Many know New Hampshire for its scenic mountains, quaint wildlife, cheap alcohol, and low taxes. In fact, New Hampshire is one of only five states without an income tax or sales tax. However, we all know that government cannot function without revenue and New Hampshire's government needs to take in money somehow. So how does New Hampshire get its revenue? If you live in this state, or have considered moving here, you're well aware of the high property taxes assessed to its residents. But how are these property taxes calculated? In this post we'll explore this very question along with how this may impact you at tax time.
How is Property Tax Calculated?
For New Hampshire, like most other states with a property tax, the tax is assessed based on the value of the property. Specifically, there is a dollar value assessed for every $1,000 of property valuation. As an example, if the tax rate is $25, and your home is valued at $250,000, your property tax would be $6,250 ($250,000/$1000 * $25).
How is Property Valued?
Each municipality (just a fancy word for town) values property based on the appraised value as of April 1st of the current year.1 Municipalities will periodically revalue property to get a more up to date valuation. Since this is expensive and time consuming, property is normally not revalued every year.
Where Should You Live?
There are many considerations that go into where someone decides to live, and taxes are certainly one of those considerations. The New Hampshire Department of Revenue releases the tax rates of each municipality year to year. To get an idea of what your taxes might look like, you can follow this link and click on the "tax rates" PDF of Excel sheet for 2018. The rates will vary from town to town. Some of the larger cities are as follows: Manchester: 23.68, Nashua: 21.21, Concord: 28.19, Bedford: 20.40.
Keep in mind, when deciding on where to live, property value is directly related to your annual tax bill. For instance, Bedford is known for its great schools. While that city's tax per $1,000 is lower than that of Manchester, Concord, or Nashua, you will likely find yourself paying more for a home, and as a result, having a higher tax bill. It may make sense if you don't have school age children to look at moving to a town that isn't as highly rated for schools with potentially lower tax rates and property values.
Are there Property Tax Exemptions or Credits?
Each municipality can offer property tax exemptions and credits for specific groups or their residents. Two of the primary property tax exemptions and credits in New Hampshire are for low income elderly folks and military veterans. Check your municipalities website for specific information about the available property tax exemptions and credits where you live.
1) Elderly Exemption:
There are a few limiting criteria that must be met in order to be eligible for this exemption.
- Must be 65 or older
- Must have resided in NH for at least 3 years
- Must own their real estate for at least five years
- Must own a home that meets the definition of residential real estate
- The property could not have been transferred to the individual from a person under the age of 65 and related to them within the last five years
There is also income and asset requirements that must be met. The persons income must be under $20,400 if married ($13,400 if single). Their assets (not including the home and up to two acres of its land) must be under $35,000 in value.2 Each municipality may choose to increase these thresholds if they wish.
The exemption amount for qualified elderly individuals varies for each municipality and the age of the individual. Most municipalities have age banded amounts that increase with age. For instance, Nashua's exemption amounts are $192,000 for ages 65-74, $224,000 for ages 75-79 and $280,000 for 80 or above.
2) Military Veterans:
In order to qualify for the standard veterans credit, the claimant must have been a resident of the town for at least one year prior to April 1 of the year in which the credit is claimed must have served during a qualifying war for not less than 90 days or have been separated because of a service-connected disability; and he or she must have received an honorable discharge. The credit can range from $50 - $2,000 or a full exemption depending on the municipality. Also, if the property is owned by married veterans, they are both eligible for the credit.
Surviving spouses of servicemembers who have died while on active duty with the United States military or in military service of a foreign ally of the United States and disabled veterans are also eligible for different credits. For a more thorough explanation you can review the New Hampshire Municipal Associations description of these credits and exemptions here.
What About You?
Tax planning is an important part of any financial plan. With the absence of a sales or income tax in New Hampshire, tax planning often gets overlooked. However, being informed about property tax rates, exemptions and credits gives you the information you need to make decisions that can potentially save you thousands on taxes every year.
Deciding to buy or sell a home shouldn't be made solely because of tax reasons but should be a consideration especially true if you live or work in a state other than New Hampshire. It's best to always consult your financial advisor before making these big decisions, to make sure you've thought about all of the pertinent variables.