New Hampshire does not tax wages, salaries, or most other income

New Hampshire is one of nine states with no state income tax on wages and salaries. If you work in New Hampshire or live there and earn a paycheck, you do not owe state income tax on that money. Federal income tax still applies — that comes out of your paycheck regardless of where you live — but the state itself does not take a cut.

This is a permanent feature of New Hampshire's tax code, not a temporary break or exemption. It applies to W-2 employees, self-employed people, and anyone else earning wages or salary income in the state.

Key Takeaways

  • New Hampshire has no state income tax on wages, salaries, or self-employment income.
  • Federal income tax still applies; only the state portion is absent.
  • New Hampshire does tax interest and dividend income at 5%, though some retirement income is exempt.
  • The state funds itself through property taxes, sales tax, and business taxes instead.
  • If you move to New Hampshire from another state, you do not owe back state income tax on wages you earned there before moving.

What income New Hampshire does tax

While New Hampshire skips income tax on wages, it does tax interest and dividend income at a flat rate of 5%. This includes interest from savings accounts, bonds, and CDs, as well as dividends from stocks and mutual funds. The tax applies to New Hampshire residents on all such income, regardless of where the money comes from.

Retirement income has different rules. Social Security benefits are not taxed by New Hampshire. Distributions from traditional IRAs and 401(k)s are also exempt from state tax. Pension income from a former employer is exempt as well. This means retirees in New Hampshire often pay no state tax at all, even if they have substantial retirement income.

Capital gains — money you make selling an investment at a profit — are not taxed separately in New Hampshire. They are treated as part of your overall income, and since wage income is not taxed, capital gains are not either.

How New Hampshire funds state services without income tax

New Hampshire relies on other revenue sources to pay for schools, roads, and state programs. The largest source is property tax, which is among the highest in the nation. Homeowners and renters (through their landlords) pay substantial property taxes to fund local schools and municipal services.

The state also collects a 9% sales tax on most goods and services, though groceries and clothing are exempt. Businesses pay corporate taxes, and the state collects taxes on meals, rooms (hotel stays), and utilities. These combined sources replace what other states collect through income tax.

What happens if you move to New Hampshire from a state with income tax

If you relocate to New Hampshire from a state that has income tax, you do not owe that previous state's income tax on wages you earned before you moved. Your tax obligation to your old state ends on the date you establish residency in New Hampshire. You will need to file a part-year return in your former state for the months you lived and worked there.

Once you are a New Hampshire resident, you owe no state income tax on wages going forward. If you still own property in your former state or earn income from it, you may still owe tax to that state on that specific income, but your wages are not subject to it.

Interest and dividend income: who pays the 5% tax

The 5% tax on interest and dividends applies to New Hampshire residents on all such income, whether it is earned in New Hampshire or elsewhere. If you live in New Hampshire and have a savings account in another state, you still owe the 5% tax to New Hampshire on the interest.

Non-residents who earn interest or dividends from New Hampshire sources may also owe the tax, depending on the type of income and the state where they live. The rules vary, and some income is exempt. If you are unsure whether you owe this tax, the New Hampshire Department of Revenue Administration publishes guidance on their website.

Self-employed income and business owners

If you are self-employed or own a business in New Hampshire, you do not pay state income tax on your business income. This applies whether you operate as a sole proprietor, LLC, S-corp, or partnership. Your federal self-employment tax and federal income tax still apply, but New Hampshire takes nothing.

You will still owe New Hampshire's business profits tax if your business meets certain thresholds, and you may owe the interest and dividend tax if your business generates investment income. But the income from the business itself — your profit — is not subject to state income tax.

Frequently Asked Questions

Do I have to file a New Hampshire state tax return?

If you have no interest or dividend income, you do not have to file a state return. If you have interest or dividend income above a certain threshold (currently $2,400 for single filers), you must file. Check the New Hampshire Department of Revenue Administration website for current thresholds and filing requirements.

If I work in New Hampshire but live in another state, do I owe New Hampshire income tax?

No. New Hampshire has no income tax on wages, so your employer does not withhold it and you do not owe it, regardless of where you live. You may owe income tax to the state where you live, depending on that state's rules.

Are military pensions taxed in New Hampshire?

Military pensions are exempt from New Hampshire's interest and dividend tax. They are treated as retirement income and are not taxed by the state. Federal income tax may still apply depending on your overall tax situation.

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

New Hampshire has no inheritance tax or gift tax. Money you inherit or receive as a gift is not taxed by the state. However, if that money generates interest or dividends after you receive it, the 5% tax on those earnings applies.

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

Yes, property taxes are deductible on your federal income tax return, subject to the federal cap on state and local tax deductions (currently $10,000 per year). This is a federal rule, not a New Hampshire rule, but it may reduce your federal tax bill.