1031 Exchange & DST Investing in New Hampshire
New Hampshire imposes no tax on capital gains, and its interest and dividends tax was fully repealed effective January 1, 2025, so exchange planning here is driven by federal tax alone. Section 1031 still allows deferral of the federal gain on qualifying exchanges.
State tax treatment of a 1031 exchange
New Hampshire does not levy a broad-based personal income tax or a tax on capital gains, and the state's Interest and Dividends Tax was repealed as of January 1, 2025. As a result, there is no New Hampshire state income tax to defer, and Section 1031 planning in the state is focused on deferring the federal capital gains and depreciation-recapture tax.
Because there is no state-level tax on the gain, New Hampshire has no clawback provision and no nonresident real estate withholding tied to income tax. Investors still benefit from Section 1031 at the federal level, which remains fully available.
Market snapshot
Manchester and Nashua form the core of New Hampshire's investment market, benefiting from the state's lack of income and sales taxes and its proximity to the Boston metro. The Seacoast around Portsmouth adds a tourism and hospitality dimension, and multifamily demand has been strong statewide.
Apartments and small commercial properties draw the most 1031 replacement interest, supported by in-migration from higher-tax neighboring states. The favorable tax climate makes New Hampshire property attractive to investors both inside and outside the state.
Why 1031 & DST investors look here
- With no state capital gains tax, New Hampshire sellers still face substantial federal tax that Section 1031 can defer
- Owners of Manchester and Seacoast multifamily often want to move from active management to passive income
- DST and 721 structures offer diversification and estate-planning benefits regardless of the favorable state tax picture
Replacement-property options
A New Hampshire exchange can be completed into replacement property anywhere in the country. Accredited investors commonly identify DST interests, 721 UPREIT contributions, or Opportunity Zone investments in other states, exchanging a hands-on property for diversified, professionally managed real estate. These investments are illiquid, involve market and sponsor risk, and are available only to accredited investors.
Frequently asked questions
Does New Hampshire tax a 1031 exchange?
No. New Hampshire does not tax capital gains, so there is no state income tax on the sale to defer. Section 1031 still applies at the federal level to defer the federal gain and recapture.
Can I exchange New Hampshire property for out-of-state DSTs?
Yes. Section 1031 does not require in-state replacement property, so a New Hampshire property can be exchanged into DST interests holding real estate anywhere in the U.S., subject to accredited-investor eligibility.
Did New Hampshire repeal its Interest and Dividends Tax?
Yes. The Interest and Dividends Tax was fully repealed effective January 1, 2025, so New Hampshire now has no broad tax on investment income, including capital gains.
Gerald F. “Jerry” Baker, III — Founder & Managing Principal, Baker 1031 Investments · FINRA Series 22 / 63 · SIE. Read full bio →
State tax treatment is general and changes frequently; this page is educational and is not tax, legal, or investment advice. Confirm current state and local rules with your own CPA and attorney. Securities offered through Aurora Securities, member FINRA/SIPC. Real estate investments involve risk, including possible loss of principal.