New Hampshire has no income tax on wages or salaries

New Hampshire does not tax the money you earn from a job. There is no state income tax on wages, salaries, or self-employment income. If you work in New Hampshire or live there and work elsewhere, you will not owe New Hampshire income tax on what you earn.

This is one of nine states in the United States with no income tax on wages. It affects how much of your paycheck you keep and how you file your taxes each year.

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 some accounts and amounts are exempt.
  • If you live in New Hampshire and work in a state with income tax, you may owe tax to that state, not to New Hampshire.
  • Property taxes and sales taxes in New Hampshire are higher than in many states with income tax, so the overall tax burden varies by how you spend and own.

What New Hampshire does tax instead

Because New Hampshire collects no income tax, it relies on other sources of revenue. The state has a 5 percent tax on interest and dividend income — money earned from savings accounts, bonds, stocks, and investment accounts. This applies to residents only, not to people who work in the state but live elsewhere.

Some income is exempt from this tax. Interest and dividends earned in retirement accounts like IRAs and 401(k)s are not taxed. Accounts held by people over 65 are also exempt. If your total interest and dividend income is below a certain threshold — which varies by filing status — you may not owe the tax at all.

New Hampshire also collects sales tax and property tax. The state sales tax is 9 percent on most goods, though groceries and clothing are exempt. Property tax rates vary by town and county but are generally higher than the national average, partly because the state does not collect income tax.

How this affects your federal taxes

The absence of New Hampshire income tax does not change what you owe the federal government. You still file a federal tax return and pay federal income tax based on your income, filing status, and deductions — the same as someone in any other state.

When you file your federal return, you report your total income from all sources. New Hampshire residents do not get a deduction or credit on their federal taxes for living in a state without income tax. The federal government taxes income the same way regardless of where you live.

If you work in another state but live in New Hampshire

If you live in New Hampshire and work in a state that has income tax — Massachusetts, Vermont, or Maine, for example — you will owe income tax to that state, not to New Hampshire. You file a tax return in the state where you work and pay that state's income tax on the wages you earned there.

You do not file a New Hampshire income tax return in this situation. New Hampshire does not tax income earned outside the state. However, you still owe federal income tax on all your earnings, and you may owe the interest and dividend tax to New Hampshire if you have investment income.

If you work in New Hampshire but live elsewhere

If you live in another state and work in New Hampshire, you do not owe New Hampshire income tax on your wages. New Hampshire does not tax non-residents' wages. You file an income tax return in the state where you live and pay that state's income tax on your total income, including what you earned in New Hampshire.

Some states have reciprocal agreements with New Hampshire that affect where you file, but these explore only to certain border counties and specific situations. If you work near a state border, check with your home state's tax authority about whether a reciprocal agreement applies to you.

Property tax and overall tax burden

New Hampshire's lack of income tax does not mean the state is cheaper overall. Property taxes are among the highest in the nation. The median property tax rate is roughly 0.85 percent of home value per year, though this varies significantly by town. A home worth $300,000 could cost $2,500 to $3,500 per year in property tax alone.

Sales tax at 9 percent is also higher than the national average. For someone who owns property and spends heavily on taxable goods, the total state tax burden can be similar to or higher than in states with income tax but lower property and sales taxes. The advantage of no income tax is most noticeable for high earners and least noticeable for people with significant property holdings.

Frequently Asked Questions

Do I have to file a New Hampshire tax return if I live there?

Only if you have interest or dividend income above the exemption threshold. If your only income is wages or salary, you do not file a state return. You still file a federal return.

What counts as interest and dividend income in New Hampshire?

Interest from savings accounts, money market accounts, CDs, and bonds. Dividends from stocks and mutual funds. Income from investment accounts that are not retirement accounts. Retirement account earnings are exempt.

If I move to New Hampshire from another state, do I owe back taxes?

No. You owe income tax only to the state where you lived and worked during the year you earned the income. Moving to New Hampshire does not create a tax debt to the state for income earned elsewhere in previous years.

Does New Hampshire tax Social Security or pension income?

No. Social Security benefits and most pension income are not subject to New Hampshire's interest and dividend tax. Military pensions are also exempt.