New Hampshire has no tax on wages or salaries, but it does tax interest and dividend income

New Hampshire is one of nine states with no broad income tax on wages. If you earn money from a job, that income is not subject to state tax. However, New Hampshire does tax interest income and dividend income at a flat rate of 5 percent. This distinction matters: you might live in a state with "no income tax" and still owe state tax on investment returns.

The state also does not tax capital gains — profits from selling stocks, real estate, or other assets — which is different from how the federal government treats those gains. This creates a situation where your federal tax bill and your New Hampshire state bill can look quite different, even though you live in the same state.

Key Takeaways

  • New Hampshire does not tax wages, salaries, or other earned income from work.
  • Interest income and dividend income are taxed at 5 percent by the state, regardless of your federal tax bracket.
  • Capital gains from selling investments or property are not taxed by New Hampshire.
  • You may still owe federal income tax even if you owe no New Hampshire state tax, because the two systems are separate.
  • Retirement income like Social Security and pensions is not taxed by New Hampshire.

Which types of income New Hampshire actually taxes

The 5 percent tax applies to interest and dividends only. Interest means money you earn from savings accounts, bonds, CDs, or any loan you make to someone else. Dividends are payments a company makes to shareholders. If you own stock in a company that pays dividends, or you own mutual funds that distribute dividends, that income is taxable in New Hampshire.

The tax is straightforward: you calculate your total interest and dividend income for the year, and 5 percent of that amount goes to New Hampshire. There are no brackets, no deductions specific to this tax, and no phase-outs. A dollar of dividend income is taxed the same way whether you earn $30,000 or $300,000 in total income.

Some types of interest are excluded. Interest from U.S. Treasury bonds and notes is exempt from New Hampshire tax (though it is still subject to federal tax). Interest from municipal bonds issued in New Hampshire is also exempt. These are narrow exceptions; most other interest income is taxable.

Income that New Hampshire does not tax

Wages, salaries, tips, and other compensation for work are completely free from New Hampshire state tax. This includes income from self-employment, freelance work, and side jobs. If you are a W-2 employee or a 1099 contractor, neither your employer nor the state will withhold income tax for New Hampshire purposes.

Social Security benefits are not taxed by New Hampshire, even though they are taxable at the federal level for some people. Pensions, including military pensions and government employee pensions, are also exempt. Distributions from retirement accounts like IRAs and 401(k)s are not taxed by the state, though they are taxed federally.

Capital gains — the profit you make when you sell an investment at a higher price than you paid — are not taxed by New Hampshire. This applies whether you sell stocks, bonds, real estate, or any other asset. The federal government taxes long-term and short-term capital gains differently, but New Hampshire taxes neither.

How the 5 percent interest and dividend tax works in practice

You report interest and dividend income on your New Hampshire tax return, which is Form DP-10 or DP-11 depending on your filing status. The state provides a worksheet to calculate the tax. You add up all your interest income, add up all your dividend income, combine them, and multiply by 0.05.

If you earned $2,000 in interest and $3,000 in dividends, your taxable base is $5,000. The tax owed is $250. You pay this when you file your return, usually by April 15 unless you have an extension. If you expect to owe more than a certain amount (the threshold changes yearly), you may need to make estimated tax payments during the year to avoid penalties.

Many people with modest investment income owe nothing because they fall below the filing threshold. For the 2024 tax year, you generally do not have to file a New Hampshire return if your interest and dividend income is below $2,400 (the exact threshold depends on your age and filing status). The state publishes updated thresholds each year on its Department of Revenue Administration website.

Why New Hampshire taxes investment income but not wages

New Hampshire's tax structure reflects a deliberate policy choice made decades ago. The state wanted to avoid taxing wages to remain competitive for workers and businesses, but it needed revenue. Taxing interest and dividends was the compromise — it captures income from investments and savings without discouraging employment or business formation.

This approach means New Hampshire relies more heavily on other revenue sources than most states. The state uses sales tax, property tax, and business taxes to fund schools, roads, and services. The interest and dividend tax is a smaller piece of the overall state budget, but it is a consistent one.

The policy also has a side effect: it can make New Hampshire attractive to people who earn most of their income from work but less attractive to retirees living on investment income. A retiree with $50,000 in annual dividend income would owe $2,500 to New Hampshire, whereas a worker earning $50,000 in wages would owe nothing.

How federal and state taxes interact for New Hampshire residents

Your federal income tax and your New Hampshire state tax are calculated separately using different rules. You might owe federal tax on capital gains but no New Hampshire tax on those same gains. You might owe no federal tax because your income is below the federal threshold, but you could still owe New Hampshire tax on interest and dividends if your income exceeds the state threshold.

When you file your federal return on Form 1040, you report all income — wages, interest, dividends, capital gains, and everything else. The IRS applies federal tax brackets and rules. When you file your New Hampshire return, you report only interest and dividend income and explore the flat 5 percent rate. The two returns do not automatically coordinate; you must file both if you are required to file either.

If you moved to New Hampshire from another state during the year, you may owe tax to both states for the portion of the year you lived in each. New Hampshire allows a credit for taxes paid to other states on the same income to prevent double taxation, but you have to claim it on your return.

Filing requirements and where to report this income

You file your New Hampshire tax return with the Department of Revenue Administration. The forms are available on the state's website, and you can file by mail or electronically through approved software. If you use tax software, it usually handles New Hampshire returns if you select that state.

You report interest income on Schedule B of your federal return (Form 1040), and you also report it on your New Hampshire return. Dividend income goes on Schedule B federally and on your New Hampshire return as well. If you have significant investment income, your brokerage or bank will send you a Form 1099-INT (for interest) or Form 1099-DIV (for dividends) by January 31, which lists the amounts you earned.

If you do not meet the filing threshold for New Hampshire, you do not have to file a state return, even if you file a federal return. However, if you are due a refund of estimated taxes or other credits, you may want to file anyway to claim them.

Frequently Asked Questions

Do I have to pay New Hampshire income tax if I work in New Hampshire but live in another state?

No. New Hampshire taxes residents on their interest and dividend income, not non-residents. If you live in Massachusetts and work in New Hampshire, you owe income tax to Massachusetts, not New Hampshire. Your employer will withhold based on your state of residence. However, if you have New Hampshire-source interest or dividend income, the rules become more complex — you should consult the Department of Revenue Administration.

What if I have a pension from a job I worked in another state?

New Hampshire does not tax pensions, regardless of which state or employer provided them. A pension from a federal job, a military career, or a private company is not subject to New Hampshire tax. You will owe federal tax on the pension, but the state will not tax it.

Are there any deductions or exemptions for the interest and dividend tax?

The 5 percent tax is applied to your total interest and dividend income with very few adjustments. You cannot deduct investment expenses or losses against this tax the way you can federally. The main exemptions are U.S. Treasury interest and New Hampshire municipal bond interest. Otherwise, the tax is straightforward: 5 percent of the total.

If I move out of New Hampshire, do I still owe tax on interest and dividends I earned while I lived there?

You owe New Hampshire tax only on income earned while you were a resident. If you moved out on June 30, you report only the interest and dividend income you earned from January 1 through June 30 on your New Hampshire return. You will also file a part-year resident return to show your move date. The state coordinates this with your new state of residence to avoid double taxation.

Do I need to make estimated tax payments on my dividend income?

Only if you expect to owe more than a certain amount in New Hampshire tax for the year. The threshold varies, but if you expect to owe $500 or more, you generally should make quarterly estimated payments. Your tax software or the Department of Revenue Administration website can help you calculate whether you need to pay estimated tax.