New Hampshire Interest & Dividends Tax

The New Hampshire Interest & Dividends Tax (I&D Tax) stands as a unique feature in the state’s tax landscape, often catching newcomers and even long-time residents by surprise. Unlike most states that levy a broad-based income tax, New Hampshire targets a specific type of income – interest and dividends – while leaving wages and salaries untaxed. This distinctive approach to taxation reflects the state’s “Live Free or Die” ethos, balancing a desire for limited government intervention with the need for revenue to fund essential services. The I&D Tax has been a part of New Hampshire’s fiscal policy for nearly a century, evolving over time to adapt to changing economic conditions and political priorities. In recent years, it has become the subject of intense debate, with some arguing for its preservation as a crucial revenue source and others advocating for its repeal as part of a broader effort to make New Hampshire entirely income-tax-free. As we delve into the intricacies of this tax, it’s important to understand not only its current form but also its historical context and future trajectory, as these factors significantly impact how residents and businesses in the Granite State approach their financial planning and tax strategies.

What is the New Hampshire Interest & Dividends Tax?

The New Hampshire Interest & Dividends Tax is a state tax levied on income earned from interest and dividends. Unlike a general income tax, it does not apply to wages, salaries, or other forms of earned income. The tax primarily affects individuals, partnerships, and fiduciaries who receive significant income from investments.Key points about the I&D Tax:

• It’s one of New Hampshire’s primary sources of revenue not tied to property or business taxes.
• The tax applies to both residents and non-residents who derive interest or dividend income from New Hampshire sources.
• It’s often referred to as New Hampshire’s version of an income tax, though it’s much more limited in scope.

Current Tax Rates and Recent Changes

As of 2025, the I&D Tax rate stands at 4%. However, it’s important to note that this rate is part of a phaseout plan:

• For tax years ending before December 31, 2023: 5%
• For tax years ending on or after December 31, 2023: 4%
• For tax years ending on or after December 31, 2024: 3%
• The tax is scheduled to be repealed entirely for tax years beginning on or after January 1, 2025

This phaseout plan, enacted in 2021, reflects a significant shift in New Hampshire’s tax policy, aiming to eventually eliminate this form of taxation entirely.

Who Must File the I&D Tax Return?

The filing requirement for the I&D Tax depends on the amount of interest and dividend income received. Generally, the following must file:

1. Individuals:
   • Single filers with gross interest and dividends exceeding $2,400 annually
   • Joint filers with gross interest and dividends exceeding $4,800 annually
2. Fiduciaries:
   • Estates and trusts with gross interest and dividends exceeding $2,400 annually
3. Partnerships and LLCs:
   • Entities with non-transferable shares and gross interest and dividends exceeding $2,400 annually
4. Part-year residents:
   • Must file if their total taxable income for the entire year exceeds the thresholds mentioned above

It’s crucial to note that these thresholds apply to gross income before any exemptions or deductions.

How to File the I&D Tax Return?

Filing the New Hampshire I&D Tax return involves several steps:

1. Obtain Form DP-10:
   • This is the primary form for reporting Interest & Dividends Tax
   • It can be downloaded from the New Hampshire Department of Revenue Administration website or obtained at local tax offices
2. Gather necessary documents:
   • Federal Form 1040 and associated schedules
   • 1099 forms reporting interest and dividend income
   • Records of any tax-exempt interest
3. Complete Form DP-10:
   • Report all taxable interest and dividends
   • Calculate your tax liability
   • Apply any applicable credits or exemptions
4. Submit the form:
   • File electronically through the state’s Granite Tax Connect system
   • Or mail the completed form to the New Hampshire Department of Revenue Administration
5. Pay any tax due:
   • Electronic payment options are available
   • Checks can be mailed with paper returns

Exemptions and Deductions for the New Hampshire Interest & Dividends Tax

New Hampshire offers several exemptions and deductions for the I&D Tax:

1. Standard exemption:
   • $2,400 for individual filers
   • $4,800 for joint filers
2. Additional exemptions:
   • $1,200 for filers who are 65 years or older
   • $1,200 for filers who are blind
   • $1,200 for filers who are disabled and unable to work
3. Specific income exemptions:
   • Interest from New Hampshire and U.S. government obligations
   • Dividends from certain New Hampshire-based banks
   • Interest and dividends from New Hampshire-registered credit unions
4. Deductions:
   • Expenses incurred in producing the taxable interest or dividend income

These exemptions and deductions can significantly reduce the taxable amount for many filers, often eliminating the tax liability for those with moderate investment income.

Due Dates and Extensions

The I&D Tax follows a similar timeline to federal income taxes:

1. Regular due date:
   • April 15th for calendar year filers
   • 15th day of the 4th month following the end of the taxable year for fiscal year filers
2. Extensions:
   • Automatic 7-month extension if 100% of the tax due is paid by the original due date
   • No separate extension form is required if the full payment is made
3. Estimated tax payments:
   • Required if the tax liability exceeds $500
   • Due on April 15, June 15, September 15, and January 15 of the following year

It’s important to note that an extension of time to file is not an extension of time to pay. Any tax due should be paid by the original deadline to avoid interest and penalties.