Overview of New Hampshire Retirement Tax Friendliness
New Hampshire does not tax salaries or wages, but there is a 5% tax on dividends and interest for the current tax year. However, this tax is due to be phased out by January 2027, with rates steadily declining until then. So while retirement income is not taxed at the state level, retirees with investment income may owe some taxes. Property taxes in New Hampshire are high, and there is no state sales tax.
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New Hampshire Retirement Taxes
The Granite State is a popular choice for seniors who are looking to relocate for their retirement. It is filled with charming New England towns, while maintaining a lower cost of living than most other New England states. New Hampshire also has some of the lowest retirement taxes of any state in the country.
Why? Well it begins with New Hampshire’s personal income tax - or rather, lack thereof. New Hampshire has no tax on personal income from salaries and wages. This means that retirement income - whether from Social Security, a pension or a retirement account - is not taxed at the state level. That can create significant savings for retirees as compared with other states.
Another major source of savings for seniors in New Hampshire is the state's nonexistent sales tax. It isn’t all good news, though, as New Hampshire does have some of the highest property taxes in the U.S. What’s more, there is a 5% tax on interest and dividends greater than $2,400 ($4,800 for joint tax filers). New legislation will decrease this tax to 4% in 2023, 3% in 2024, 2% in 2025 and 1% in 2026. Then, by Jan. 1, 2027, the tax will be repealed entirely.
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Is New Hampshire tax-friendly for retirees?
New Hampshire has no personal income tax, which means Social Security retirement benefits are tax-free at the state level. Income from pensions and retirement accounts also go untaxed in New Hampshire. On top of that, there is no sales tax, estate tax or inheritance tax here.
So what does New Hampshire tax? Real estate. If you are planning on buying a home for your New Hampshire retirement, you will pay some of the highest property taxes in the U.S.
You will also pay taxes on investment income above $2,400 if you’re single or $4,800 if you’re married and filing a joint tax return. But there is an additional $1,200 exemption for seniors who are at least 65 years old, residents who are blind (regardless of age) and disabled adults who can’t work who are below the age of 65.
Is Social Security taxable in New Hampshire?
Since New Hampshire does not have a state income tax, it does not tax Social Security retirement benefits. Some benefits may still be subject to federal taxes, however.
Are other forms of retirement income taxable in New Hampshire?
Retirement income is not taxable in New Hampshire. This includes income from a pension and income from retirement accounts such as a 401(k) or IRA. Retirement income from these sources is taxed in many other states, so this can represent a significant source of savings for New Hampshire retirees.
How high are property taxes in New Hampshire?
A typical homeowner in New Hampshire pays more than $6,097 annually in property taxes. That is more than twice the national average. One reason property taxes are so high is that the state of New Hampshire collects a statewide property tax in addition to the local taxes that cities, counties and school districts collect.
In all, the average effective property tax rate in New Hampshire is 1.77%. This means a senior who owns a home can expect to pay about $1,770 in annual property taxes for every $100,000 in home value.
New Hampshire provides a property tax rebate for some homeowners. To be eligible, single persons must have income of no more than $20,000, while for married persons or heads of household, the income limit is $40,000. The rebate is equal to some or all of the state property taxes paid in a year. The exact amount is determined by a complicated formula and depends on home value as well as household income.
How high are sales taxes in New Hampshire?
There are no sales taxes in New Hampshire. Products such as clothing, electronics, food and furniture can all be purchased without sales tax. For retirees, that can add up to significant savings as compared with other states. The national average sales tax rate is around 5.11%.
What other New Hampshire taxes should I be concerned about?
New Hampshire does not have a sales tax, but it does have a number of sin taxes. The state has a cigarette tax of $1.78 per 20-pack of cigarettes and a beer tax of 30 cents per gallon. Alcohol sales also provide significant revenue to the state, because you can only purchase liquor in New Hampshire at a state-run store. There is no estate tax or inheritance tax in New Hampshire.