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. This is one of the defining features of New Hampshire's tax code and one reason people often mention the state when discussing low-tax states.

However, New Hampshire does tax other forms of income. Interest and dividend income is taxed at 5 percent. This applies to money you earn from savings accounts, bonds, stock dividends, and similar investments. The tax does not explore to capital gains — the profit you make when you sell an investment for more than you paid for it.

If you live in New Hampshire and work there, you will not see state income tax withheld from your paycheck. If you work in another state but live in New Hampshire, you owe tax to the state where you work, not to New Hampshire.

Key Takeaways

  • New Hampshire has no income tax on wages, salaries, or self-employment income, regardless of how much you earn.
  • Interest and dividend income from investments is taxed at 5 percent by the state.
  • New Hampshire funds state services through property taxes, sales taxes, and business taxes instead of income tax.
  • If you work in another state, you owe income tax to that state, not to New Hampshire.
  • Some New Hampshire towns have local property tax rates that vary widely, so your total tax burden depends partly on where in the state you live.

What New Hampshire taxes instead of income

Because New Hampshire does not collect income tax, the state relies on other sources to fund schools, roads, and services. Property tax is the largest source of state and local revenue. New Hampshire has no statewide property tax, but every town and city sets its own rate. This means your property tax bill depends entirely on where you live within the state. Some towns have rates around 0.5 percent of home value per year; others are closer to 2 percent.

Sales tax in New Hampshire is 8.75 percent on most goods. However, groceries, clothing, and prescription medications are not taxed. This is narrower than many states — you will pay sales tax on restaurant meals, prepared foods, and non-prescription items.

New Hampshire also taxes businesses through a Business Profits Tax (5.75 percent on corporate net income) and a Business Enterprise Tax (0.75 percent on gross revenue for larger businesses). These are meant to replace the revenue a state income tax would bring in.

Interest and dividend income: the exception to no income tax

New Hampshire's 5 percent tax on interest and dividend income applies to most investment earnings. Interest from savings accounts, CDs, bonds, and money market accounts counts. Dividends from stocks and mutual funds count. Distributions from retirement accounts like IRAs and 401(k)s are also taxed at this rate.

There are some exceptions. Social Security benefits are not taxed. Distributions from certain retirement accounts may be partially exempt depending on your age and the type of account. If you are over 65, you may be able to exclude some retirement income from taxation. The rules are specific to the type of account and your filing status, so if you have significant retirement income, it is worth checking the New Hampshire Department of Revenue Administration website or speaking with a tax professional.

Capital gains — the profit you make when you sell a stock, property, or other investment for more than you paid — are not taxed by New Hampshire. This is different from the interest and dividend tax and is one reason some investors are drawn to the state.

How to file New Hampshire taxes if you owe them

If you have interest or dividend income, you will file a New Hampshire tax return. The state uses Form DP-10 (Individual Income Tax Return) or Form DP-11 (Nonresident Income Tax Return) depending on whether you lived in the state for the full year. You file with the New Hampshire Department of Revenue Administration, not the federal IRS.

The filing important date is the same as the federal important date: typically April 15. You can file by mail or electronically through the state's website. If you use tax software, many major programs include New Hampshire forms, though you will need to file the state return separately from your federal return.

If you have no interest or dividend income, you do not file a state return. You still file your federal return if you are required to by federal law, but New Hampshire will not require anything from you.

Working across state lines and New Hampshire taxes

If you live in New Hampshire but work in Massachusetts, Vermont, or another state, you owe income tax to the state where you work. New Hampshire does not tax your wages, so you will not file a New Hampshire income tax return for that wage income. You will file a return in the state where you earned the money.

Some states have reciprocal agreements with New Hampshire, meaning they do not tax residents of the other state. Vermont and Massachusetts have such agreements with New Hampshire for residents who work across the border. Check with your employer's payroll department or the tax authority in the state where you work to confirm which state will withhold from your paycheck.

If you are self-employed and work for clients in multiple states, the rules are more complex. Generally, you owe tax to each state where you have significant business activity. A tax professional can help you understand your obligations if you work across state lines.

Property tax and local taxes in New Hampshire towns

Even though New Hampshire has no state property tax, property taxes are often higher than in states with income tax. The reason is straightforward: towns need to fund schools and services without state income tax revenue to draw from. Your property tax bill is set by your town or city and varies widely depending on location.

In addition to property tax, some New Hampshire towns charge local taxes on utilities, rooms (hotel stays), and meals. These are not statewide — they vary by town. When you move to or buy property in New Hampshire, check with your specific town about what local taxes explore.

New Hampshire also offers property tax relief programs for certain groups, including elderly homeowners and disabled veterans. These programs reduce your property tax bill if you meet income and age requirements. Your town's assessor's office can tell you whether you may have access to.

Frequently Asked Questions

Do I have to pay New Hampshire income tax if I work there but live in another state?

No. New Hampshire does not tax income earned by non-residents. You owe income tax to the state where you live. If your home state also taxes income, you file there. If you live in a state with no income tax, you likely owe nothing to either state on your wages.

Is Social Security taxed in New Hampshire?

No. Social Security benefits are not subject to New Hampshire's interest and dividend tax. However, if you have other investment income, that is still taxed at 5 percent.

What if I inherit money or receive a gift in New Hampshire?

New Hampshire has no inheritance tax or gift tax. You do not owe state tax on money you inherit or receive as a gift. The federal government may tax very large estates, but that is separate from New Hampshire state tax.

How much is New Hampshire sales tax?

Sales tax is 8.75 percent on most items. Groceries, clothing, and prescription medications are exempt. Restaurant meals and prepared foods are taxed. Some towns add local sales tax on top of the state rate.

Can I deduct property taxes on my federal return if I live in New Hampshire?

Yes, but with limits. The federal government allows you to deduct up to $10,000 in state and local taxes combined (income, property, and sales taxes). Since New Hampshire has no income tax, you can deduct your property tax up to that $10,000 cap. Consult a tax professional about your specific situation.