New Hampshire is one of the most tax advantageous states in the country. The have no personal income tax and also no sales tax. Due to low taxes, it’s one of the best states for retirees.
State Income Taxes in New Hampshire
The state of New Hampshire is one of only 9 states that does not have personal income tax. However, they do have taxes on some non-earned income, such as interest and dividends.
Interest and Dividend Taxes in New Hampshire
The State of New Hampshire is one of only two States that have an Interest and Dividend Tax (the only other one being Tennessee). This is due to New Hampshire not having an individual income tax. The I&D Tax is 5.00% for residents whose total Interest and Dividend income is greater than $2,400.
State Business Taxes in New Hampshire
The state of New Hampshire has two (2) different business taxes. The Business Profits Tax (BPT) and the Business Enterprise Tax (BET). This tax rate effects all businesses such as Corporations, S Corporations, LLCs and Sole Proprietorships. However, both the BPT and BET are only assessed on businesses that have a minimum amount of gross receipts.
Business Profits Tax (BPT) – The BPT is 7.70% tax. It’s only assessed if your business income is over the threshold of $50,000. However, if your business is either a sole proprietorship, partnership, or LLC, there is a special deduction called the “Compensation Deduction for Personal Services.” This deduction allows a sole proprietors, LLC members, or partners to deduct Reasonable Compensation from the Gross Margins calculations of the BPT. All earnings subject to self-employment tax are exempt from the BPT. If you own an S Corporation, then your officer’s salary is deducted from Gross Margins to calculate the tax.
Business Enterprise Tax (BET) – The BET is 0.60% tax. If your business meets one of the following thresholds you must pay BET:
- Gross Margins are greater than $222,000 (as of the year 2021), or
- Enterprise Value Tax Base is greater than $111,000.
Your Enterprise Value Tax Base consists of the sum of the following paid by the business:
- Compensation Paid
- Interest Paid
- Dividends Paid
Additionally, any BET tax you pay will give you a tax credit on your BPT so there is no double taxation of the gross margins tax.
Deduction of BPT and BET on Business Return
Please make sure that your CPA or Tax Preparer deducts the BPT and BET as a business expense on your tax return (on Schedule C, 1120-S, or 1065), and not as a State Income Tax Deduction on your Schedule A.
This is a common mistake that is made by CPAs and Tax Preparers that are not familiar with New Hampshire Business Tax Law.
Sales and Property Taxes in New Hampshire
Sales Tax – There is no sales tax in New Hampshire – Yay!
Property Taxes – the average property tax rate for residential property in the state of New Hampshire is 1.89%, making it one of the most expensive places in the country to pay property tax (behind New Jersey and Illinois).
Unemployment taxes in New Hampshire
Unemployment taxes usually consist of three factors. They are the wage base, range of rates, number of schedules. Below is an outline of the three:
- Wage Base – New Hampshire has a wage base of $14,000
- UI Rates – range from 0.10% to 7.50%
- Schedules – New Hampshire has multiple rate schedules regarding Unemployment Taxes.
New Hampshire Business Entities – LLCs
New Hampshire has an average cost to opening an LLC. Here are some important facts:
- New Hampshire’s annual LLC fee is $100
- When you initially register, you pay an additional one time fee of $100
- Secretary of State of New Hampshire website – click here