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New Hampshire Retirement Tax Friendliness

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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. This means that 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. There is no state sales tax.

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You will pay of New Hampshire state taxes on your pre-tax income of
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Quick Guide to Retirement Income Taxes
is toward retirees.
Social Security income is taxed.
Withdrawals from retirement accounts are taxed.
Wages are taxed at normal rates, and your marginal state tax rate is %.
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    Jennifer Mansfield, CPA Tax

    Jennifer Mansfield, CPA, JD/LLM-Tax, is a Certified Public Accountant with more than 30 years of experience providing tax advice. SmartAsset’s tax expert has a degree in Accounting and Business/Management from the University of Wyoming, as well as both a Masters in Tax Laws and a Juris Doctorate from Georgetown University Law Center. Jennifer has mostly worked in public accounting firms, including Ernst & Young and Deloitte. She is passionate about helping provide people and businesses with valuable accounting and tax advice to allow them to prosper financially. Jennifer lives in Arizona and was recently named to the Greater Tucson Leadership Program.

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New Hampshire Retirement Taxes

Photo credit: ©iStock.com/omersukrugoksu

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 big source of savings for seniors in New Hampshire? Sales tax. The Granite State doesn’t have that either. It isn’t all good news, however. 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).

Is New Hampshire tax-friendly for retirees?

Yes. New Hampshire has no personal income tax. This means Social Security retirement benefits are tax-free at the state level. Income from a pension and income from retirement accounts also go untaxed in New Hampshire. On top of that, there is no sales tax in New Hampshire, no estate tax and no inheritance tax.

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. Retirees who believe that their tax liability will exceed $500 must make estimated tax payments of 25% of the total amount owed. These payments are due on the 15th of April, June, September and January of the following year.

Is Social Security taxable in New Hampshire?

No. 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?

No. 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 an 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.

Photo credit: ©iStock.com/DenisTangneyJr

How high are property taxes in New Hampshire?

Very high. A typical homeowner in New Hampshire pays more than $5,000 annually in property taxes. This 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.

The average effective property tax rate in New Hampshire is 2.19%. This means a senior who owns a home can expect to pay about $2,190 in annual property taxes for every $100,000 in home value.

What is the New Hampshire low- and moderate-income homeowners property tax relief program?

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 is no sales tax 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 state and local sales tax rate is around 6.85%.

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 pack of 20 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.

Most Tax Friendly Places for Retirees

SmartAsset’s interactive map highlights the places in the country with tax policies that are most favorable to retirees. Zoom between states and the national map to see the most tax-friendly places in each area of the country.

Rank City Income Tax Paid Property Tax Rate Sales Tax Paid Fuel Tax Paid Social Security Taxed?

Methodology To find the most tax friendly places for retirees, our study analyzed how the tax policies of each city would impact a theoretical retiree with an annual income of $50,000. Our analysis assumes a retiree receiving $15,000 from Social Security benefits, $10,000 from a private pension, $10,000 in wages and $15,000 from a retirement savings account like a 401(k) or IRA.

To calculate the expected income tax this person would pay in each location, we applied the relevant deductions and exemptions. This included the standard deduction, personal exemption and deductions for each specific type of retirement income. We then calculated how much this person would pay in income tax at federal, state, county and local levels.

We calculated the effective property tax rate by dividing median property tax paid by median home value for each city.

In order to determine sales tax burden we estimated that 35% of take-home (after-tax) pay is spent on taxable goods. We multiplied the average sales tax rate for a city by the household income after subtracting income tax. This product is then multiplied by 35% to estimate the sales tax paid.

For fuel taxes, we first distributed statewide vehicle miles traveled to the city level using the number of vehicles in each county. We then calculated miles driven per capita in each city. Using the nationwide average fuel economy, we calculated the average gallons of gas used per capita in each city and multiplied that by the fuel tax.

For each city we determined whether or not Social Security income was taxable.

Finally, we created an overall index weighted to best capture the taxes that most affect retirees. The income tax category made up 40% of the index, property taxes accounted for 30%, sales taxes 20% and fuel taxes 10%.

Sources: Internal Revenue Service, Social Security Administration, state websites, local government websites, US Census Bureau 2018 American Community Survey, Avalara, American Petroleum Institute, GasBuddy, UMTRI, Federal Highway Administration