Overview of New Hampshire Taxes
New Hampshire has no income tax on wages, though the state does charge a 5% tax on income from interest and dividends. No cities in New Hampshire levy local income taxes.
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- Our Tax Expert
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 Paycheck Quick Facts
How Your New Hampshire Paycheck Works
One thing you’ll notice on your New Hampshire paycheck is deductions for FICA (Federal Insurance Contributions Act) taxes. FICA taxes are Social Security and Medicare taxes, and they are withheld from each of your paychecks in order for you to pay into these systems. Social Security is taxed at 6.2% and Medicare at 1.45%. Your employer will match these contributions so the total FICA taxes paid are 12.4% of your pay to Social Security and 2.9% to Medicare. Any earnings you have in excess of $200,000 are subject to an additional 0.9% Medicare surtax, which your employer doesn’t match. If you are self-employed, you are responsible for paying the full FICA taxes yourself, though you can deduct the employer portion.
Even in a state like New Hampshire that does not levy income tax on wages, workers still have to pay federal income taxes. How much you pay in federal income taxes depends on several factors including your salary, your marital status, the number of allowances you claim and if you elect to have additional tax withheld from your paycheck.
Your employer figures out how much to withhold from each of your paychecks for federal income taxes based on the information you provide on your W-4 form. Every time you start a new job, you will need to fill out a new W-4. You can also fill out a new W-4 if you have a big life change, like a marriage, or if you just want to make changes to your allowances.
Keep in mind that withholding calculations for federal income tax have changed for the 2018 tax year because of President Trump’s new tax plan. You should have seen changes to your paychecks in early 2018. If you haven’t already checked, go over your W-4 just to make sure the information is still correct and you’re claiming the right number of allowances.
Your marital status and whether or not you have dependents are two factors that may affect how many allowances you can claim. The more allowances you claim, the less your employer will withhold in taxes and the larger your paychecks will be. However, if you claim allowances that you do not qualify for, you will be underpaying your taxes all year. That could leave you paying a tax bill come April.
Beyond claiming allowances, you can also request additional withholding from each paycheck. For example, say you want to withhold an additional $20 from each paycheck so that the taxes you pay throughout the year will more closely cover your actual tax liability. There is a line on the W-4 form where you can write in how much more you want withheld ($20 in this example).
If you contribute to a retirement account, like a 401(k) or 403(b), that money will come from your pay. The same is true for health savings accounts (HSAs) and flexible spending accounts (FSAs). These medical accounts take pre-tax money, which means the money you pay into them comes out of your pay before taxes are removed. Pre-tax contributions lower your taxable income and could save you money on your taxes right now. Premiums that you pay for an employer-sponsored health or life insurance will also come out of your paycheck. These plans usually take pre-tax money, but check your individual plan’s details to make sure.
Another factor worth noting is the frequency of your paychecks. If you get paid weekly or bi-weekly, your checks will be smaller than if you get paid monthly. The more frequently you get paid, the larger each paycheck is. You still make the same amount of money, assuming the same salary, but longer pay periods could mean more challenges to your monthly budgeting.
New Hampshire Median Household Income
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As we mentioned, New Hampshire does not have any income tax on wages. The state does tax income from interest and dividends at a flat rate of 5%. There are also no local income taxes in any New Hampshire cities.
If you’re considering a move to the Granite State, make sure to take a look at our New Hampshire mortgage guide. It will help you understand mortgage rates and other important mortgage details in the state.
How You Can Affect Your New Hampshire Paycheck
Do you often owe money when you file your taxes? Look at your W-4 form because you may be claiming too many allowances and underpaying your taxes all year. If this is the case, the simple fix is to claim fewer allowances. You can also have your employer withhold a dollar amount from each of your paychecks.
If you can afford it, you should consider increasing how much of your salary you are putting into a 401(k) or 403(b) retirement fund. Upping your contribution will help you reach your savings goals and it will also help you to lower how much you pay in taxes. As mentioned, money that goes into a 401(k) or 403(b) is taken out of your paycheck before taxes are applied so you are actually lowering your taxable income. And while New Hampshire doesn’t collect income taxes, you can still save on federal taxes.
Another option is to put more of your paycheck into an HSA or FSA if your employer offers it. One important difference with spending accounts and retirement accounts is that only $500 rolls over from year to year in an FSA. That means if you contribute more than $500 to an FSA but you don’t use it all within the year, you will lose it. (Money in an HSA does roll over.)
On the other hand, if you regularly get a big refund, that’s a problem, too – after all, that’s extra money you could have been using all year. In this case, you might explore whether you could claim allowances so less money is withheld from your paycheck.
Most Paycheck Friendly Places
SmartAsset's interactive map highlights the most paycheck friendly counties across the country. Zoom between states and the national map to see data points for each region, or look specifically at one of the four factors driving our analysis: Semi-Monthly Paycheck, Purchasing Power, Unemployment Rate, and Income Growth.
Methodology Our study aims to find the most paycheck friendly places in the country. These are places in the country with favorable economic conditions where you get to keep more of the money you make. To find these places we considered four different factors: semi-monthly paycheck, purchasing power, unemployment rate and income growth.
First, we calculated the semi-monthly paycheck for a single individual with two personal allowances. We applied relevant deductions and exemptions before calculating income tax withholding. To better compare withholding across counties we assumed a $50,000 annual income. We then indexed the paycheck amount for each county to reflect the counties with the lowest withholding burden.
We then created a purchasing power index for each county. This reflects the counties with the highest ratio of household income to cost of living. We also created an unemployment rate index that shows the counties with the lowest unemployment. For income growth, we calculated the annual growth in median income over five years for each county and indexed the results.
Finally, we calculated the weighted average of the indices to yield an overall paycheck friendliness score. We used a one half weighting for semi-monthly paycheck and a one-sixth weighting for purchasing power, unemployment rate and income growth. We indexed the final number so higher values reflect the most paycheck friendly places.
Sources: SmartAsset, government websites, US Census Bureau 2017 5-Year American Community Survey, MIT Living Wage Study, Bureau of Labor Statistics