How Much Tax Is Deducted From a Paycheck in NH?
Clarify what taxes are truly deducted from your New Hampshire paycheck. Understand the federal requirements and NH's distinct approach to wage taxation.
New Hampshire does not impose a state income tax on wages earned by employees, distinguishing it from many other states. While residents do not face state income tax deductions from their paychecks, they are still subject to federal payroll taxes. This article explains the federal taxes typically withheld from paychecks.
Federal Income Tax Withholding
Federal income tax withholding is a mandatory deduction from an employee’s gross pay, calculated by employers based on information provided on IRS Form W-4, the Employee’s Withholding Certificate. The W-4 form guides employers on how much federal income tax to deduct from each paycheck, helping to ensure that the employee’s tax liability is covered throughout the year.
The amount withheld is influenced by several factors detailed on the W-4, such as the employee’s filing status (e.g., single, married filing jointly, head of household). It also considers any elections made for dependents or other income adjustments. The federal income tax system operates on a progressive scale, meaning higher income levels are subject to higher tax rates.
Employees do not need to file a new W-4 every year unless their personal or financial situation changes significantly. However, it is advisable to review withholding periodically to prevent under-withholding, which could lead to a tax bill or penalties, or over-withholding. The goal is to align the amount withheld with the actual tax liability, avoiding surprises at tax filing time.
Social Security and Medicare Taxes
Social Security and Medicare taxes, collectively known as Federal Insurance Contributions Act (FICA) taxes, are mandatory federal deductions supporting social insurance programs. These taxes are split between the employee and the employer. The Social Security tax rate for employees is 6.2% of their wages, while the Medicare tax rate is 1.45% of all covered earnings.
For Social Security, there is an annual wage base limit, meaning earnings above this limit are not subject to Social Security tax. For 2025, the Social Security wage base limit is $176,100.
In contrast, the Medicare tax does not have a wage base limit, meaning all earned income is subject to the 1.45% Medicare tax. An Additional Medicare Tax of 0.9% applies to wages exceeding certain thresholds: $200,000 for single filers, $250,000 for married couples filing jointly, and $125,000 for married individuals filing separately. Employers are required to withhold this additional tax once an employee’s wages surpass the $200,000 threshold.
New Hampshire’s Wage Tax Landscape
New Hampshire stands out from most states because it does not levy a state income tax on earned wages. This means employees working in New Hampshire do not have state income tax withheld from their paychecks. This absence of a state income tax deduction directly impacts the total amount an employee receives in their net pay.
While New Hampshire does not tax earned wages, the state does impose other types of taxes. These include taxes on interest and dividends, as well as property taxes. It is important to note that these other state-level taxes are not deducted from an employee’s paycheck.