New Hampshire Business Profits Tax for Rental Property LLCs

The most common misconception about investing in New Hampshire is that the state's lack of a personal income tax means rental income goes untaxed at the state level. It's partially true for individuals holding property in their own name. But the moment you put your rental properties in an LLC — which nearly every experienced investor does for liability protection — you enter New Hampshire's two-tiered business tax system: the Business Profits Tax (BPT) and the Business Enterprise Tax (BET).

These taxes apply to rental LLCs, partnerships, and any entity holding income-producing real estate that crosses the statutory thresholds. Understanding both is essential before you structure your first acquisition.

The Business Profits Tax (BPT)

The BPT is assessed on the net taxable income of businesses operating in New Hampshire. The current rate is 7.5% on net taxable business profits, effective for taxable periods ending on or after December 31, 2023.

Filing threshold: For tax years beginning on or after January 1, 2025, any entity with gross business income from all activities (from everywhere, before deductions) exceeding $109,000 must file a BPT return — even if the net taxable profit is zero.

"Gross business income" is defined as total rental revenues before any expense deductions. This is the critical detail. An LLC with three rental units generating $3,500 per month per unit grosses $126,000 annually — well above the $109,000 threshold — and must file a BPT return even in a year where operating expenses and depreciation produce a net loss on paper.

At the $109,000 threshold, a small two-unit property at $4,550 in monthly combined rent crosses the filing requirement. This is not a tax that only large portfolios encounter.

The Business Enterprise Tax (BET)

The BET is a separate tax assessed on the "enterprise value tax base," calculated as the sum of all compensation paid to employees, interest paid on business debt, and dividends distributed to owners.

The current BET rate is 0.55%. Under HB 155, this is scheduled to decrease to 0.50% for taxable periods ending on or after December 31, 2026.

Filing threshold: For tax years beginning on or after January 1, 2025, the BET filing threshold is gross business receipts exceeding $298,000, or an enterprise value tax base exceeding $298,000.

The Mortgage Interest Trap

The BET creates an unusual tax exposure for leveraged real estate investors that has no equivalent in most other states. Because the BET base includes interest paid on business debt — not just compensation and dividends — every dollar of mortgage interest your LLC pays on investment property loans is subject to the 0.55% BET rate.

Here's why this matters: an LLC can owe substantial BET even when it has no net taxable profit and owes zero BPT.

Example: An LLC holds four rental properties with $2.4 million in combined mortgage debt at a 7% annual interest rate. Annual mortgage interest payments total $168,000. If the LLC also has gross receipts exceeding $298,000 (which four multi-family properties likely do), the enterprise value tax base includes that $168,000 in interest. BET owed: $168,000 × 0.55% = $924. That's a modest number — but it compounds across a larger portfolio, and it's owed regardless of whether the properties are profitable.

Highly leveraged portfolios are more exposed to the BET mortgage interest problem than portfolios with lower debt-to-equity ratios.

The Tax Credit Integration

New Hampshire's law prevents pure double taxation: any BET paid by the entity is allowed as a direct credit against the entity's BPT liability. Unused BET credits carry forward for up to ten taxable periods to offset future BPT obligations. In practice, you pay the higher of the two taxes, with the lower one offsetting the other.

The I&D Tax Repeal — What Changed in 2025

New Hampshire previously imposed an Interest and Dividends (I&D) Tax of 3% on investment income received by individuals. This tax was phased down and fully repealed for all taxable periods beginning on or after January 1, 2025. Individual investors holding property in their own name (not through an entity) now have zero state-level income tax exposure on rental income or capital gains — only federal taxes apply.

This creates an interesting planning question: does holding property personally (avoiding BPT and BET) or in an LLC (liability protection but subject to business taxes) produce better after-tax outcomes? The answer depends on gross revenue levels, the degree of leverage, and liability exposure. Properties with gross rents below $109,000 held by an individual owner have zero state income tax. Properties in an LLC above $109,000 gross face BPT filing requirements and potential BET on interest payments.

LLC Formation in New Hampshire

If you're holding investment property in an LLC, the basic formation requirements under RSA Chapter 304-C are:

• File Articles of Organization with the NH Secretary of State and pay a $100 filing fee
• Designate and maintain a registered agent with a physical address in New Hampshire
• File an Annual Report with the Secretary of State by April 1st each year, with an $80 fee

Entity Structuring Considerations

Investors with larger portfolios sometimes structure separate LLCs for individual properties to keep gross receipts per entity below the $109,000 BPT threshold and below $298,000 for BET. Whether this approach is worth the additional administrative burden depends on your total portfolio income, the mortgage interest exposure across entities, and how the thresholds interact with your specific revenue mix.

New Hampshire tax professionals who specialize in real estate entity structures are worth consulting on this — the interplay between BPT, BET credits, and the mortgage interest issue is complex enough that generic national tax advice frequently misses the state-specific nuances.

What This Means for the Manchester Rental Market

Manchester is the most common market for multi-family LLC investing in the state. A four-unit building in Manchester rented at $1,500 per unit generates $72,000 annually — below the $109,000 BPT threshold. Add a second property and you're likely above it. The threshold is low enough that even a modest two-property portfolio in an urban market crosses into BPT filing territory within the first few years of scaling.

The New Hampshire Investment Property Guide covers the BPT and BET in the context of full investment underwriting — including how these taxes interact with property tax carry costs, financing structures, and exit strategy planning. Getting clarity on the business tax exposure before you form your LLC is far simpler than restructuring after you've already acquired properties.

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