1031 exchange in
New Hampshire.
NH's headline is no income tax — but the property tax bill is the trade-off, and on commercial it's not optional. The hidden 1031 cost here is the 1.5% Real Estate Transfer Tax, split buyer/seller, that hits both legs of your exchange. Most NH 1031 buyers are MA residents trying to escape 5% Massachusetts tax — fine in theory, but you still owe MA on residency, not on situs.
Key facts for New Hampshire
- Federal conformance
- No state income tax
- Clawback regime
- No
- State capital gains
- New Hampshire has no broad personal income tax, and the Interest & Dividends Tax was fully repealed effective January 1, 2025. There is no state-level tax on capital gains from the sale of New Hampshire real property.
- Top CRE markets
- ManchesterNashuaPortsmouth
Does New Hampshire follow federal 1031 rules?
New Hampshire has no income tax to conform to, so federal Section 1031 treatment governs. The cost you actually feel at closing is the 1.5% combined Real Estate Transfer Tax (RSA 78-B) — split equally between buyer and seller — which applies to each leg of an exchange.
New Hampshire capital gains tax structure
New Hampshire has no broad personal income tax, and the Interest & Dividends Tax was fully repealed effective January 1, 2025. There is no state-level tax on capital gains from the sale of New Hampshire real property.
There's no broad income tax, no sales tax, no I&D tax (repealed January 1, 2025 under HB 2 of the 2023 legislative session). The state runs on a Business Profits Tax (7.5%) and a Business Enterprise Tax (0.55%), the Real Estate Transfer Tax (1.5% combined), the Meals & Rooms Tax (8.5%), and most importantly for CRE underwriting — extraordinarily high local property taxes. Statewide effective property tax rates run roughly 1.9-2.2% on commercial — among the highest in the country and the line item that tends to surprise out-of-state 1031 buyers more than anything else. There is no state-level capital gains tax to defer or recognize, which makes NH a clean 1031 destination on the income-tax side.
Federal tax treatment of a successful 1031 is deferral of capital gain and unrecaptured Section 1250 depreciation recapture (federally taxed at a maximum 25% when eventually recognized). New Hampshire's state treatment sits on top of those federal rates.
Common 1031 replacement strategies in New Hampshire
Most NH 1031 demand originates in Massachusetts. MA residents 1031-ing out of MA-situs property into NH replacement get the long-term benefit of no state tax on rental income (other than property tax) but still owe MA on residency until they actually move. The institutional-grade product is thin — Manchester multifamily, Portsmouth mixed-use along the seacoast, and Nashua flex-industrial near the MA border are the realistic plays. NH is not a market for value-add scattered-site or anything that requires deep local broker relationships at scale; you will price the listing inefficiency into your bid.
Top New Hampshire CRE markets for 1031 buyers
Manchester
The state's largest CRE market — Class B multifamily trades 6.0-7.0% on stabilized product, with industrial flex along the I-93/I-293 corridor in the 6.5-7.5% range. Manchester's tenant base is healthcare (Catholic Medical Center, Elliot), state-government adjacent, and a mix of small-bay industrial. Don't confuse Manchester with a Boston suburb — Class A institutional capital is meaningfully thinner here, and lease comps come slow.
Nashua
Nashua trades like a southern-tier MA submarket because functionally it is one. Flex industrial and small-bay along Route 3 and the I-3/I-93 stretch sees real demand from MA-domiciled tenants chasing the no-sales-tax operating advantage. Cap rates run 6.25-7.25% on stabilized industrial; multifamily is in the 5.75-6.75% range. The closer you get to the MA border the tighter the pricing — and the more your buyer pool is MA-resident exchangers.
Portsmouth
Coastal, tourism-influenced, and the most expensive small CRE market in northern New England. Mixed-use and small retail in the downtown trade well below 6% caps when something stabilized actually lists, which is rare. Industrial at the Pease Tradeport (former Air Force base, now an air/business development zone) is the institutional product — credit-tenant flex 5.75-6.75%. Hospitality is a real asset class here but watch the seasonality and the M&R tax compliance burden.
Local counsel, recording, and filing in New Hampshire
NH is an attorney-state for real estate closings — you cannot reasonably close commercial without NH counsel on at least one side of the table. Title insurance rates are not state-regulated. Recording is by county (10 counties); the Hillsborough and Rockingham registries handle the bulk of CRE volume. The 1.5% RETT is administered through the DRA, and the form (CD-57-P for purchaser, CD-57-S for seller) is filed at closing — the title company typically handles it, but missing it delays recording.
Recent developments in New Hampshire
The full repeal of the Interest & Dividends Tax effective January 1, 2025 closed the last individual income tax in the state. For 1031 purposes the practical change is small (capital gains were never in scope of the I&D tax), but it removes a residual filing risk for retired NH 1031 sellers who held DST or sponsor-promoted yield product after the exchange.
Common mistakes in New Hampshire 1031 exchanges
- Forgetting the 1.5% RETT hits both legs. NH's combined Real Estate Transfer Tax is $0.75 per $100 on the buyer plus $0.75 per $100 on the seller — 1.5% total per transaction. On a 1031 exchange you pay it on the relinquished closing AND the replacement closing. There is no 1031 carve-out. On a $4M upleg that's $60K in transfer tax alone, before any QI fees.
- Underestimating commercial property tax. Effective commercial property tax rates in NH run 1.9-2.2% in many municipalities — Manchester, Claremont, and Berlin push higher. If you're underwriting an NH replacement off comps from MA, NY, or any tax-friendly Sun Belt market, you are likely off by 50-150 bps on the operating expense line. Pull the actual current-year tax bill from the assessor before you bid.
- Assuming MA residency tax goes away when you buy NH property. MA residents who 1031 from MA-situs property into NH-situs property still owe MA income tax on their worldwide income, including the rental income from the NH replacement, until they actually become NH residents. Buying NH real estate alone does not change MA residency — and MA aggressively audits domicile claims. The NH 'tax move' is a residency move, not a real estate move.
What to do if you're starting a New Hampshire-source 1031
- Engage a Qualified Intermediary before the downleg closes. Your QI cannot be a disqualified person (attorney, CPA, or real estate agent who has represented you in the last two years).
- Confirm state conformance and any clawback or withholding filings with a New Hampshire-licensed CPA.
- Identify replacement property within 45 days in writing, delivered to your QI, under the Three-Property Rule or one of the alternative identification rules.
- Close on replacement within 180 days of the downleg closing or by your federal tax-return due date (with extensions), whichever is earlier.
- File Form 8824 with your federal return reporting the exchange. File any required New Hampshire state forms for the year, including any clawback or withholding-exemption filings.
FAQ: 1031 exchanges in New Hampshire
Why do so many Massachusetts residents own New Hampshire commercial real estate?
NH has no state income tax and no sales tax — so the rental income from NH-situs property avoids state tax once you are actually a NH resident. The catch is residency: you cannot just buy NH property and stop filing in MA. You have to actually domicile in NH, which is a fact-pattern test (driver's license, voter registration, where you sleep, family ties). MA's Department of Revenue audits this aggressively.
Does the 1031 exchange exempt me from New Hampshire's 1.5% Real Estate Transfer Tax?
No. NH's Real Estate Transfer Tax (RSA 78-B) applies to every conveyance for consideration. There is no Section 1031 exemption. You pay 0.75% as buyer on the upleg and 0.75% as seller on the downleg — and your counterparty pays the matching half on each leg. Plan on 1.5% per transaction in transfer tax friction.
Is there non-resident real estate withholding in New Hampshire?
No. NH does not require buyer-side withholding on sales by non-residents. There is no state income tax to withhold against. This is a cleaner closing experience than NJ, NY, or MA next door.
How do New Hampshire's high property taxes affect 1031 underwriting?
Effective commercial property tax rates run 1.9-2.2% statewide and higher in some municipalities. That's roughly double what an out-of-state buyer might assume coming from a low-property-tax state. If you're underwriting NH replacement off pro forma rents and your tax line is wrong, your cap rate is wrong by 50-150 bps. Always pull the actual current-year tax bill from the local assessor and test what reassessment-on-sale looks like in that municipality.
Can I 1031 my Vermont or Maine property into New Hampshire and improve my tax situation?
Federally, yes — the exchange is straightforward. State-side, VT and ME both tax the federally-deferred gain only when the replacement is eventually sold (no clawback, no situs-based reach). The NH-side benefit is no income tax going forward on rental income, once you are an NH resident. If you stay a VT or ME resident, you continue to owe your home state on the NH rental income.
Do I need a New Hampshire-licensed attorney for an NH 1031 closing?
Yes, in practice. NH is an attorney-state for real estate — you cannot meaningfully close commercial without NH counsel handling the title work, the RETT filings (CD-57 forms), and the recording in the appropriate county registry. An out-of-state attorney can advise on the federal 1031 mechanics but not on the NH closing itself.
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