New Hampshire has no tax on wages, salaries, or most other income

New Hampshire does not tax wages, salaries, self-employment income, or investment gains the way most states do. If you work in New Hampshire or live there, you will not owe state income tax on your paycheck. This is one of the few states in the country with this structure.

However, "no income tax" does not mean New Hampshire has no state taxes at all. The state funds itself through other mechanisms — primarily a tax on dividends and interest income, property taxes, and sales taxes. Understanding what New Hampshire does and does not tax matters if you are deciding whether to move there, calculating your total tax burden, or figuring out what forms you need to file.

Key Takeaways

  • New Hampshire does not tax wages, salaries, self-employment income, or capital gains, so you owe no state income tax on these sources.
  • New Hampshire does tax dividends and interest income at 5%, which is separate from federal tax on the same income.
  • Property taxes in New Hampshire are among the highest in the nation because the state relies on them instead of income tax.
  • If you work in New Hampshire but live in another state, you typically owe income tax only to your state of residence, not to New Hampshire.
  • You do not file a New Hampshire state income tax return unless you have dividend or interest income above the filing threshold.

What income New Hampshire does not tax

Wages and salaries are completely exempt from New Hampshire state tax. Whether you earn $30,000 or $300,000 per year, none of it goes to New Hampshire income tax. This applies to W-2 employees, contractors, and self-employed people — the state does not distinguish between them for income tax purposes because it does not tax income at all.

Capital gains — the profit you make when you sell a stock, mutual fund, or real estate — are also not taxed by New Hampshire. Long-term gains, short-term gains, and gains on your primary residence all escape state tax. This is different from the federal government, which taxes capital gains, and different from many neighboring states like Massachusetts and Vermont, which do tax them.

Retirement income is generally not taxed either. Distributions from 401(k)s, IRAs, pensions, and Social Security are all exempt from New Hampshire state tax. This is one reason New Hampshire attracts retirees, though property taxes often offset that advantage.

The dividend and interest tax: what you do owe

New Hampshire's one income-like tax is a 5% tax on dividends and interest. If you own stocks that pay dividends, bonds, or savings accounts that earn interest, you owe New Hampshire tax on that income. This tax applies only to residents — if you live out of state, you do not owe it to New Hampshire even if you own New Hampshire property or have accounts there.

The threshold matters. You do not owe the dividend and interest tax unless your total dividends and interest exceed $2,400 per year (as of 2024; this threshold adjusts annually). If you have $2,000 in dividend income, you owe nothing. If you have $3,000, you owe 5% on the amount over $2,400, which is $30.

This tax is separate from federal tax on the same income. The IRS will tax your dividends and interest, and New Hampshire will also tax them. You cannot deduct one from the other.

How property taxes replace income tax revenue

Because New Hampshire does not tax income, it relies heavily on property taxes to fund schools, towns, and services. New Hampshire's effective property tax rate — the percentage of home value you pay annually — ranks among the highest in the nation. In many towns, property tax bills run 1.5% to 2% of home value per year, compared to a national average closer to 0.8%.

This means that while you save on income tax, you may pay more in property tax than you would in a state with income tax. A person earning $100,000 in New Hampshire pays no state income tax, but a homeowner with a $400,000 house might pay $6,000 to $8,000 per year in property tax. The total state and local tax burden is not necessarily lower than in states with income tax — it is straightforward collected differently.

New Hampshire also has a 9% sales tax on meals and lodging, and a 5% sales tax on other goods. These are additional ways the state funds itself without an income tax.

If you work in New Hampshire but live elsewhere

If you live in Massachusetts, Vermont, Maine, or another state but work in New Hampshire, you owe income tax to your state of residence, not to New Hampshire. New Hampshire does not tax non-residents on wages earned in the state. Your employer will withhold tax for your home state, and you will file a return there.

The exception is if you are self-employed and have a business location in New Hampshire. Some states tax self-employment income based on where the work is performed, not where you live. Check with your state's tax department or a tax professional if you fall into this category.

If you own rental property in New Hampshire but live elsewhere, you owe tax on the rental income to your state of residence. New Hampshire does not tax it.

Filing requirements for New Hampshire residents

Most New Hampshire residents do not file a state tax return because they have no income to report. If you earn only wages and have no dividends or interest above $2,400, you have no filing requirement.

If you do have dividend or interest income above the threshold, you file Form DP-10 with the New Hampshire Department of Revenue Administration. This is a separate form from your federal return. You report your total dividends and interest, explore the $2,400 exemption, and calculate the 5% tax owed.

If you are self-employed, you still do not file a state income tax return because New Hampshire does not tax self-employment income. However, you still owe federal self-employment tax and federal income tax, which you report on your federal return.

How this affects your federal taxes

New Hampshire's lack of state income tax does not change your federal tax bill. The IRS taxes wages, capital gains, dividends, and interest regardless of whether your state does. You will still file a federal Form 1040 and pay federal income tax on all these sources of income.

Some people mistakenly think that living in a state without income tax reduces their federal taxes. It does not. Federal tax is separate from state tax, and the IRS does not reduce your federal bill because your state does not tax you.

You may be able to deduct state and local taxes (SALT) on your federal return, but only up to $10,000 per year. If you live in New Hampshire and pay property tax and sales tax, those count toward this limit. The dividend and interest tax also counts. However, since you are not paying income tax, your total SALT deduction will likely be lower than someone in a high-income-tax state.

Frequently Asked Questions

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

Only if you have dividend or interest income above $2,400 per year. If you earn only wages and have no investment income, you have no state filing requirement. You still file a federal return if you owe federal tax.

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

No. Your old state may tax you on income earned while you lived there, but New Hampshire will not. Once you establish residency in New Hampshire, you owe no state income tax on future wages. Your old state determines when your residency ends based on when you move.

Does New Hampshire tax retirement income like pensions and Social Security?

No. Pensions, 401(k) withdrawals, IRA distributions, and Social Security are all exempt from New Hampshire state tax. This applies only to residents; non-residents do not owe New Hampshire tax on any income.

Are capital gains taxed in New Hampshire?

No. Profits from selling stocks, mutual funds, real estate, or other investments are not taxed by New Hampshire. You will owe federal capital gains tax, but not state tax.

What if I have a business in New Hampshire but live in another state?

New Hampshire does not tax business income or self-employment income, even for non-residents. However, your state of residence may tax business income based on where you work. Contact your state's tax department to determine your filing requirements.