New Hampshire Taxes
New Hampshire has no state income tax, so there is no need for any reciprocity arrangement with Massachusetts or any other state. These arrangements prevent double taxation by crediting state tax already paid to one state. Massachusetts taxes any income earned in the state by residents or non-residents. While the New Hampshire resident pays no state income tax to New Hampshire, he is still responsible for paying local property taxes as well as taxes on any capital gains or dividends.
Massachusetts charges a 5.3 percent income tax to all taxpayers, including New Hampshire residents, who earned Massachusetts source income during the tax year. There is a $4,400 personal exemption for taxpayers who are single or married filing separately; those who are married filing jointly receive an $8,800 exemption. All professional income, unemployment compensation and lottery winnings are subject to the tax.
Both Massachusetts residents and New Hampshire-based non-residents enjoy the same freedom from taxation on social security benefits and interest from U.S. debt obligations in Massachusetts. To qualify for No Tax Status or the Limited Income Credit, you must apply all of your professional earnings to the calculation, even those that Massachusetts cannot tax. The only exception is military compensation, which does not count toward No Tax Status or the Limited Income Credit.
More than 87,000 New Hampshire residents work in Massachusetts, according to a 2011 article by Raymond Lanier in the "Concord Monitor." These residents pay close to $235 million in Massachusetts income tax annually while paying no income tax at all to New Hampshire. The arrangement is thus financially beneficial to Massachusetts because New Hampshire has no state income tax.