New Hampshire does not have a state income tax on wages

New Hampshire is one of nine states that does not tax wages or salaries. If you earn money from a job, you will not owe state income tax to New Hampshire, regardless of how much you make. This applies whether you work full-time, part-time, or are self-employed.

However, New Hampshire does tax two specific types of income: interest and dividends. If you earn money from investments, savings accounts, or stock dividends, you may owe state tax on that income. The state also taxes capital gains on the sale of certain assets, though this tax is scheduled to phase out over time.

The lack of wage tax is one reason New Hampshire is known as a tax-friendly state for workers. But the state makes up revenue through other taxes, including property tax, sales tax, and the interest and dividend tax mentioned above.

Key Takeaways

  • New Hampshire does not tax wages, salaries, or self-employment income from work.
  • The state does tax interest income and dividend income at a rate of 5 percent.
  • New Hampshire has no sales tax, but property taxes are among the highest in the nation.
  • If you move to New Hampshire or work there while living elsewhere, you will not owe state income tax on your wages.
  • Capital gains tax in New Hampshire is scheduled to be phased out by 2032.

Who pays the interest and dividend tax

The interest and dividend tax applies to New Hampshire residents only. If you live in the state and earn interest from a bank account, money market account, or certificate of deposit, you owe 5 percent tax on that income. The same rate applies to dividends from stocks or mutual funds.

You must report this income on your New Hampshire tax return even if you do not owe federal tax. The state provides a form for this purpose, and most banks and investment companies will send you a statement showing how much interest or dividends you earned during the year.

There are some exceptions. Interest earned on certain bonds issued by New Hampshire or other states is exempt. Retirement account distributions, such as money from an IRA or 401(k), are also exempt from this tax.

How capital gains tax works in New Hampshire

New Hampshire taxes capital gains — the profit you make when you sell an asset for more than you paid for it — at 5 percent. This applies to gains from the sale of stocks, real estate, or other investments. However, the state is phasing out this tax over time.

As of now, the capital gains tax is scheduled to decrease and eventually disappear by 2032. The exact timeline depends on state budget decisions, but the trend is toward elimination. If you sell an asset and realize a gain, you will owe tax on it under current law, but that obligation may change in the coming years.

Capital gains from the sale of your primary residence are exempt from this tax, so selling your home does not trigger a state capital gains tax bill.

Property tax and other state taxes in New Hampshire

Although New Hampshire has no income tax, it relies heavily on property tax to fund schools and local services. New Hampshire property taxes are among the highest in the United States, with an average effective rate around 2 percent of home value. This means a home worth $300,000 could carry an annual property tax bill of $6,000 or more, depending on the town.

The state also has no sales tax, which is unusual among states without income tax. This combination — no income tax, no sales tax, but high property tax — shapes the overall tax burden for residents. Renters do not pay property tax directly, but it is often reflected in rent prices.

New Hampshire also taxes certain business activities and collects fees on vehicle registration, licenses, and other services. The state has an 8 percent tax on meals and lodging, which affects restaurants and hotels.

What this means 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 state income tax on your wages. Your home state may tax that income, depending on its own rules, but New Hampshire will not.

The reverse is also true: if you live in New Hampshire and work in another state, that other state may tax your wages. You would then report that income on both your New Hampshire return (for interest and dividends) and your home state return (for wages). Most states have agreements to prevent double taxation, but you should check your specific situation.

How to file if you have interest or dividend income

If you are a New Hampshire resident with interest or dividend income, you must file a state return even if you have no federal tax liability. You will need to report the total amount of interest and dividends you earned during the year, which your bank or investment company will provide on a 1099 form.

The New Hampshire Department of Revenue Administration provides the forms and instructions on its website. You can file by mail or electronically. The filing important date is the same as the federal important date, usually April 15.

If your only income is wages and you have no interest or dividend income, you do not need to file a New Hampshire state return. You will only file a federal return.

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 and you have no interest or dividend income, you do not need to file a New Hampshire state return. You will file a federal return as usual, but the state has no claim on your wage income.

What counts as interest and dividend income for New Hampshire tax purposes?

Interest from savings accounts, money market accounts, and CDs counts. Dividends from stocks and mutual funds count. Interest from bonds issued by states or municipalities may be exempt. Retirement account distributions are generally exempt. Your bank or investment company will tell you what to report.

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

No. New Hampshire does not tax wages, so moving to the state does not create any wage tax liability. Your previous state may have taxed your wages while you lived there, but New Hampshire will not tax income you earned before you moved.

Is New Hampshire really cheaper than other states if property taxes are so high?

It depends on your income and assets. If you earn high wages, New Hampshire saves you money because there is no income tax. If you own property, the high property tax may offset that savings. Renters typically benefit more from the lack of income tax than homeowners do.

Will the capital gains tax go away completely?

The law currently schedules it to phase out by 2032, but that timeline can change if the state legislature votes to alter it. The state budget situation and political priorities affect whether the phase-out stays on track. Check the New Hampshire Department of Revenue Administration website for updates.