Independent New Hampshire Journalism · Northfield, NH

New Hampshire Taxed Interest and Dividends for More Than a Century. Census Records Trace It From $675,000 in 1942 to $183 Million at Its Peak.

The state’s Interest and Dividends Tax was enacted in 1923, and its repeal took effect with tax periods beginning Jan. 1, 2025. The U.S. Census Bureau’s record of state tax collections follows it from fiscal 1942 through fiscal 2025, including the years when the same line also carried a commuter tax the U.S. Supreme Court struck down.

For more than a century, New Hampshire taxed some of what savings earn. The Interest and Dividends Tax, which the New Hampshire Department of Revenue Administration says was enacted in 1923, applied to residents’ interest and dividend income above an exemption. In fiscal 1942, the first year with New Hampshire detail in the Census Bureau’s historical database of state tax collections, the line on which the bureau records that kind of tax showed $675,000. In fiscal 2024 it showed $183.4 million, the highest figure in the database for New Hampshire. In fiscal 2025, the year the repeal took effect, it showed $91.2 million.

The bureau’s figures are in current dollars as originally reported, not adjusted for inflation, and they cover state government only. Its classification manual places “taxes on special types of income (e.g., interest, dividends, income from intangible property, etc.)” on the individual income tax line, code T40. The bureau does not name the New Hampshire law behind each figure. Two other records tie the line to the Interest and Dividends Tax. A U.S. Supreme Court opinion of 1975 described New Hampshire’s fiscal 1970 income tax revenue, $3,462,000, as coming “from the tax on residents’ unearned income,” the same figure the bureau’s database shows for that year. And for fiscal 2022 and 2023, the bureau’s figures fall within 3 percent of the Interest and Dividends Tax revenue the state reported to its General Fund.

What the tax was

The tax fell on income from owning assets: interest, dividends and distributions. According to the New Hampshire Fiscal Policy Institute’s January 2024 testimony to the House Ways and Means Committee, which draws its rate and exemption history from the Department of Revenue Administration’s 2023 annual report, the original 1923 filing threshold was $600 of income. Wages, salaries and gains from selling an asset were not taxable under it. The institute’s testimony also notes that income held in Individual Retirement Accounts and certain employer retirement plans was excluded by statute, RSA 77:4-b.

The rate changed over the decades. The Supreme Court’s 1975 opinion described a 4.5 percent tax on interest and dividends above $600. The institute’s testimony says the rate was 5 percent from 1977 to 2022. The exemption rose to $1,200 in 1981, when married couples were first allowed to file jointly, and to $2,400 in 1995. A separate exemption for filers 65 or older, blind, or disabled and unable to work began at $600 in 1977 and stood at $1,200 in the tax’s last years. The institute noted that the exemptions had stayed at dollar amounts set in 1995 and 1981, unadjusted for inflation.

The repeal came in steps. A phase-down enacted with the state budget for fiscal 2022 and 2023 set the rate at 4 percent and then 3 percent. House Bill 2, passed and signed in the 2023 session, moved the final repeal up from 2026 to 2025. In a January 2025 release, the Department of Revenue Administration laid out the schedule: 5 percent for tax periods ending before Dec. 31, 2023; 4 percent for periods ending on or after that date; 3 percent for periods ending on or after Dec. 31, 2024; and no tax for periods beginning on or after Jan. 1, 2025. Under prior law, the department said, the tax was imposed at 3 percent on residents with more than $2,400 of interest and dividend income, or $4,800 on a joint return. The release said the repeal “does not provide amnesty” for earlier years, and that returns for 2024 and earlier were still due.

The line climbed with the markets

The line passed $10 million for the first time in fiscal 1980, $50 million in fiscal 1996, $100 million in fiscal 2007 and $150 million in fiscal 2022. It did not climb every year. From fiscal 2008 to fiscal 2011, it fell from $117.9 million to $75.7 million. The institute said strong revenue in the years before its testimony was “likely in part reflecting the performance of the stock market and asset values.” A tax on investment income moves with what investments pay.

As a share of everything the state collected in taxes, the line stayed small. Except for fiscal 1951, when it was 11.3 percent, it ranged from 2.5 percent (fiscal 2017) to 7.0 percent (fiscal 1990). It was 5.0 percent in fiscal 1942, 3.7 percent in fiscal 1970, 3.9 percent in fiscal 2000 and 5.2 percent in fiscal 2024. Part of the drop between 1990 and 2000 came from the other side of the ratio: the bureau’s state property tax line rose from $549,000 in fiscal 1999 to $473.7 million in fiscal 2000, lifting total state tax collections from $1,070.8 million to $1,696.1 million.

A commuter tax in the same column

For a few years in the 1970s, the bureau’s line held more than the tax on interest and dividends. New Hampshire’s Commuters Income Tax, as the Supreme Court described it, taxed nonresidents’ New Hampshire-derived income above $2,000 at 4 percent, reduced to whatever the worker’s home state would have charged on the same income. The law also imposed a 4 percent tax on residents’ out-of-state earnings, then exempted that income whenever the other state taxed it, exempted it or did not tax it. “The effect of these imposition and exemption features is that no resident of New Hampshire is taxed on his out-of-state income,” Justice Thurgood Marshall wrote for the Court. “Nor is the domestic earned income of New Hampshire residents taxed.”

One of the opinion’s footnotes used the Census Bureau’s own figures. Income tax revenue was $3,462,000 in fiscal 1970. In fiscal 1971, “the first in which the State taxed the earned income of nonresidents,” it rose to $5,238,000, an increase of 51.3 percent. The bureau’s historical database shows the same two figures.

Maine residents who worked in New Hampshire in 1970 challenged the tax. The New Hampshire Supreme Court upheld it. On March 19, 1975, the U.S. Supreme Court reversed, holding that the tax violated the Privileges and Immunities Clause of Article IV of the Constitution. Six justices joined Marshall’s opinion, for a 7-1 decision; Justice Harry Blackmun dissented, and Justice William O. Douglas took no part. The opinion gave one appellant’s numbers: with $33,000 of New Hampshire-derived income, the appellant paid $252 to New Hampshire, while “a resident with the same earned income would have paid only the $10 resident tax.”

The bureau’s line reached $8.6 million in fiscal 1975. In fiscal 1976, the first full fiscal year after the ruling, it was $6.2 million, down 27.9 percent. The database does not separate the two taxes, so the size of the commuter tax in any one year cannot be read from it.

New Hampshire workers who cross state lines have stayed a tax question. Granite State Report has reported on the nearly 100,000 residents who worked in another state in 2024 and the 2020 dispute over Massachusetts taxing New Hampshire residents who worked from home.

Who paid it

The tax reached a minority of households, and a small group of them paid most of it. The Fiscal Policy Institute’s testimony, working from Department of Revenue Administration data for tax year 2021, when the rate was 5 percent, counted 71,529 filers in one passage and 71,259 in another; its percentages match the smaller total. By its count, 15,524 filers, or 21.8 percent, owed nothing, which the institute said likely reflected the exemptions for age and disability. Another 28,061, or 39.4 percent, owed less than $500. At the top, 2,071 filers, 2.9 percent of the total, reported more than $200,000 of income taxable under the Interest and Dividends Tax and paid $79.2 million, or 57.3 percent of the tax collected for that year.

Those figures count only interest, dividends and distributions. Wages, salaries and capital gains were not part of the tax, so the institute’s brackets measure investment income alone, not a household’s full income.

Two sets of books

The Census Bureau’s numbers and the state’s own do not match exactly. The Fiscal Policy Institute reported Interest and Dividends Tax revenue to the General Fund of $157.5 million in state fiscal 2022 and $147.3 million in fiscal 2023. The bureau’s individual income line shows $153.6 million and $149.5 million for the same years: 2.5 percent lower in one year and 1.5 percent higher in the other. The bureau’s documentation says its state tax data “may differ from data published by state governments” because the bureau may define “state government” differently. Its historical database also flags a change in its classification system beginning with fiscal 2005 data.

For a long view, the bureau’s series has one advantage: it uses the same categories for every state and reaches back to the 1940s. For the dollars the state itself booked, its own financial reports are the primary record; the Fiscal Policy Institute took its General Fund figures from the Department of Administrative Services’ Annual Comprehensive Financial Report for fiscal 2023.

The last fiscal year on the books

New Hampshire’s fiscal 2025 ran from July 1, 2024, to June 30, 2025. It straddled the repeal date. Returns for tax year 2024, taxed at 3 percent, were still due, and the Department of Revenue Administration told taxpayers not to send estimated payments for 2025. The bureau’s line for the year was $91.2 million, half of fiscal 2024’s $183.4 million and 2.7 percent of state tax collections.

As published in October 2026, the bureau’s historical database runs through fiscal 2025. Fiscal 2026, the first year that began after the repeal took effect, is not in that edition. Granite State Report’s earlier look at the bureau’s fiscal 2025 figures found that taxes on business income made up a third of New Hampshire’s state tax collections, the largest such share of any state. An earlier Granite State Report argument piece made the case that the repeal left a hole in the state’s budget.

For more than a century, the Interest and Dividends Tax was New Hampshire’s tax on residents’ investment income. The Census record shows how small a share of the state’s taxes it was, how closely it tracked what savings and stocks paid, and how far the line fell in the year the repeal took effect.

— Granite State Report

Fact check

Editor’s note. Collection figures are drawn from the U.S. Census Bureau’s Annual Survey of State Government Tax Collections historical database (fiscal 1942–2025), its documentation and its tax revenue classifications. The tax’s enactment and exemptions are from the New Hampshire Department of Revenue Administration’s Interest and Dividends Tax transparency page; the repeal schedule is from the department’s January 2025 release as published by The Nashua Telegraph. Rate and exemption history, filer counts and General Fund revenue are from the New Hampshire Fiscal Policy Institute’s Jan. 16, 2024, testimony to the House Ways and Means Committee, which cites the Department of Revenue Administration’s reports and, for General Fund revenue, the Department of Administrative Services’ Annual Comprehensive Financial Report. The Commuters Income Tax account is from Austin v. New Hampshire, 420 U.S. 656 (1975). Shares and percentage changes are Granite State Report arithmetic.

Corrections: Granite State Report corrects verified errors promptly and appends a dated note identifying what changed and when. The corrections policy and the corrections register are public, and correction notes are never removed.