New Hampshire Business Profits Tax on Rental Real Estate

[Bob Santilli]

Hello All,

I'm somewhat new to real estate investing and have 1 cash flowing property right now. In speaking with another investor in New Hampshire I came across a state tax situation that I was not aware of and was looking for some clarification.

In NH when you sell a piece of real estate that is used for business purposes (generating rental income) you are subject to the Business Profits Tax (approx 8.5%). The person I was speaking with said that he was subject to this tax from his cost basis all the way up to his sale price. Let me illustrate below for clarity.

Original Purchase Price - $73,000

Adjusted Cost Basis after several years of depreciation - $55,000

Sale price - $100,000

Federal Level

At the federal level this individual would be responsible for depreciation recapture from $55,000 up the purchase price of $73,000 at (25% federal level) and then Long Term Capital Gains tax from $73,000 up to the sales price of $100,000.

State Level

Business Profits Tax from $55,000 up to the sales price of $100,000 @ 8.5%.

Can anyone provide any clarity on this state specific tax situation? Maybe a CPA in NH or any CPA familiar with NH.  I appreciate any information provided! Thanks!