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Tax Year 2026Updated July 13, 2026

Does New Hampshire Tax Tips in 2026?

No – New Hampshire does not tax tips because it has no state tax on earned income. New Hampshire has never taxed wages, salaries, or tip income. The state's former Interest & Dividends (I&D) Tax – which applied only to investment income – was fully phased out as of January 1, 2025. In 2026, New Hampshire has zero income-based taxation of any kind. Tipped workers benefit from the federal OBBBA tips deduction (IRC §224) on their federal return and owe no New Hampshire state tax on tips.

How New Hampshire's Tips Tax Treatment Works

New Hampshire has a unique tax history among no-income-tax states. While it never taxed wages, salaries, or tips, it maintained the Interest & Dividends (I&D) Tax for decades – a 5% tax on interest and dividend income above certain exemption amounts. This made New Hampshire similar to Tennessee's former Hall Tax: investment income was taxed, but earned income was not.

The New Hampshire legislature enacted a phase-out of the I&D Tax beginning in 2023 (reducing the rate from 5% to 4%, then 3% in 2024, then 0% on January 1, 2025). As of 2026, New Hampshire has no income-based tax of any kind. There is no state return to file for any type of income, no conformity question with the OBBBA, and no state tax liability on tips.

New Hampshire is also notable for having no state sales tax, making it one of only two states (along with Alaska) with neither an income tax nor a sales tax. The state funds government primarily through property taxes (among the highest in the nation), business taxes (the Business Profits Tax and Business Enterprise Tax), and various excise taxes including meals and rooms taxes on hospitality services.

Federal Tips Deduction Quick Reference

DetailValue
IRC Section§224 (OBBBA)
Maximum deduction$25,000 tips
Deduction typeAbove-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 datesJan 1, 2025 – Dec 31, 2028
New Hampshire treatmentDoes not conform

Worked Examples Comparing Federal and New Hampshire Treatment

Example 1: Portsmouth restaurant server (single filer, $37,000 income, $14,000 in tips)

Federal return:
Qualified tip income: $14,000
Tips deduction claimed: $14,000 (capped at $25,000)
Estimated federal tax savings: $1,680.00

New Hampshire return:
New Hampshire has no state tax on wages, salaries, or tips. The $14,000 in tip income is taxed only at the federal level. New Hampshire's former Interest & Dividends Tax (phased out Jan 1, 2025) never applied to earned income like tips.

Example 2: Ski resort worker (single filer, $48,000 income, $17,000 in tips)

Federal return:
Qualified tip income: $17,000
Tips deduction claimed: $17,000 (capped at $25,000)
Estimated federal tax savings: $2,040.00

New Hampshire return:
New Hampshire imposes no state tax on earned income. The $17,000 in tips faces only federal income tax and FICA payroll taxes. Since January 1, 2025, New Hampshire has no income-based tax of any kind – the Interest & Dividends Tax has been fully phased out.

New Hampshire – From I&D Tax to Fully Tax-Free

New Hampshire's journey to becoming a fully no-income-tax state completed on January 1, 2025, when the Interest & Dividends Tax phase-out reached 0%. For decades, New Hampshire occupied an unusual middle ground: it didn't tax wages, salaries, or tips, but it did tax interest and dividend income at 5%. This distinction made New Hampshire technically a "limited income tax" state in some classifications, though tipped workers were always completely unaffected by the I&D Tax.

The phase-out was enacted as part of the state's 2023 budget (HB 2), reducing the rate by 1 percentage point per year over three years. With its completion, New Hampshire now has the same zero-income-tax status as Texas, Florida, and other states on this list – but with the added distinction of having no sales tax either.

New Hampshire's high property taxes: Without income or sales tax revenue, New Hampshire municipalities rely almost entirely on property taxes for local funding. This gives New Hampshire some of the highest effective property tax rates in the country. While this doesn't affect tip income directly, tipped workers who own homes in New Hampshire face a significant property tax burden that partially offsets the benefit of having no income or sales tax.

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Frequently Asked Questions

Does New Hampshire tax tips or wage income in 2026?
No. New Hampshire has never taxed wages, salaries, or tip income. The state's former Interest & Dividends (I&D) Tax applied only to interest and dividend income and was fully phased out as of January 1, 2025. In 2026, New Hampshire has no income-based tax of any kind. Tip income is completely exempt from state taxation.
What was New Hampshire's Interest & Dividends Tax and did it ever apply to tips?
New Hampshire's Interest & Dividends (I&D) Tax was a 5% tax on interest and dividend income above certain exemption thresholds. It never applied to wages, salaries, tips, capital gains, or other earned income. The NH legislature enacted a phase-out beginning in 2023, reducing the rate by 1% per year: 4% in 2023, 3% in 2024, and fully eliminated on January 1, 2025. Tips were never subject to this tax at any point.
What taxes do tipped workers in New Hampshire still pay?
New Hampshire tipped workers pay federal income tax (reduced by the OBBBA deduction of up to $25,000), Social Security tax (6.2%), and Medicare tax (1.45%, plus 0.9% for high earners). New Hampshire has no state sales tax and no state payroll tax on employees. Property taxes in New Hampshire are among the highest in the nation (since local governments rely heavily on property tax without income or sales tax revenue). There are no local income taxes anywhere in New Hampshire.
Is New Hampshire now a fully no-income-tax state?
Yes. As of January 1, 2025, New Hampshire has zero income-based taxation. The phaseout of the Interest & Dividends Tax (the state's only form of income tax) was completed on that date. New Hampshire now joins Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming as states with no income tax of any kind. However, New Hampshire remains unique in also having no state sales tax.
Does New Hampshire have any local income taxes on tips?
No. No city or town in New Hampshire imposes a local income tax. New Hampshire municipalities are funded primarily through local property taxes, which are among the highest in the nation. This property-tax-heavy model is a direct result of the state having neither an income tax nor a sales tax. Tipped workers owe zero state or local income tax on their tips regardless of where they live or work in New Hampshire.
How does New Hampshire's tax structure compare to neighboring states for tipped workers?
New Hampshire is significantly more favorable for tipped workers than its New England neighbors. Massachusetts taxes tips at 5%, Vermont has rates up to 8.75%, and Maine has rates up to 7.15%. Workers who live in New Hampshire but commute to tipped jobs in Massachusetts may still owe Massachusetts income tax on that income. However, tips earned at New Hampshire restaurants, hotels, and ski resorts are free from state income tax entirely.