For an overview of New Hampshire’s Interest & Dividends Tax status, read NH Interest & Dividends Tax Repeal: A Quick Look at Key Changes.
New Hampshire has long been recognized as one of the few states without an individual income tax. However, there has been an exception to this claim. For many years, New Hampshire imposed a tax on the interest and dividend income of its residents. Non-residents were generally not subject to this tax unless they were members of certain pass-through entities conducting business in the state. Additionally, certain business entities, such as limited liability companies (LLCs), partnerships, and associations, were also subject to this tax.
With the recent turn of the year, applicable taxpayers can now bid farewell to this tax on their interest and dividend income.
A Brief Summary of the Repeal of the I&D Tax
For decades, New Hampshire imposed a 5% tax rate on certain interest and dividend income received during the taxable year by resident individuals, LLCs, partnerships, and associations. In 2021, legislation was passed to phase out the I&D tax. As part of this phase-out, the tax rate was set to decrease by a percentage point each year until it was completely phased out for tax years ending in 2027. The initial decrease to 4% applied to tax years ending on or after December 31, 2023.
However, in 2023, additional legislation was passed to accelerate the phase-out, moving the end date of the I&D tax up to 2025.
2024 Tax Filings
For taxable periods ending on or after December 31, 2024, the applicable tax rate is now 3%. The New Hampshire Department of Revenue Administration (DRA) recently published a Technical Information Release (TIR 2025-001) informing taxpayers about the repeal of the interest and dividends tax effective January 1, 2025, and providing considerations for filing returns for the 2024 tax year. The DRA emphasized that taxpayers required to file a 2024 I&D tax return must do so by the statutory due date, which is April 15 for calendar year taxpayers. Even though the tax is being repealed, taxpayers who meet the filing threshold must still file for 2024.
Taxpayers may file an extension for this return, but any tax owed must be paid by the original due date. Taxpayers failing to make payments by the due date will be subject to interest and penalties.
As the I&D tax has been repealed, all overpayments of a taxpayer’s 2024 tax liability will be refunded unless there are any outstanding prior balances due. The TIR also mentions that estimated tax payments for the 2025 tax year should not be made. If taxpayers have mistakenly made estimated tax payments for the 2025 tax year, they should request a refund in writing. Those uncertain about their refund eligibility should consult their tax advisor.
For those who previously made estimated tax payments under the assumption of a slower phase-out, it is important to review their payment history and request refunds where applicable. Businesses and trusts handling tax filings on behalf of multiple individuals should ensure that all compliance obligations are met before the final repeal takes effect.
Those uncertain about their refund eligibility should consult their tax advisor.
Is This Really Goodbye?
Shortly after the beginning of 2025, a New Hampshire legislator introduced HB 503-FN, a bill to reinstate the interest and dividends tax at a rate of 5% for taxable periods ending on or after December 31, 2025. However, taxpayers would not be subject to the tax if their gross interest and dividend income did not exceed $20,000—significantly higher than the 2024 thresholds of $2,400 for individual filers, partnerships, LLCs, and associations, and $4,800 for joint filers. While it is too early to predict whether this bill will pass, a similar proposal (HB 1492-FN) introduced in 2024 did not move forward.
Given these legislative efforts, taxpayers with significant interest and dividend income should monitor developments and discuss potential financial planning adjustments with their tax advisor. Those who previously structured investments to minimize taxable interest and dividends may want to reassess their portfolio strategy, as the repeal of the I&D tax opens the door to alternative income-generation approaches. The fate of HB 503-FN will depend on broader tax policy and budgetary considerations. Taxpayers should stay informed, as a reinstated tax could impact financial planning.
Ben Staples joined ARB as a tax supervising senior in 2023 and became a tax manager in 2024. He provides tax compliance and consulting services, with a focus on pass-through entities and clients in the automotive dealership industry.
