(k) withdrawals is not taxed by New Hampshire. This makes the state attractive to retirees, since they can receive pension and Social Security payments without state tax consequences. The interest and dividend tax is the main state-level income tax New Hampshire residents encounter, and it only applies if your investment income exceeds the annual exemption.
How New Hampshire Replaces Income Tax Revenue
States that do not collect income tax must fund schools, roads, and public services through other means. New Hampshire relies heavily on property taxes, which are assessed on the value of real estate you own. Property tax rates vary by town and county, but New Hampshire's effective property tax rate is among the highest in the nation because the state does not have income tax to distribute to local governments.
The state also collects revenue through sales tax (6 percent on most goods, though groceries and clothing are exempt), business taxes, and licensing fees. When you add up property taxes, sales taxes, and the interest and dividend tax, your total state tax burden in New Hampshire may be similar to or higher than in a state with income tax, depending on your income sources and whether you own property.
Federal Income Tax Still Applies
The absence of state income tax does not mean you avoid income tax altogether. Federal income tax is collected by the U.S. Internal Revenue Service and is required in all states, regardless of whether the state itself collects income tax. You will still file a federal tax return and pay federal tax on your wages, self-employment income, and other taxable income.
When you file your federal return, you may be able to deduct state and local taxes you paid (including property tax and the interest and dividend tax) up to a limit of $10,000 per year. This deduction can reduce your federal tax liability, but it does not eliminate the need to pay federal tax in the first place.
Tax Implications If You Move to or From New Hampshire
If you move to New Hampshire from a state with income tax, your state tax burden will likely decrease, since you will no longer owe that state's income tax on wages. However, if you own property in New Hampshire, your property tax bill may be higher than it was in your previous state, which can offset some of the savings.
If you move away from New Hampshire to a state with income tax, you will begin owing that state's income tax on your wages. The timing of your move matters: most states tax income based on where you lived on the last day of the year, so moving mid-year may result in owing tax to both states for part of the year. You may be able to claim a credit on one state's return for taxes paid to another, but you should verify this with a tax professional or the state revenue department.
Remote Work and New Hampshire Tax Status
If you work remotely for a company based in another state, your tax situation depends on where you live, not where your employer is located. If you live in New Hampshire and work remotely for a company in Massachusetts or New York, you owe New Hampshire tax (or lack thereof) on your wages, not the tax of the state where your employer is based.
However, if you live in another state and work remotely for a New Hampshire company, you owe tax to your home state, not New Hampshire. Some states have tried to tax remote workers employed by in-state companies, but this is rare and legally uncertain. The safest approach is to file taxes in the state where you physically live for the majority of the year.
Frequently Asked Questions
Do I have to pay New Hampshire income tax if I work in New Hampshire but live in another state?
No. You owe income tax to the state where you live, not where you work. If you live in Massachusetts and work in New Hampshire, you owe Massachusetts income tax on your wages. New Hampshire does not tax non-residents' wages earned within the state.
Is Social Security taxed in New Hampshire?
No. New Hampshire does not tax Social Security benefits, pensions, or other retirement income. This is one reason the state is popular with retirees. You will still owe federal tax on Social Security if your combined income exceeds certain thresholds, but the state will not tax it.
What is the interest and dividend tax rate in New Hampshire?
The rate is 5 percent on interest and dividend income above the annual exemption of $2,400 per person. This applies to earnings from savings accounts, stocks, bonds, and similar investments. Retirement accounts like IRAs and 401(k)s are exempt from this tax.
If I inherit money in New Hampshire, do I owe state tax on it?
New Hampshire has no inheritance tax or estate tax. You will not owe state tax on money you inherit. Federal estate tax may explore if the estate is very large, but that is a federal matter, not a state one.
How much property tax do I pay in New Hampshire?
Property tax rates vary by town and county. New Hampshire's statewide effective property tax rate is around 2.1 percent of home value, but individual towns range from under 1 percent to over 3 percent. You can find your town's rate by contacting your local assessor's office or checking your town's website.