How New Hampshire Landlords Can Save Big on State Taxes Using the Personal Compensation Deduction
- Ryan Poirier
- Nov 18
- 3 min read
If you own rental property in New Hampshire and file as a sole proprietor, partner, or LLC—not a corporation—you might be missing out on a powerful tax break that most out-of-state CPAs won’t even mention.
We’re talking about a Granite State–only rule called the Personal Compensation Deduction under the New Hampshire Business Profits Tax (BPT). And if you’re not taking full advantage of it, you’re probably overpaying.
Let’s fix that.
What Is the Landlord Personal Compensation Deduction?
New Hampshire doesn’t have a state income tax, but we do have a Business Profits Tax. This applies to net business income, including profits from rental properties if you own them personally or through an LLC taxed as a disregarded entity or partnership.
Here’s the twist: the state lets landlords deduct a “reasonable amount” for the personal labor they put into managing their rental properties—before BPT is calculated.
Think of it like paying yourself for your time—without having to actually cut a check.
Why Landlords Should Care
Managing a rental property in New Hampshire takes real work:
Screening tenants
Coordinating repairs
Shoveling snow in February
Filing eviction notices if things go south
Showing units, prepping leases, running deposits
You may not track your hours, but that labor has value—and New Hampshire lets you treat it that way. Most states don’t.
That’s the core of the Personal Compensation Deduction: You get to carve out the value of your sweat equity before calculating taxable business profits.
How Much Can You Deduct?
You’ve got two options:
1. Safe Harbor: Deduct up to $75,000—No Justification Needed
Suppose you’re a sole proprietor or an LLC/partnership, and you’re actively involved in managing your properties. In that case, you can claim up to $75,000 per year in compensation without having to justify it with market studies or time logs.
This is called the Record-Keeping Safe Harbor. It’s fast, clean, and defensible—even during audit. And it can knock your Business Profits Tax liability to zero if your profits fall under that number.
2. Over $75,000? You’ll Need Backup
If you manage multiple units or large properties and believe your labor value is worth more than $75K, you can claim a higher deduction. But you’ll need to support it with documentation showing your work duties and comparable market rates—something we help our clients build properly.
Can Out-of-State Tax Pros Handle This?
Most can’t. This deduction is unique to New Hampshire, and it’s not on federal tax forms. We’ve reviewed returns from national firms and out-of-state preparers who either miss the deduction entirely, or misapply it.
Worse, some just file the minimum and let you overpay, thinking “It’s not that much anyway.”
But for landlords in NH, this could mean saving thousands every year. And the longer you hold your properties, the more this deduction compounds in value.
Real Example: Local Landlord With 3 Units
How does the Landlord Personal Compensation Deduction work? Let’s say you own and self-manage a 3-unit property in Sunapee, with annual net profits (after expenses but before depreciation) of $40,000.
If you don’t claim personal compensation, you’ll owe:
BPT on the full $40,000 → 7.5% = $3,000
If you claim the $40,000 as personal compensation using the safe harbor:
BPT on $0 → $0 owed
No fancy math. Just real savings.
Let’s Maximize Your Deductions the Right Way
We work exclusively with New Hampshire clients—and we know how the state’s tax rules really work. Whether you own a single duplex or a small portfolio of rental homes, we’ll help you:
Properly apply the personal compensation deduction
Avoid common errors that trigger audit letters
Coordinate this with your federal return and depreciation
Structure things cleanly if you’re using multiple LLCs
Out-of-state firms don’t live here. We do. And we know what actually flies with Concord.
Want to see how much you could save?
📞 Schedule a free 15-minute review
FAQ (New Hampshire–Specific)
Q: Is this deduction only for landlords?
No—any non-corporate NH business owner can use it. But landlords often miss it because they don’t think of themselves as “earning wages” from their own business.
Q: I live in Massachusetts but own NH rentals. Can I still use this?
Yes—if your rental entity is a sole proprietorship or partnership/LLC. The key is your NH tax structure, not your personal residency.
Q: What if I don’t take a W-2 wage?
Perfect. This deduction is not about payroll. It’s an adjustment allowed by NH for owners who put in personal time without running payroll through the entity.
Q: Do I need to amend past years to fix this?
If you’ve missed the deduction in prior years and overpaid BPT, we can likely file amended NH returns—up to 3 years back—and request a refund.
Q: Do you have any more information on Taxes for Landlords?
Sure! Start Here.
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