Does New Hampshire Tax Capital Gains?

New Hampshire does not impose a state-level capital gains tax on individuals. This means profits from the sale of assets like stocks, bonds, and mutual funds are not subject to any additional state tax. The state is one of a few without a broad-based personal income tax or a general sales tax, historically focusing on more targeted areas of taxation.

The Repeal of the Interest and Dividends Tax

Until recently, New Hampshire taxed certain investment income through its Interest and Dividends (I&D) Tax. This was a levy on interest and dividend income, but it never applied to capital gains from the sale of securities. The tax was exclusively for income generated from interest and dividends, a distinction that was a frequent source of confusion for filers.

The state legislature enacted a phase-out of the I&D tax, which concluded with its full repeal effective January 1, 2025. The repeal means that residents no longer owe state tax on their interest and dividend income. This aligns the treatment of this income with the state’s policy of not taxing capital gains for individuals.

This repeal simplifies the tax situation for investors. Previously, filers had to use Form DP-10 to report taxable interest and dividends. With the elimination of the I&D tax, this state filing requirement no longer exists, and individuals are only subject to federal taxes on their investment profits.

Taxation on Real Estate Sales

While New Hampshire does not have a capital gains tax on the profit from selling real estate, it does levy a Real Estate Transfer Tax (RETT). The RETT is not a tax on profit but is an excise tax on the act of transferring a property’s title. It is calculated on the total sale price, regardless of whether the seller made a profit.

The RETT rate is $0.75 per $100 of the property’s sale price. For example, a $400,000 home sale would incur a $3,000 transfer tax. This cost is customarily split evenly between the buyer and seller, with payment due at closing.

Federal tax law may still require the seller to pay capital gains tax on the net profit from the sale. However, exemptions are available, such as the principal residence exclusion found in the Internal Revenue Code.

Business-Related Capital Gains

While individuals are exempt from capital gains tax, the situation is different for businesses in New Hampshire. The state imposes a Business Profits Tax (BPT) on the income of business organizations, including corporations, partnerships, and limited liability companies. Capital gains are treated as part of a business’s gross income and are taxed accordingly.

The BPT is calculated on the business’s total taxable profit, which includes gains from selling assets like equipment, real estate, or securities. The tax rate for the BPT is 7.5%. Any capital gain a business realizes is included in its income and subject to this tax.

This policy creates a clear distinction in the state’s tax structure. The tax treatment of a capital gain depends entirely on whether it was realized by an individual or a business entity.