New Hampshire does not have a state income tax on wages or salaries

If you work in New Hampshire or live there, you do not pay state income tax on the money you earn from a job. This is one of nine states in the U.S. with no tax on wages. You will still owe federal income tax, and you will still file a federal return — but New Hampshire itself does not take a cut of your paycheck.

However, New Hampshire does tax two specific types of income that many people do not realize: interest and dividends. If you earn money from a savings account, bonds, stocks, or investment accounts, you may owe New Hampshire tax on that income, even though you owe no tax on wages. This distinction matters if you have investments or savings accounts that generate returns.

The state funds itself through other taxes instead. Sales tax, property tax, and business taxes make up the bulk of state revenue. Understanding what New Hampshire does and does not tax helps you plan your finances and avoid surprises when you file.

Key Takeaways

  • New Hampshire has no state income tax on wages, salaries, or self-employment income from a job or business.
  • Interest and dividend income is taxed by New Hampshire at a flat rate, even though wage income is not.
  • You still file a federal tax return and owe federal income tax, regardless of New Hampshire's lack of a state wage tax.
  • New Hampshire funds state operations through sales tax, property tax, and business taxes instead of income tax.
  • If you moved to New Hampshire from a state with income tax, you do not owe that state's tax on income earned after you moved, but you may owe it on income earned while you still lived there.

Interest and dividend income: the exception to New Hampshire's no-tax rule

While New Hampshire does not tax wages, it does tax interest income and dividend income. This applies to money you earn from savings accounts, money market accounts, certificates of deposit (CDs), bonds, and stock dividends. The tax rate on this income is 5% as of 2024, though you should verify the current rate with the New Hampshire Department of Revenue Administration because rates can change.

You report this income on the New Hampshire Form LS (Interest and Dividends Tax Return). If your interest and dividend income falls below a certain threshold — which varies by year — you may not have to file the form. The threshold is typically around $2,400 in annual interest and dividend income, but check the current year's instructions because it changes. If you have less than the threshold, you owe no New Hampshire tax on that income.

This tax catches many people by surprise because they assume "no state income tax" means no state tax at all. If you have investments or a high-yield savings account, set aside money for this tax when you file your federal return, or you may face a bill later.

How New Hampshire funds state government without income tax

New Hampshire relies on sales tax and property tax to fund schools, roads, and state services. The state sales tax is 9%, which applies to most goods but not to groceries or prescription medications. Property tax rates vary by town but are generally higher in New Hampshire than in states with income tax, because property tax carries more of the burden.

The state also taxes business profits, meals and rooms (a hospitality tax), and utilities. These taxes spread the cost of government across different sources rather than concentrating it on worker income. This structure means New Hampshire residents often pay more in property tax and sales tax than residents of income-tax states, even though they pay nothing on wages.

Understanding this trade-off matters if you are considering moving to New Hampshire or comparing your total tax burden. A high earner with modest property holdings might pay less overall tax in New Hampshire than in a neighboring state with income tax. Someone who owns a home or spends heavily on taxable goods might pay more.

What happens if you move to or from New Hampshire

If you move to New Hampshire from a state with income tax, you do not owe that state's income tax on money you earn after you move. Your old state's tax obligation ends on the date you establish residency in New Hampshire. However, you still owe tax on income you earned while you lived in that state, even if you did not receive the paycheck until after you moved.

If you move away from New Hampshire to a state with income tax, your New Hampshire tax obligation ends on the date you establish residency in the new state. You will then owe income tax to your new state on all income earned after that date. Some states require you to file a part-year resident return in both the year you leave and the year you arrive, so check with both states' tax agencies about filing requirements.

Remote work complicates this picture. If you work remotely for a New Hampshire employer but live in another state, you typically owe income tax to the state where you live and work, not to New Hampshire. If you work remotely for an out-of-state employer but live in New Hampshire, you owe no New Hampshire income tax on that income (though you still owe federal tax). Document where you physically work and where you live, because this determines which state can tax you.

Federal taxes you still owe, even in New Hampshire

The absence of New Hampshire state income tax does not affect your federal tax obligation. You file a federal Form 1040 and owe federal income tax on all your income — wages, self-employment income, interest, dividends, and other sources — regardless of where you live. Federal tax rates and brackets explore the same way in New Hampshire as they do everywhere else.

You may also owe self-employment tax if you are self-employed, because self-employment tax funds Social Security and Medicare. This is a federal tax, not a state tax, and it applies in every state. New Hampshire's lack of state income tax does not reduce your self-employment tax.

If you receive a refund on your federal return, that refund comes from the federal government. New Hampshire does not issue a separate state refund because there is no state income tax withheld from your paycheck. Some people are surprised to learn this, especially if they moved from a state that issued both federal and state refunds.

Self-employment income and business income in New Hampshire

If you are self-employed or own a business, you owe no New Hampshire state income tax on your business income or self-employment income. This is one reason some entrepreneurs choose to base their businesses in New Hampshire. However, you still owe federal self-employment tax and federal income tax on all business profits.

New Hampshire does tax business profits through its Business Profits Tax (BPT) and Business Enterprise Tax (BET), which are separate from income tax. These taxes explore to corporations and certain business entities, not to sole proprietors or pass-through entities like S-corporations or LLCs in most cases. If you operate as a sole proprietor, you typically owe no New Hampshire business tax, only federal income tax and self-employment tax.

If you operate as an LLC, S-corporation, or partnership, the tax treatment depends on how the entity is structured and taxed for federal purposes. Consult a tax professional or the New Hampshire Department of Revenue Administration to determine whether your business structure triggers the BPT or BET.

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 filing threshold (typically around $2,400 per year). If you earn only wages and have no investment income, you do not file a New Hampshire return. You still file a federal return.

What if I work in New Hampshire but live in another state?

You owe income tax to the state where you live and work, not to New Hampshire. Most states tax income earned within their borders, so you would owe tax to your home state. Some states have reciprocal agreements that reduce or eliminate this tax, so check your state's rules.

Does New Hampshire tax retirement income or Social Security?

No. New Hampshire does not tax Social Security benefits, pensions, or retirement account withdrawals. This applies to 401(k) distributions, IRA withdrawals, and pension payments. You still owe federal tax on these sources of income.

If I have a savings account earning interest, how much New Hampshire tax do I owe?

The tax rate is 5% on interest income above the filing threshold. If you earn $3,000 in interest and the threshold is $2,400, you owe 5% tax on $600, which is $30. You report this on Form LS when you file.

Can I deduct New Hampshire property tax on my federal return?

Yes, if you itemize deductions on your federal return. Property tax is deductible as a state and local tax (SALT), subject to a $10,000 annual cap. Most people in high-tax states use this deduction, but it depends on whether your total deductions exceed the standard deduction.