New Hampshire State Income Tax
In New Hampshire, there is no broad-based state income or sales tax. Instead, the state relies on a variety of other taxes, including real estate and property transfers. These tax revenues have eroded as the economy has struggled.
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New Hampshire is one of the few states that does not impose a state personal income tax. It does, however, have a tax on dividends and interest, which is currently at 5%. This rate is scheduled to decrease and be phased out over the next few years. Income from retirement plans and Railroad Retirement benefits are exempt from this tax.
Despite not having a personal income tax, New Hampshire does have a number of other taxes, including property, sales, excise, and cigarette taxes. These taxes help fund local government services, infrastructure, and the state’s education system.
New Hampshire Property Tax
New Hampshire’s property taxes are a significant source of revenue for the state, with homeowners paying an average of 2.09% of their home’s value in property taxes each year, the fourth highest rate in the nation. The recent tax reform proposals from the Trump administration would significantly reduce property taxes in New Hampshire. However, these reductions wouldn’t benefit all households equally. The richest one percent of Granite Staters are projected to receive more than half of the proposed tax cuts in 2023.
New Hampshire Corporate Business Profits Tax
New Hampshire also imposes a corporate business profits tax, which is based on a formula that uses the share of a company’s assets located in New Hampshire and the share of its sales revenue generated in the state to apportion income to the state. The business profits tax is capped at 8.3 percent. In addition, FICA (Social Security and Medicare) taxes are withheld from paychecks.
New Hampshire Tax Exemptions
While New Hampshire does not have a state income tax on wages, it does have a 5% rate on interest and dividend income. Individuals whose total investment income from interest and dividends is less than $2,400 or $4,800 (for joint filers) are exempt from the state’s tax.
In addition, New Hampshire offers a sales tax exemption on most food items and prescription drugs, which makes the state a shopping destination and contributes to its high quality of life. However, it’s important to remember that the state imposes a use tax, which applies when vendors do not collect sales tax.
