Does New Hampshire Have a Capital Gains Tax?

New Hampshire lacks a broad-based state income tax on wages and salaries. However, the absence of a general income tax does not mean the state is entirely free of personal taxes, as residents have been subject to a tax on certain unearned income. This tax on investment income is undergoing significant changes, and taxpayers must stay informed about their final obligations.

Defining New Hampshire’s Tax on Investment Income

A common question is about a “capital gains tax,” but this is a misnomer for New Hampshire’s Interest and Dividends (I&D) Tax. The I&D Tax, governed by RSA 77, does not apply to profits from selling assets like stocks or real estate. Instead, it is a tax levied on income from interest and dividends, including from bank accounts, bonds, and mutual funds.

Certain types of income are exempt from the I&D Tax. Non-taxable income sources include:

• Interest earned from accounts at New Hampshire-chartered banks
• Distributions from retirement accounts like IRAs and 401(k)s
• Income from federally-defined employee benefit plans
• Interest from U.S. government obligations
• Stock dividends paid in the form of new stock

A legislative change is repealing the I&D Tax. The tax has been phased out, with the rate dropping over several years. For the tax year ending on or after December 31, 2024 (filed in 2025), the rate is 3%. As of January 1, 2025, the Interest and Dividends Tax will be fully repealed. Taxpayers must still file a final return for the 2024 tax year and pay any tax liabilities from 2024 and prior years.

Determining Your Filing Requirement

The requirement to file a New Hampshire Interest and Dividends Tax return is based on gross income thresholds. For the 2024 tax year, an individual resident must file if their gross interest and dividend income from all sources is more than $2,400. For married couples filing a joint return, the threshold is $4,800. These thresholds also apply to partnerships, fiduciaries of estates, and limited liability companies (LLCs) that are not taxed as corporations.

Residency status plays a role in your filing obligation. Full-year residents who exceed the income thresholds are required to file. Part-year residents must also file if their worldwide gross interest and dividend income for the entire year surpasses the $2,400 or $4,800 thresholds, even if they only lived in the state for a portion of the year.

It is important to assess all sources of interest and dividend income when determining if you meet the filing requirement. The responsibility to file rests on meeting the gross income test, regardless of whether any tax will ultimately be due after exemptions are applied.

Calculating the Interest and Dividends Tax

To calculate your I&D tax liability, you must gather your federal Form 1099-INT for interest income and Form 1099-DIV for dividend income. The starting point for the state calculation is the gross amount of this income, which must be reported on the New Hampshire return.

After totaling your gross interest and dividend income, you can subtract any applicable exemptions. Every filer is entitled to a standard exemption of $2,400 ($4,800 for joint filers). Additional exemptions of $1,200 each are available for residents who are age 65 or older, are legally blind, or are disabled and unable to work. These additional exemptions can be combined if a taxpayer qualifies for more than one.

The calculation itself is straightforward. For a single filer under 65 with $10,000 in dividend income for tax year 2024, the process would be: subtract the $2,400 standard exemption from the $10,000 of income, resulting in a net taxable income of $7,600. This net amount is then multiplied by the 2024 tax rate of 3%, which would result in a tax due of $228.

Filing and Paying Your Tax Obligation

The primary form for this purpose is Form DP-10, the New Hampshire Interest and Dividends Tax Return. This form can be obtained from the New Hampshire Department of Revenue Administration (NHDRA) website. Taxpayers have the option to file electronically through the state’s online portal, Granite Tax Connect, or by mailing a paper return.

The annual deadline for filing the DP-10 and paying the tax is April 15th, aligning with the federal tax deadline. If you cannot file by the deadline, New Hampshire grants an automatic 7-month extension to file. However, an extension of time to file is not an extension of time to pay; penalties and interest will accrue on any unpaid balance after the original April 15th due date.

Payments can be made electronically or by sending a check with your mailed paper return. For taxpayers who expected their I&D tax liability to be $500 or more for the year, estimated tax payments were required. With the tax being repealed, taxpayers should not make any estimated payments for the 2025 tax year. Any overpayments for the 2024 tax year will be refunded after the final return is filed.