New Hampshire State Tax: Understanding the Basics

When it comes to taxes, New Hampshire is a state that is often misunderstood. Known for being a tax-friendly state, it is often assumed that New Hampshire does not have a sales tax or an income tax. However, the reality is a little more complex than that. This article provides an overview of the tax system in New Hampshire, including how it compares to other states, what taxes residents and businesses need to pay, and how these taxes are used to fund important public services.

The Current Tax Climate in New Hampshire

New Hampshire is one of the few states in the United States that does not have a broad-based income tax. This means that individuals who live in New Hampshire are not required to pay state income taxes on wages, salaries, or bonuses they earn while working within the state. Additionally, the state does not impose a sales tax on goods and services. However, this does not mean that New Hampshire is completely tax-free.

First, New Hampshire does levy taxes on investments and interest income. This tax is called the Interest and Dividends Tax, and it applies to individuals who earn more than $2,400 in dividends or interest in a year. The tax rate is 5%, and it is paid directly to the state of New Hampshire.

Second, New Hampshire does have a business profits tax (BPT) that is imposed on corporations that do business within the state. The BPT applies to both C corporations and S corporations, and the rate is currently set at 8.5% of net business income. Non-profit organizations, sole proprietorships, and partnerships are not subject to the BPT.

Despite these taxes, New Hampshire is still considered to be a relatively low-tax state when compared to others in the US. According to WalletHub, a personal finance website, New Hampshire has the 5th lowest tax burden among the 50 states and the District of Columbia. This ranking is based on a combination of property, income, and sales tax rates, as well as other factors such as vehicle property taxes and estate taxes.

Taxes on Property in New Hampshire

One area where New Hampshire does collect taxes is on property. All property owners in the state are required to pay property taxes, which are used to fund local public services such as schools, roads, and public safety. In 2020, New Hampshire had the 6th highest property tax rate in the US according to the Tax Foundation, a nonpartisan tax research organization. The average effective property tax rate in the state was 1.99%.

Property taxes in New Hampshire are assessed based on the value of the property. This value is determined by local assessors, who take into account factors such as the location, size, age, and condition of the property. Property owners can appeal their assessment if they believe it is incorrect, but they must do so within a certain timeframe and follow certain procedures.

One unique aspect of New Hampshire’s property tax system is the use of the “”yield tax.”” This tax is a supplementary tax that applies to unincorporated towns and is used to fund county budgets. The yield tax is calculated based on a formula that takes into account the total value of property in the town and the amount of revenue needed to fund the county budget. The yield tax rate can vary from year to year, depending on the revenue needs and the total value of property in the town.

Taxes on Alcohol, Tobacco, and Gambling

New Hampshire also levies taxes on certain goods and services that are considered to be “”sin”” items. These include alcohol, tobacco, and gambling.

The state imposes a tax on beer, wine, and spirits. The tax rate varies depending on the type and strength of the beverage, with stronger drinks being subject to higher rates. As of 2021, the tax rate on beer is 30 cents per gallon, the tax rate on wine is 30 cents per liter, and the tax rate on spirits is $6.06 per gallon. These taxes are collected by distributors and retailers and are included in the price that consumers pay at the point of sale.

New Hampshire also has a tax on tobacco products, including cigarettes, cigars, and smokeless tobacco. The tax rate on cigarettes is $1.78 per pack, which is slightly lower than the national average of $1.81 per pack. The tax rate on other tobacco products varies depending on the type of product and the weight or volume of the packaging.

Finally, New Hampshire generates revenue through taxes on legalized gambling, including casino gaming, sports betting, and lottery sales. The state currently has one casino, located in the town of Salem, and several off-track betting locations. In 2019, the state became the 14th in the US to legalize sports betting, with revenue from these activities being subject to a 10% tax rate.

How Taxes Are Used in New Hampshire

The taxes collected by the state of New Hampshire are used to fund a variety of critical public services, including education, healthcare, public safety, and transportation. According to the state’s Department of Revenue Administration, the largest portion of tax revenue goes to support local K-12 schools, with over 50% of property tax revenues going towards education.

The state also has a number of dedicated funds that are supported by specific taxes or fees. These funds are used to finance specific programs or services, such as the Highway Fund, which is used to maintain and improve the state’s transportation infrastructure, and the Conservation Fund, which supports land conservation and park development projects.

In recent years, there have been debates in New Hampshire about how to fund certain public services, such as transportation and healthcare. Some policymakers have advocated for the implementation of a broad-based income tax to generate more revenue for these programs, while others have suggested increasing taxes on specific goods and services, such as gasoline or tobacco, to raise additional funds.

Conclusion

New Hampshire’s tax system is relatively unique when compared to other states in the US. While the state does not have a broad-based income tax or a sales tax, it does collect revenues through a variety of other sources, including property taxes, taxes on investments and interest income, business profits taxes, and taxes on specific goods and services.

These tax revenues are used to fund critical public services, such as education, healthcare, public safety, and transportation. While there have been debates about how to generate additional revenue to support these services, New Hampshire’s relatively low-tax climate has helped to make it an attractive destination for both individuals and businesses.

New Hampshire has one of the lowest tax burdens in the United States, owing to a lack of sales tax and conventional personal income tax.  The state relies on property taxes and taxes on dividends for revenue.  Tax returns are due on April 15.

New Hampshire state sales/use tax – There is no sales tax in New Hampshire.

New Hampshire personal income tax

New Hampshire does not tax personal income.  Income from dividends and interest are taxed at a rate of 5%.  This tax is assessed from individuals, partnerships, LLCs earning more than $2,400 annually from investments.  There are exemptions for the disabled and the elderly.

Most individuals pay no taxes at all in New Hampshire.

New Hampshire excise taxes

Taxes will be assessed on alcohol, tobacco, gasoline and other miscellaneous items, at the discretion of the state.

– $1.78 per package of 20 cigarettes

– Liquor excise tax is almost zero, sales controlled by state

– Wine is sold by the state only and taxes are collect through its sale to consumers

– $.30 per gallon of beer

– $.196/gallon on gasoline

– There is an 8% tax on lodging and restaurant meals

New Hampshire inheritance tax

There is no New Hampshire inheritance or estate tax

New Hampshire payroll taxes

State Disability Insurance – none

State Unemployment Insurance – 1.10% to 9.50%, wage base is $12,000.  New employer contribution is 1.7%.
State minimum wage follows federal standards

New Hampshire state property tax

Property taxes are based on municipality and assessed annually, semiannually or quarterly.  State and local property taxes are collected in New Hampshire.  100% of the full market value is used to determine the taxation rate.  Taxes will be adjusted with the market value of the property.  There is a low and moderate income tax relief program for homeowners.  New Hampshire property taxes are among the highest in the nation, reflecting the lack of other forms of taxation.  A state education property tax rate of $2.35 per $1,000 of assessed value is also levied.
Property taxes can be deferred at a 5% interest rate.  Deferred taxes cannot be more than 85% of the value of the property.

New Hampshire state corporate tax

The corporate tax rate in New Hampshire is a flat 8.5% for all corporations grossing $50,000.  This is somewhat higher than other states.

Exemptions

Elderly New Hampshire residents can receive exemptions from property tax is they earn below a certain threshold, generally 5,000 for single individuals and $6,000 for married couples will have $5,000 exempted from the property tax evaluation.  The low and moderate tax relief program will help individuals making less than $20,000 for a single person or $40,000 for a married couple in a property considered a homestead and taxed by the state education tax.