Tax Year 2026Updated July 13, 2026

Does New Hampshire Tax Overtime in 2026?

No - New Hampshire does not tax overtime because it has no state income tax on wages. New Hampshire has never taxed wage income. The state's Interest & Dividends Tax applies only to investment income and is being phased to 0% by January 1, 2027. Overtime pay owes $0 in New Hampshire state tax. New Hampshire workers still benefit from the federal OBBBA overtime deduction (IRC §225), which allows deducting up to $12,500 ($25,000 MFJ) in overtime premium pay from federal adjusted gross income.

How New Hampshire's Overtime Tax Treatment Works

New Hampshire is one of nine states with no state income tax on wages. While New Hampshire does have an Interest & Dividends (I&D) Tax on investment income, it has never taxed wages, salaries, or overtime pay. The I&D Tax is being phased out – it drops by 1% per year and reaches 0% on January 1, 2027.

Federal benefit still applies: New Hampshire workers can claim the federal OBBBA overtime deduction (IRC §225) on their federal return, deducting up to $12,500 ($25,000 MFJ) in qualifying overtime premium pay from federal AGI.

Employer-only payroll taxes: New Hampshire employers pay unemployment insurance (UI) tax and contribute to the state's paid family and medical leave program. These are employer-only obligations – employees see no state deductions from their paychecks. Federal FICA taxes (6.2% Social Security + 1.45% Medicare) still apply to all overtime wages.

Federal Overtime Deduction Quick Reference

Detail	Value
IRC Section	§225 (OBBBA)
Maximum deduction	$12,500 overtime ($25,000 MFJ)
Deduction type	Above-the-line (Schedule 1-A)
FICA still applies?	Yes (Social Security 6.2% + Medicare 1.45%)
MFS eligible?	No (MFJ or Single/HoH only)
Effective dates	Jan 1, 2025 – Dec 31, 2028
New Hampshire treatment	Does not conform
What qualifies?	Overtime premium only (the 0.5x above regular rate), FLSA non-exempt employees

Worked Examples Comparing Federal and New Hampshire Treatment

Example 1: Healthcare worker (single filer, $50,000 income, $8,000 overtime premium)

Federal return:
Qualifying overtime premium: $8,000
Overtime deduction claimed: $8,000 (capped at $12,500)
Estimated federal tax savings: $960.00

New Hampshire return:
New Hampshire has no state income tax on wages. This healthcare worker's $8,000 in overtime premium pay owes $0 in New Hampshire state tax. The federal OBBBA overtime deduction (IRC §225) provides the only tax relief, reducing federal income tax by an estimated $960 at the 12% bracket.

Example 2: Financial services worker (single filer, $80,000 income, $12,500 overtime premium - federal cap reached)

Federal return:
Qualifying overtime premium: $12,500
Overtime deduction claimed: $12,500 (capped at $12,500)
Estimated federal tax savings: $2,750.00

New Hampshire return:
New Hampshire has no state income tax on wages, so no state tax applies to overtime. The federal OBBBA deduction caps at $12,500 for single filers, saving an estimated $2,750 in federal taxes at the 22% bracket. The Interest & Dividends Tax being phased out applies only to investment income, not wages or overtime.

New Hampshire – No Wage Tax, I&D Tax Phasing Out

New Hampshire occupies a unique position among no-income-tax states. It has never taxed wages, salaries, tips, or overtime pay. However, until recently, it did tax interest and dividend income through the Interest & Dividends (I&D) Tax. This tax has been gradually phased down:

Through 2022: 5% on interest and dividend income
2023: 4%
2024: 3%
2025: 2%
2026: 1%
January 1, 2027: 0% – full repeal

This phase-out has no impact on overtime workers, since the I&D Tax has never applied to earned income. But it means New Hampshire will become a completely income-tax-free state for individuals starting in 2027.

Trust, Banking, and Financial Services Industry

New Hampshire has cultivated a significant trust and financial services industry, partly attracted by the state's no-wage-tax environment. The state is home to numerous trust companies, banks, and financial services firms. Non-exempt workers in these industries – including bank tellers, customer service representatives, loan processors, and operations staff – can earn FLSA overtime and claim the federal OBBBA deduction on the premium portion.

Employer-Only Payroll Obligations

New Hampshire imposes payroll-related taxes and contributions only on employers, not employees:

Unemployment Insurance (UI): Employer-paid on wages up to the taxable wage base.
Paid Family and Medical Leave (PFML): New Hampshire's voluntary PFML program involves employer contributions. Unlike some states' mandatory programs, this does not create an employee-side payroll deduction.

New Hampshire overtime workers face only federal obligations: income tax (reduced by the OBBBA deduction) and FICA.

Related Tools

No Tax on Overtime Calculator - calculate your federal overtime deduction
New Hampshire Tax Guide - full state tax overview
New Hampshire Paycheck Calculator
Does New Hampshire Tax Tips?
W-2 Code TP: Tips Reporting Guide
W-2 Code TT: Overtime Reporting Guide
All 51 States: Tips & Overtime Tax Map

Frequently Asked Questions

Does New Hampshire tax overtime pay in 2026?

No. New Hampshire has no state income tax on wages, salaries, or overtime pay. New Hampshire has never taxed earned income. The state's Interest & Dividends (I&D) Tax applies only to interest and dividend income and is being phased out – it drops to 0% effective January 1, 2027. Overtime pay owes $0 in New Hampshire state tax.

Do New Hampshire workers benefit from the federal overtime deduction?

Yes. The federal OBBBA overtime deduction (IRC §225) allows qualifying workers to deduct up to $12,500 ($25,000 for married filing jointly) in overtime premium pay from federal adjusted gross income. New Hampshire workers benefit from this on their federal return, which is their only income tax obligation on wages.

What is New Hampshire's Interest & Dividends Tax and does it affect overtime?

New Hampshire's Interest & Dividends (I&D) Tax applies only to interest and dividend income – it has never applied to wages, salaries, tips, or overtime pay. The I&D Tax has been gradually phased down: it was 5% through 2022, then reduced by 1% each year. It reaches 0% on January 1, 2027, at which point New Hampshire will have no state income tax of any kind. Overtime workers are completely unaffected by this tax.

Does New Hampshire have any payroll taxes on employees?

New Hampshire does not impose any employee-side state income or payroll taxes on wage income. Employers pay unemployment insurance (UI) tax and contribute to the state's paid family and medical leave program, but these are employer-only obligations. Employees see no New Hampshire state deductions from their paychecks for income or payroll taxes. Federal FICA taxes (Social Security and Medicare) still apply to all overtime wages.

How does overtime work in New Hampshire's trust and financial services industry?

New Hampshire has a significant trust, banking, and financial services sector, partly attracted by the state's favorable tax environment. Non-exempt workers in these industries – such as bank tellers, loan processors, and support staff – are entitled to FLSA overtime at 1.5x their regular rate for hours over 40 in a workweek. The overtime premium qualifies for the federal OBBBA deduction. Exempt employees (e.g., those meeting the administrative or professional duties test) do not earn FLSA overtime and cannot claim the deduction.

Will New Hampshire become fully tax-free in 2027?

Effectively, yes for individuals. When the Interest & Dividends Tax drops to 0% on January 1, 2027, New Hampshire will have no state-level tax on any form of individual income – no wage tax, no investment income tax, no capital gains tax. New Hampshire does have a Business Profits Tax and Business Enterprise Tax that apply to businesses, but individual workers earning wages and overtime will have zero state income tax liability.