New Hampshire stands out with its tax policies, particularly regarding capital gains and state income taxes. These policies can significantly impact residents and anyone considering doing business in the state.
Capital Gains Tax
New Hampshire has no state capital gains tax. The state taxes interest and dividends. It does not tax income earned from work or sales. Income from retirement plans is exempt from the tax on interest and dividends.
Real Estate and Business Taxes
New Hampshire’s real estate transfer tax is straightforward, with both buying and selling parties paying 0.75% of the sale, for a total aggregate of 1.5%. For businesses, an out-of-state company often needs Foreign Qualification to do business in New Hampshire. The state taxes business profits and business enterprise.
New Hampshire has a higher property tax of 2.05% versus Massachusetts’ 1.15%. Homeowners could save money in other ways. The median property tax rate is 1.93% of assessed home value. An exemption for property taxes is available to those aged 65 and older who have lived in New Hampshire for at least three years.
Tax Exemptions and Considerations
This New Hampshire tax is only applicable to certain types of income. New Hampshire has set income tax exemption amounts for single & joint filers, allowing you to earn a certain amount of taxable income without paying taxes. Only if the amount of income earned from taxable investment and interest sources is greater than the applicable tax exemption for your filing status, do you have to pay state income tax.
Comparison with Other States
The states with no additional state tax on capital gains are: Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. In contrast, a majority of U.S. states have an additional capital gains tax rate between 2.9% and 13.3%.
Moving Between States
Factors like state capital gains taxes can influence decisions to move between states, especially for retirees. For instance, a couple moving from Texas to California may face different state tax implications on their capital gains. Federal capital gains tax does not include state capital gains tax, and most states tax capital gains according to the same tax rates they use for regular income.
Understanding Federal vs. State Taxes
How state taxes differ from federal taxes is a key consideration. Most states that impose income taxes use progressive tax systems, similar to the federal income tax system, where higher levels of income are taxed at a higher percentage rate.