New Hampshire Business Profits Tax (BPT) and Business Enterprise Tax (BET)

New Hampshire has no general personal income tax and no general sales tax, but it taxes business activity through two parallel filings: the Business Profits Tax (BPT) at 7.5% on net business profits and the Business Enterprise Tax (BET) at 0.55% on the enterprise value tax base of compensation, interest, and dividends paid. BET paid is a dollar-for-dollar credit against BPT, so most filers effectively pay the larger of the two. Both taxes apply to sole proprietors, partnerships, LLCs, and corporations conducting business in NH. The Interest & Dividends Tax was fully repealed for tax years beginning on or after January 1, 2025. The 2025 BPT filing threshold is $109,000 of gross business income; the 2025 BET filing threshold is $298,000 of either gross receipts or enterprise value tax base. Tax year 2025.

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1. Scope and what New Hampshire does not tax

New Hampshire is famous for what it does not tax. It is one of nine US states with no broad-based personal income tax on wages, and one of five states with no general retail sales tax. There is no withholding from wages, no W-2 state line, no state Form 1040, no state sales-tax permit for retailers selling tangible personal property at retail in-state, and no use-tax self-assessment for consumers.

What New Hampshire does tax, and what this skill covers:

1. Business Profits Tax (BPT) under RSA 77-A — a 7.5% net income tax imposed on every business organization carrying on business activity within New Hampshire, including sole proprietorships, partnerships, LLCs (regardless of federal classification), corporations, S-corporations, trusts, and non-profit organizations to the extent of unrelated business income. The BPT is imposed at the entity level even on pass-through entities — there is no flow-through to owners for NH purposes. This is the single most important point for federal practitioners new to NH: a Schedule C filer with NH-source business income files a NH BPT return in the entity's own right.

2. Business Enterprise Tax (BET) under RSA 77-E — a 0.55% tax on the "enterprise value tax base" (EVTB), which is the sum of compensation paid, interest paid, and dividends paid by the enterprise. The BET is a value-added-tax-like measure that captures economic activity even when the entity has zero or negative profits. The BET paid for a tax period is a credit against the BPT for the same period; any excess BET carries forward five years.

What this skill does NOT cover and refers out:

• Real Estate Transfer Tax (RETT) under RSA 78-B — a 1.5% tax on the consideration paid in transfers of real property in NH, split equally between buyer and seller. Refer to a real-estate-tax-focused engagement.
• Meals and Rooms (Rentals) Tax under RSA 78-A — an 8.5% tax on prepared meals, hotel rooms, and certain motor vehicle rentals. Refer to a hospitality-vertical engagement.
• Communications Services Tax under RSA 82-A — 7% on two-way communications services.
• Tobacco Tax, Beer Tax, Electricity Consumption Tax, Utility Property Tax — vertical-specific excises.
• Property tax — administered by municipalities, not the NH Department of Revenue Administration.
• Interest & Dividends Tax (I&D) under RSA 77 — REPEALED. See Section 11 for the phase-out and final-year filings.

The administering agency for BPT and BET is the New Hampshire Department of Revenue Administration (NH DRA), Concord, NH.

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2. BPT mechanics

2.1 Rate

The BPT rate is 7.5% for tax periods ending on or after December 31, 2023, and continuing for tax year 2024 and tax year 2025. This is the result of a sequence of statutory reductions:

• 8.5% — through tax year 2017
• 7.9% — tax year 2018 (Chapter 156, Laws of 2017)
• 7.7% — tax years 2019 through 2021 (Chapter 156, Laws of 2017)
• 7.6% — tax year 2022 (Chapter 91, Laws of 2021)
• 7.5% — tax year 2023 and forward (Chapter 91, Laws of 2021, as amended)

Further scheduled reductions tied to general-fund revenue triggers have been paused by the legislature. Assume 7.5% for any tax period ending in calendar 2025 unless a later session law moves the rate.

2.2 Taxable base — starting point

The BPT base for a business organization is its "gross business profits" as defined in RSA 77-A:1, II, which starts from federal taxable income reported (or that would be reported) on the appropriate federal form:

NH business organization	Federal starting point
Sole proprietorship	Schedule C, Line 31 net profit (or Schedule F net farm profit)
Partnership	Form 1065 ordinary business income plus separately stated items
LLC taxed as partnership	Same as partnership
LLC taxed as disregarded entity	Schedule C of the sole owner
S-corporation	Form 1120-S ordinary business income plus separately stated items (NH does not recognize the S election — see Section 2.5)
C-corporation	Form 1120 taxable income before NOL and special deductions
Trust or estate with business income	Form 1041 fiduciary taxable income from business activity

2.3 NH-specific modifications (RSA 77-A:4)

From the federal starting point, the following modifications are made to arrive at "gross business profits":

Additions:

• Interest received on obligations of states and political subdivisions other than NH (federal tax-exempt municipal interest) — RSA 77-A:4, I.
• Net operating loss deductions taken for federal purposes (NH has its own NOL — see Section 2.7).
• Federal special deductions taken under IRC §§241–250 (corporate dividends-received deduction, etc.) — added back, then the NH-specific Section 3.5 dividends adjustment is computed separately.
• Compensation paid to partners or proprietors for personal services that exceeds the "reasonable compensation deduction" — i.e., the federal starting point for partnerships does not deduct partner compensation, so this is a NH-only deduction handled below.
• §168(k) bonus depreciation taken for federal purposes — NH does not conform to federal bonus depreciation. Add it back and compute the NH depreciation deduction without bonus.
• §179 expense in excess of the federal pre-2003 limit — historically NH capped §179 at $25,000, but for tax periods ending on or after December 31, 2017, NH conforms to the federal §179 limit as in effect under the IRC tie-in (see RSA 77-A:3-b and the current IRC reference date in RSA 77-A:1, XX). Verify the current IRC reference year before relying on a §179 deduction above $25,000.

Subtractions:

• Interest on US obligations included in federal income — RSA 77-A:4, II.
• Foreign dividend gross-up under IRC §78 — RSA 77-A:4, IV.
• A portion of dividends received from a unitary affiliate to the extent already included in combined-return income.
• The reasonable compensation deduction (RSA 77-A:4, III) for sole proprietors and partners — see Section 2.4 below. This is the most important NH-specific deduction for freelance and small-business clients.
• NH NOL carryover — see Section 2.7.

2.4 Reasonable compensation deduction for sole proprietors and partners

Because the BPT applies at the entity level to pass-through structures, a sole proprietor or partner who works full-time in the business would be taxed at 7.5% on the entire net profit — including the portion that is really compensation for their labor — unless an adjustment is made. RSA 77-A:4, III provides the reasonable compensation deduction: an amount equal to the fair compensation paid for the personal services of the proprietor or partner is deductible in arriving at gross business profits.

Key rules under RSA 77-A:4, III and Rev 304.04:

1. Who qualifies. The deduction is available to a proprietor of a sole proprietorship or a partner in a partnership (including an LLC taxed as a partnership) who renders actual personal services to the business. It is not available to a shareholder-employee of a C-corporation or S-corporation — those persons take a W-2 wage that is already deductible at the entity level on the federal return.

2. How much is reasonable. "Reasonable compensation" is the amount that would be paid to a person at arm's length for the same services in the same industry and geography. It is the same factual standard the IRS applies to S-corporation reasonable-wage cases, and the NH DRA has historically looked at:

   • Education, training, and certifications of the proprietor/partner
   • Hours actually worked in the business
   • Comparable wages in the local labor market (BLS OES data, NH Employment Security wage surveys)
   • Industry norms (an attorney sole proprietor with ten years of experience would expect $120,000+; a part-time craft seller might be $20,000)
   • Whether the proprietor has other employment

3. Statutory minimum and safe harbor. RSA 77-A:4, III(b) provides that the deduction is presumed reasonable up to a statutory minimum equal to $75,000 for tax periods beginning on or after January 1, 2023 (Chapter 91, Laws of 2021, as amended). Taxpayers claiming up to this presumptive amount are not required to provide additional substantiation. Claims above the presumptive amount require documentation.

4. Substantiation above the safe harbor. A taxpayer claiming compensation above $75,000 must maintain:

   • A written statement of duties performed
   • Hours worked records (timesheets, calendar, project logs)
   • Comparable-wage evidence (BLS data, recruiter quotes, industry surveys, prior W-2 history)
   • Board-equivalent documentation if the entity has co-owners The DRA can disallow the excess on audit and rebill BPT plus interest and penalty.

5. Ceiling. The deduction cannot exceed the gross business profits before the deduction — i.e., it cannot create or increase a BPT loss. If the business has $30,000 of profit before the deduction and the proprietor claims $75,000 of reasonable compensation, the deduction is capped at $30,000 and the BPT base is zero; the unused $45,000 does NOT carry over as a NOL because it was never compensation actually paid.

6. Multiple proprietors/partners. Each partner computes a separate reasonable-compensation deduction based on their own services. The sum is deducted at the partnership level.

7. Interaction with self-employment. The reasonable compensation deduction is for NH BPT only. It does NOT affect federal Schedule C net profit, does NOT affect federal SE tax, and does NOT change the federal QBI computation. It is purely a NH-side modification.

2.5 No recognition of the S-corporation election

NH does not recognize the federal S election for BPT purposes. An S-corporation is taxed at the entity level as if it were a C-corporation for BPT — the corporation pays 7.5% on its NH-apportioned profits. The shareholders do not separately report their pro-rata share of S-corp income on a NH return (and there is no NH personal income tax for them to report it on anyway).

Practical implication for the S-corp election decision: in NH, the S-corp election saves federal SE tax but provides no NH-side benefit (and adds NH payroll filings — see Section 7.6). The federal break-even analysis must therefore be net of the additional NH compliance cost and the loss of the reasonable-compensation deduction (which the S-corp shareholder would replace with a federally deductible W-2 wage — economically similar but structurally different).

2.6 Combined returns and water's-edge

For unitary business groups, NH requires a combined return when there is more than 50% common ownership (direct or constructive under IRC §1563) and the entities are engaged in a unitary business under the three-unities test (RSA 77-A:1, XV; Rev 305.03). The combined group reports a single NH BPT return on Form NH-1120-WE.

NH uses a water's-edge combined-return regime — foreign corporations whose business activity outside the United States is 80% or more of their worldwide activity are excluded from the combined group. There is no worldwide combined election.

For a single freelancer or small-business owner with one entity, combined-return rules are not triggered. They become relevant when the owner controls multiple operating entities (e.g., an operating LLC and a real-estate holding LLC under common ownership conducting a unitary business).

2.7 NH NOL

NH has its own net operating loss carryover under RSA 77-A:4, XIII. Key features:

• NH NOL is computed using NH modifications (not federal NOL).
• Carryforward period: 10 years for losses generated in tax periods ending on or after December 31, 2022 (HB 1221, Chapter 144, Laws of 2022). Earlier-period losses retain their original carryforward (5 years for pre-2013, etc.) — review carryover schedules carefully.
• No carryback.
• Per-year deduction cap: an apportioned NH NOL deduction is capped at the lesser of the carryover or the gross business profits before the NOL deduction.
• 80%-of-taxable-income federal limitation under IRC §172(a)(2)(B) does not apply for NH purposes.

2.8 Reasonable-compensation deduction worked computation

To make the mechanic concrete: take a sole proprietor with $200,000 of federal Schedule C net profit, no other NH modifications, and 100% NH apportionment.

• Federal Schedule C Line 31: $200,000
• NH starting gross business profits: $200,000
• Reasonable compensation deduction (below $75k safe harbor): $75,000
• NH gross business profits after RCD: $125,000
• BPT rate: 7.5%
• BPT before credits: $9,375
• (BET credit applied — see Section 6)

If the proprietor instead substantiates $150,000 of reasonable compensation (industry comparables documented):

• NH gross business profits after RCD: $50,000
• BPT: $3,750

2.9 §179 and depreciation timing differences

NH does not conform to federal bonus depreciation (§168(k)) at all. For an asset placed in service in 2025 that took 60% federal bonus, NH requires the asset to be depreciated using MACRS without bonus — creating a permanent year-of-acquisition timing difference that reverses over the asset's recovery period. Maintain a separate NH depreciation schedule from year one.

For §179, NH currently conforms to the federal §179 limit as of the IRC reference date in RSA 77-A:1, XX. The 2025 IRC reference date should be confirmed against the NH DRA's published IRC update bulletin; if NH is still tied to a pre-OBBBA IRC, the federal §179 limit of $1,250,000 (2025) may differ from the NH limit.

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3. BPT filing threshold

A business organization is required to file a BPT return if its gross business income exceeds the statutory threshold. "Gross business income" is gross revenue from all sources, before any deductions — essentially federal gross receipts, not net profit.

• 2025 threshold: $109,000.
• The threshold is indexed for inflation and rounded to the nearest $1,000. The 2024 threshold was $103,000.
• A taxpayer below the threshold is not required to file a BPT return.
• A taxpayer that has filed in prior years and falls below the threshold should file a final-return / no-tax-due indicator to close the account; the DRA will otherwise issue a non-filer notice.
• The threshold applies per business organization, not per owner. A married couple operating two separate proprietorships each tests its own threshold.

Important: BPT threshold and BET threshold are independent. A taxpayer below the BPT threshold may still be above the BET threshold and required to file the BET. The reverse is also true.

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4. BET mechanics

4.1 Rate

The BET rate is 0.55% for tax periods ending on or after December 31, 2023, and continuing for tax year 2024 and tax year 2025. Rate history:

• 0.75% — through tax year 2017
• 0.675% — tax year 2018
• 0.60% — tax years 2019 through 2021
• 0.55% — tax year 2022 and forward (Chapter 91, Laws of 2021)

4.2 Enterprise value tax base (EVTB)

The BET is imposed on the "enterprise value tax base," which under RSA 77-E:3 is the sum of three components, each as adjusted by NH-specific modifications:

1. Compensation paid or accrued during the tax period — including:

   • Wages and salaries paid to employees (federal Form 941 Line 2 / Form W-3 Box 1, with reconciliations)
   • Commissions, bonuses, severance
   • Net earnings from self-employment of proprietors and partners up to the FICA wage base for the year (i.e., the "self-employment compensation" of the proprietor or partner is included in the BET base even though no W-2 is issued)
   • Deferred-compensation accruals that are deductible federally in the current period
   • Fringe benefits that are federally taxable to the recipient (health insurance is NOT included if excluded from the employee's federal wages)
   • Compensation paid to independent contractors who are reclassified as common-law employees under federal rules — but bona fide §3121 independent-contractor payments are NOT compensation (they may be the contractor's own BET base)

   For a sole proprietor with no employees, the "compensation paid" item is the proprietor's own self-employment net earnings (the same number as Schedule SE Line 4) capped at the year's FICA wage base ($176,100 for 2025).

2. Interest paid or accrued during the tax period — interest expense on debt, including:

   • Bank loan interest, business credit-card interest, mortgage interest on business real property
   • Imputed interest under IRC §483 and §7872 to the extent deductible
   • Excludes: interest paid to the US government on tax deficiencies (not deductible federally); interest already capitalized to inventory under §263A
   • Interest paid to a partner or proprietor on a loan from the partner/proprietor IS included if the entity deducts it federally

3. Dividends paid during the tax period — only by C-corporations and other dividend-paying entities. Specifically:

   • For C-corporations: all dividends declared during the period out of accumulated earnings and profits
   • For partnerships and proprietorships: dividends are zero by definition because distributions to partners and proprietors are not federal-tax dividends
   • For S-corporations: distributions are NOT dividends for BET purposes (they are returns of basis); only constructive dividends under federal §301 are included
   • Stock dividends and stock splits not taxable to recipients federally are excluded

4.3 EVTB worked example

A NH LLC taxed as a partnership pays during 2025:

• $180,000 in wages to two employees (W-3 Box 1, after pre-tax 401(k) deferrals)
• $40,000 in self-employment compensation to one managing member (capped at FICA wage base — not exceeded)
• $8,000 in interest on a business line of credit
• $0 dividends (it is a partnership, not a corp)

EVTB = $180,000 + $40,000 + $8,000 + $0 = $228,000 BET = $228,000 × 0.55% = $1,254

4.4 Apportionment of EVTB

For multi-state enterprises, the EVTB is apportioned to NH using payroll, interest, and dividends factors specific to NH activity (RSA 77-E:4). The mechanics differ from BPT apportionment (Section 5):

• Compensation is apportioned by NH payroll / total payroll
• Interest is apportioned by NH interest expense location (generally where the related business activity occurs)
• Dividends are apportioned to the commercial domicile

For a single-state NH business, apportionment is 100%.

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5. BPT apportionment

5.1 Single sales factor

For tax periods ending on or after December 31, 2022, NH apportions BPT using a single sales factor — the ratio of NH sales to everywhere sales. This is the result of HB 10, Chapter 346, Laws of 2019, as further amended, which phased out the historic three-factor formula:

• Pre-2020: three-factor with double-weighted sales (property, payroll, sales-sales)
• 2020–2021: transition weighting
• 2022 and forward: 100% sales factor

5.2 Sourcing of receipts

Under RSA 77-A:3, II and Rev 304:

• Sales of tangible personal property are sourced to the destination state (where the property is delivered to the customer).
• Sales of services are sourced using market-based sourcing to the location where the customer receives the benefit of the service (for tax periods ending on or after December 31, 2021 — Chapter 91, Laws of 2021).
• Sales of intangibles (royalties, license fees) are sourced to where the intangible is used.
• Throwback / throwout: NH does NOT have a throwback rule. Sales to a state where the taxpayer is not taxable are NOT thrown back to NH — they remain in the everywhere denominator only (a "nowhere sale" benefit).

5.3 Freelance developer example

A NH-resident freelance software developer with one corporate client in California and one in NH:

• $120,000 from CA client (services sourced to CA — customer receives benefit in CA) → not NH sales
• $40,000 from NH client → NH sales
• NH apportionment factor = $40,000 / $160,000 = 25%

If federal Schedule C net profit after NH modifications and RCD is $80,000, NH apportioned base = $80,000 × 25% = $20,000. BPT = $20,000 × 7.5% = $1,500.

This is one of the biggest planning opportunities for NH-based service businesses: market-based sourcing combined with no throwback can apportion a large share of income out of NH.

5.4 Combined apportionment

For combined groups, the sales factor is computed at the group level (Joyce or Finnigan — NH follows Finnigan: a sale by any group member into NH is a NH sale of the group, regardless of which member made it).

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6. BET credit against BPT

This is the most important interaction in NH business taxation.

6.1 The credit

Under RSA 77-A:5, X, the BET paid for a tax period is allowed as a credit against the BPT for the same tax period. The credit is applied after all other BPT credits.

Sequence:

1. Compute BPT before credits (Section 2).
2. Compute BET (Section 4).
3. Subtract BET from BPT.
4. If BPT > BET: BPT due is BPT − BET; BET is fully credited; total NH tax = BPT.
5. If BET > BPT: BPT due is zero; BET due is the full BET amount; excess BET carries forward up to 5 tax years (RSA 77-A:5, X(b)).
6. Total NH tax in any year is therefore the greater of BPT or BET (subject to credit carryover dynamics).

6.2 Carryforward of unused BET

Excess BET (BET in excess of BPT for the year) carries forward five tax periods and is creditable against BPT in those years. The carryforward is FIFO — oldest credit used first. Unused after five years expires.

6.3 Common patterns

Business type	Typical pattern
Sole prop, low-overhead freelancer with high margin	BPT > BET — BET fully credited, BPT dominates
Labor-intensive service firm (consulting, agency, payroll-heavy)	BET > BPT — BET dominates, may build carryforward
Capital-intensive corp with low headcount, high profit	BPT > BET — BPT dominates
Real-estate LLC with mortgage interest and modest net income	BET often > BPT — BET dominates due to interest in EVTB
Loss year	BET still owed if EVTB threshold exceeded; full BET carries forward 5 years against future BPT

6.4 Filing both is the norm

Because of the credit interaction, most NH business taxpayers file both BPT and BET on a combined return form (NH-1120, NH-1065, or NH-1040), with the BET computed on a Schedule BET attached. The BPT and BET share one set of payment vouchers, one estimated-tax schedule, and one return.

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7. Filing, forms, and estimated payments

7.1 Forms by entity type

Entity	BPT form	BET schedule	Combined?
Sole proprietor	NH-1040	BET-PROP	Yes — single return
Partnership / LLC taxed as partnership	NH-1065	BET	Yes
C-corporation	NH-1120	BET	Yes
S-corporation (treated as C for NH)	NH-1120	BET	Yes
LLC taxed as disregarded entity	Flows to owner's NH-1040 (if owner is individual)	BET-PROP	Yes
Trust / estate with business income	NH-1041	BET	Yes
Unitary combined group	NH-1120-WE	BET-WE	Yes

All forms include the Schedule R (apportionment), Schedule IV (NH NOL), and applicable credit schedules.

7.2 Due dates

• Sole proprietorship and partnership/LLC: 15th day of the 4th month after year-end. For calendar-year filers, April 15 following the close of the tax year — same as federal Form 1040 / Form 1065.
• C-corporation and S-corporation: 15th day of the 4th month after year-end (note: NH uses the 4th month for corporations, NOT the 3rd month as some states do that follow federal Form 1120-S timing). For calendar-year filers, April 15.
• Combined group: Same as the parent's form due date.

7.3 Extensions

NH grants an automatic 7-month extension for BPT and BET filing if 100% of the tax due is paid by the original due date. No extension form is required if no payment is needed; otherwise file Form BT-EXT with payment. The extension is for filing only — interest accrues on any unpaid tax from the original due date.

7.4 Quarterly estimated payments

Estimated payments are required if combined BPT + BET liability is expected to be $260 or more for the current year (RSA 77-A:6 and 77-E:6 — historically the threshold has been $200; verified for 2025 as $260 by Chapter 91, Laws of 2021 indexing — confirm current DRA threshold before quoting in a client deliverable). Payments are due:

• Q1: April 15
• Q2: June 15
• Q3: September 15
• Q4: December 15

Each installment is 25% of the lesser of:

• 90% of the current year's actual tax, or
• 100% of the prior year's tax (110% if prior-year tax exceeded $40,000 — RSA 77-A:6 references the safe harbor)

Underpayment interest applies under RSA 21-J:28. The 2025 interest rate is 10% per annum (DRA publishes the rate annually).

7.5 Voucher and electronic filing

NH DRA's Granite Tax Connect portal supports e-file for NH-1120, NH-1065, NH-1040 (BPT), and the BET schedules. Paper filing is still permitted. Estimated payments may be made via ACH debit, ACH credit, check with voucher (Form BT-ESTIMATE), or credit card (with a third-party convenience fee).

7.6 Payroll filings if S-corp election is made

If a NH business operates as an S-corporation and pays the owner a federal W-2 wage, the entity must:

• Register as a NH employer with NH Employment Security (DES) for unemployment insurance
• File Form NHES-0061 quarterly UI wage reports
• Pay state UI tax (rate varies; new employers historically pay 2.7%)
• No state income tax withholding is required — NH has no PIT to withhold against

This is the most common surprise for federal practitioners helping an out-of-state client move to NH: there is no state W-2 box 17, but there is still a state UI filing.

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8. Combined returns

8.1 When required

A combined return on Form NH-1120-WE is required when both:

1. Two or more business organizations are members of a unitary business (functional integration, centralization of management, economies of scale — the three unities under Mobil Oil and Container), AND
2. There is more than 50% common ownership (direct or constructive under §1563 attribution).

8.2 Water's-edge

NH applies a water's-edge limit: a foreign corporation with 80%-or-more foreign business activity is excluded from the combined group. There is no worldwide-combined election.

8.3 Single member of a group

A single entity that is the only NH-nexus member of a unitary group still files a combined return — it does not get to file as a separate entity merely because its affiliates have no NH nexus. The other group members' apportionment factors and pre-apportionment income enter into the NH combined computation; only the NH-nexus portion is taxed.

8.4 BET in combined groups

BET is computed at the combined-group level: the group's total compensation, interest, and dividends are summed (after eliminating intercompany items) and apportioned to NH using the group's NH payroll / total payroll, NH interest / total interest, and NH dividends / total dividends factors.

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9. Interaction with federal return

9.1 Deductibility of NH BPT and BET

Both BPT and BET are deductible on the federal return as state and local taxes paid in the conduct of the trade or business:

• On Schedule C as "Taxes and licenses" (Line 23) for a sole proprietor
• On Form 1065 / 1120-S / 1120 as a business expense for entities
• They are NOT subject to the $10,000 individual SALT cap because they are paid at the entity level on a business — they are above-the-line business deductions.

The deduction is on the cash basis for cash-basis taxpayers — i.e., the BPT and BET deducted on the 2025 federal return are amounts actually paid in 2025 (estimated payments for Q1–Q4 2025 plus any 2024-year balance due paid in 2025, less any 2024 refund received in 2025 to the extent it was deducted in 2024 — recapture under the tax-benefit rule).

9.2 No PTET workaround needed

Because BPT is already imposed at the entity level (not as a pass-through to owners), NH does not need and does not have a separate Pass-Through Entity Tax (PTET) election like CA, NY, NJ, etc. The structure of the BPT effectively functions as a built-in PTET, and the SALT cap workaround is automatic.

9.3 No federal-state coordination on QBI, retirement, or SE tax

NH BPT does not reduce federal QBI, does not affect federal SE tax (Schedule SE is unaffected by NH BPT), and does not affect federal retirement-plan contribution limits. The reasonable compensation deduction is a NH-only concept and does not become a federal W-2.

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10. Worked examples

10.1 Example A — Sole proprietor freelancer, $300k revenue

Facts. Aisha is a NH-resident freelance UX designer operating as a sole proprietor (no LLC). 2025 financial summary:

• Gross receipts: $300,000 (all from US clients; $90,000 from NH clients, $210,000 from out-of-state clients with services delivered remotely to those clients' locations)
• Business expenses (rent, software, contractors, etc.): $80,000
• Federal Schedule C net profit: $220,000
• No employees
• No business interest expense
• Operates from home office (federal home office deduction taken on Form 8829, already in $80k expenses)

BPT computation.

1. Federal Schedule C net profit: $220,000
2. NH modifications: none material
3. NH gross business profits before RCD: $220,000
4. Reasonable compensation deduction. Aisha's services are full-time, with 12 years of UX design experience. BLS OES median wage for senior UX designers in NH metro area is approximately $115,000. She documents:
   • Resume showing 12 years of experience and a portfolio of $200k+ revenue per year for the prior three years
   • Time records showing 1,900 billable + 300 admin hours = 2,200 hours
   • Three recruiter quotes in the $110,000–$130,000 range for a comparable salaried role She claims $115,000 of reasonable compensation. This is above the $75,000 safe harbor and is substantiated. Deduction: $115,000.
5. NH gross business profits after RCD: $220,000 − $115,000 = $105,000
6. Apportionment. Market-based sourcing of service revenue:
   • NH-sourced sales: $90,000
   • Everywhere sales: $300,000
   • NH sales factor: 30%
7. NH apportioned base: $105,000 × 30% = $31,500
8. BPT before credit: $31,500 × 7.5% = $2,363

BET computation.

1. Compensation: Aisha has no employees. Her self-employment compensation enters the BET base. SE net earnings = $220,000 × 92.35% = $203,170; capped at 2025 FICA wage base of $176,100 → compensation = $176,100.
2. Interest paid: $0
3. Dividends paid: $0
4. EVTB before apportionment: $176,100
5. BET threshold check: EVTB $176,100 < 2025 threshold $298,000 AND gross receipts $300,000 > $298,000 → filing required (threshold is "OR")
6. Apportionment of EVTB: payroll factor based on NH residence and location of work — Aisha works from her NH home office serving clients in multiple states. The payroll apportionment factor for a proprietor's own compensation is based on where the services are performed (her NH home office) → 100% NH.
7. NH-apportioned EVTB: $176,100
8. BET: $176,100 × 0.55% = $969

BPT/BET interaction.

• BPT before credit: $2,363
• BET: $969
• BPT > BET → BET fully credited
• BPT due: $2,363 − $969 = $1,394
• BET due: $969
• Total NH tax: $2,363 (the BPT amount; BET is just the floor)

Federal deduction. Aisha deducts the $2,363 BPT + $969 BET = $3,332 on her 2025 Schedule C Line 23 (assuming she paid that amount in 2025 — actual cash flow may differ).

10.2 Example B — Multi-employee LLC, BET dominates

Facts. Granite Marketing LLC is a NH LLC taxed as a partnership with two member-managers and six employees. 2025 financial summary:

• Gross receipts: $1,800,000 (all NH-sourced; clients are NH-based businesses)
• W-2 wages to six employees: $620,000
• Member guaranteed payments / SE compensation to the two members: $180,000 total
• Office rent, software, marketing spend, other expenses: $920,000
• Business interest on line of credit: $25,000
• Federal Form 1065 ordinary business income (after guaranteed payments deducted federally): $55,000 ($27,500 each member)

BPT computation.

1. Federal Form 1065 ordinary business income: $55,000
2. NH modification: federal Form 1065 ordinary income is computed AFTER deducting guaranteed payments. NH adds them back so the partnership starts from the full pre-GP profit, then deducts the reasonable compensation. (See RSA 77-A:4, III(c) and Rev 304.04(d).) Add back: $180,000. NH gross business profits before RCD: $235,000.
3. Reasonable compensation deduction. Both members work full-time. They claim $75,000 each (within the safe harbor; no substantiation required). RCD: $150,000.
4. NH gross business profits after RCD: $235,000 − $150,000 = $85,000
5. Apportionment: 100% NH.
6. BPT: $85,000 × 7.5% = $6,375

BET computation.

1. Compensation:
   • W-2 wages: $620,000
   • Member SE compensation: $180,000 (each member's share is below the FICA wage base)
2. Interest paid: $25,000
3. Dividends paid: $0 (partnership)
4. EVTB: $620,000 + $180,000 + $25,000 = $825,000
5. BET: $825,000 × 0.55% = $4,538

BPT/BET interaction.

• BPT: $6,375
• BET: $4,538
• BPT > BET → BET fully credited
• BPT due: $6,375 − $4,538 = $1,838
• BET due: $4,538
• Total NH tax: $6,375

In this example, the labor-intensive business generates a significant BET, but the BPT still exceeds it because the partnership has substantial profit margin. The members' RCD efficiently reduces BPT but does NOT reduce BET (compensation is in EVTB whether characterized as a partner draw, a guaranteed payment, or W-2 wages).

10.3 Example C — Capital-light corp, BPT > BET, BET fully credited

Facts. Lakeside Software Inc. is a NH C-corporation with two employee-owners and one assistant. 2025 financials:

• Gross receipts: $850,000 (75% NH market, 25% MA market — services market-sourced)
• W-2 wages: $260,000 (two founder-shareholders take $110k each; one assistant $40k)
• Office rent, software, other expenses: $190,000
• No business interest
• C-corp pays no dividends (retains earnings)
• Federal Form 1120 taxable income: $400,000

BPT computation.

1. Federal Form 1120 taxable income: $400,000
2. No material NH modifications
3. Reasonable compensation deduction: not available to C-corp shareholder-employees (they already deducted federally-deductible W-2 wages). RCD: $0.
4. NH gross business profits: $400,000
5. Apportionment: NH sales factor = 75% (services sourced to the NH market clients).
6. NH apportioned base: $400,000 × 75% = $300,000
7. BPT: $300,000 × 7.5% = $22,500

BET computation.

1. Compensation: $260,000 (all W-2)
2. Interest: $0
3. Dividends: $0 (no dividends declared)
4. EVTB: $260,000
5. Apportionment: NH payroll factor — all employees work in NH → 100%. NH EVTB: $260,000.
6. BET: $260,000 × 0.55% = $1,430

BPT/BET interaction.

• BPT: $22,500
• BET: $1,430
• BPT > BET → BET fully credited
• BPT due: $22,500 − $1,430 = $21,070
• BET due: $1,430
• Total NH tax: $22,500

This is the typical pattern for a profitable, capital-light services C-corp: BPT dominates and BET is essentially a minimum-floor that is fully absorbed.

10.4 Example D — Loss year with BET carryforward

Facts. Same Granite Marketing LLC as Example B, but in 2026 the firm has a bad year:

• Gross receipts: $1,200,000
• W-2 wages: $580,000
• Member SE comp: $150,000
• Other expenses: $700,000
• Interest: $20,000
• Federal Form 1065 ordinary business income: −$250,000 (loss)

BPT.

• Gross business profits before RCD: −$250,000 + $150,000 add-back = −$100,000
• RCD limited to gross business profits, can't increase loss: $0
• NH NOL generated: $100,000 (carries forward 10 years)
• BPT: $0

BET.

• EVTB: $580,000 + $150,000 + $20,000 = $750,000
• BET: $750,000 × 0.55% = $4,125
• BET threshold ($298k) exceeded → filing required and BET owed.
• Full $4,125 carries forward as a credit against BPT in the next 5 tax years.

Total 2026 NH tax: $4,125 BET, no BPT. The $4,125 sits in carryforward and reduces 2027–2031 BPT until used (FIFO).

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11. Interest & Dividends Tax — REPEALED

The NH Interest and Dividends Tax (I&D Tax) under RSA 77 — a 5% personal tax on individuals' interest and dividend income — was fully repealed for tax years beginning on or after January 1, 2025 under Chapter 79, Laws of 2023 (HB 2, 2023 session).

Phase-out schedule:

• 2023: 4% rate (reduced from 5%)
• 2024: 3% rate
• 2025 and forward: tax does not exist

What this means practically:

1. NH residents have no individual-level tax filing obligation with NH DRA for 2025 unless they personally own a business that exceeds the BPT or BET threshold.
2. For 2024 (last year of the tax), the final DP-10 was due April 15, 2025. A 2025 DP-10 is not required and the DRA will not accept one.
3. Trusts that were previously NH-grantor-tax exposed (the historic "NH trust tax" concern) are no longer subject to NH income tax on interest and dividends. Migration of trusts into NH for tax-haven purposes remains attractive on the property-tax and asset-protection side, but the I&D angle is gone.
4. Partnerships and LLCs that were structured to avoid creating I&D-tax exposure for their NH owners no longer need that planning.

Do not confuse I&D Tax with BPT/BET. The repeal of I&D Tax does NOT reduce the BPT or BET liability of a business — those continue at 7.5% and 0.55% respectively. A common client misunderstanding (2025 onward): "NH repealed the income tax, so I don't owe anything." Wrong — they likely still owe BPT and/or BET if they operate a business.

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12. Practical workflow for an NH freelance/small-business return

Step-by-step for an NH-resident sole proprietor or single-member LLC freelancer at year-end 2025:

1. Threshold check. Compute 2025 gross business income from federal Schedule C Line 1 (or Schedule C-EZ legacy). If ≤ $109,000, no BPT return is required — but still check BET (Step 3). If > $109,000, a BPT return is required.

2. Reasonable compensation analysis. Determine the proprietor's reasonable compensation:

   • If claiming ≤ $75,000 → safe harbor, no further substantiation
   • If claiming > $75,000 → assemble BLS data, time records, comparable-wage evidence; document in the workpapers

3. BET threshold check. Compute EVTB = SE compensation (Schedule SE Line 4, capped at FICA wage base) + interest paid + dividends paid. Compute gross receipts. If either EVTB > $298,000 OR gross receipts > $298,000, a BET return is required.

4. NH modifications and apportionment. Apply NH modifications (interest on non-NH munis added back, US Treasury interest subtracted, bonus depreciation added back if any) and compute NH sales-factor apportionment using market-based sourcing.

5. BPT and BET computation. Compute BPT before credits and BET. Apply BET credit against BPT.

6. Federal-state coordination.

   • Add the NH tax to Schedule C Line 23 on a cash basis
   • Verify that the federal estimated tax safe harbor still holds after the deduction
   • Compute the federal SE tax and QBI deduction independently — NH numbers do not flow

7. File. Use Granite Tax Connect to e-file Form NH-1040 (proprietorship) by April 15, 2026, for tax year 2025. Pay BPT and BET via the same return; remit estimated payments for 2026 quarterly starting April 15, 2026.

8. Closeout. If the business is winding down, mark "final return" on the form; the DRA closes the BPT/BET account and stops sending non-filer notices.

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13. Common errors to catch in review

1. Missing the BET when business has a loss. BET is owed even at a loss if EVTB threshold is exceeded. A loss-year client is at risk of forgetting BET.

2. Claiming reasonable compensation for a C-corp shareholder-employee. RCD is for proprietors and partners only. C-corp and S-corp shareholder-employees take a W-2 instead.

3. Excessive RCD without substantiation. Anything above $75,000 needs documentation. The DRA audits this.

4. Treating S-corp income as flowing through to NH. Wrong — S-corp is taxed at the entity level for BPT.

5. Forgetting bonus depreciation add-back. If federal Schedule C took bonus depreciation, NH starts higher.

6. Throwback that doesn't exist. Some practitioners default to applying throwback because their home state has one; NH does not — out-of-state services with market-based sourcing simply stay out of the NH numerator.

7. Double-counting RCD against both BPT and BET. RCD reduces BPT only. The same compensation is fully in BET regardless.

8. Claiming a 2025 I&D Tax return. The tax does not exist for 2025. A client who received a 1099-INT does not file a NH return for that interest in 2025.

9. Missing the combined-return trigger. Two LLCs > 50% commonly owned and unitary = combined return, not two separate returns.

10. Estimated-payment underpayment. The NH safe harbor uses prior-year tax (or 110% if prior-year tax > $40,000). Clients who switched from a loss year to a profit year must pay current-year estimates because 100% of prior-year tax was zero — they cannot use the prior-year safe harbor as a shield.

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14. Provenance and citations

Primary statutes:

• RSA 77-A — Business Profits Tax (rate, base, modifications, RCD, apportionment, NOL, combined return)
• RSA 77-E — Business Enterprise Tax (rate, EVTB, threshold, apportionment, BPT credit)
• RSA 77 — Interest and Dividends Tax (repealed for tax years beginning on or after 1/1/2025)
• RSA 78-B — Real Estate Transfer Tax (out of scope)
• RSA 21-J — DRA general administration, interest and penalties

Session laws relied on for rates and thresholds:

• Chapter 156, Laws of 2017 — BPT rate reductions
• Chapter 91, Laws of 2021 — BPT to 7.6% then 7.5%, BET to 0.55%, RCD safe harbor changes, market-based sourcing for services, threshold indexation
• Chapter 346, Laws of 2019 (HB 10) — single sales factor phase-in completed 2022
• Chapter 144, Laws of 2022 (HB 1221) — NOL carryforward extended to 10 years
• Chapter 79, Laws of 2023 (HB 2) — I&D Tax phase-out and 2025 repeal

NH DRA administrative rules:

• Rev 300 series — BPT
• Rev 2400 series — BET
• Rev 304.04 — Reasonable compensation deduction
• Rev 305.03 — Combined returns and unitary business

Forms (2025 versions):

• NH-1040 — BPT/BET combined return for proprietorship
• NH-1065 — BPT/BET combined return for partnership / LLC
• NH-1120 — BPT/BET combined return for corporation / S-corp
• NH-1120-WE — BPT/BET combined return for unitary water's-edge group
• NH-1041 — BPT/BET combined return for fiduciary
• Schedule BET / BET-PROP — EVTB computation
• Schedule R — Apportionment
• Schedule IV — NH NOL
• Form BT-EXT — Extension with payment
• Form BT-ESTIMATE — Estimated payment voucher

Indexed amounts for 2025 (verify against the NH DRA's annual TIR/notice before quoting in a client deliverable):

• BPT filing threshold: $109,000 gross business income
• BET filing threshold: $298,000 (EVTB OR gross receipts)
• RCD safe harbor: $75,000
• Estimated-payment trigger: $260 of combined BPT + BET expected liability
• 110% safe-harbor trigger: prior-year tax > $40,000

Rates for tax periods ending on or after 12/31/2023 (and continuing for tax years 2024 and 2025):

• BPT: 7.5%
• BET: 0.55%

This skill must be loaded alongside us-tax-workflow-base v0.2 or later and any federal content skill the engagement requires (us-sole-prop-bookkeeping, us-schedule-c-and-se-computation, us-federal-return-assembly, etc.). NH-specific verification of indexed thresholds and current IRC reference date is required before producing a final client deliverable. Reviewer signoff under Circular 230 (CPA, EA, or attorney) is required for any return that exceeds workflow-base thresholds.

End of skill.

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