How NH Commercial Properties Get Overassessed: The No-Income-Tax Problem

How New Hampshire’s Unique Tax System Creates Commercial Property Overvaluation

New Hampshire’s tax system is famous for what it doesn’t have: no state income tax, no sales tax. That’s been the state’s marketing pitch for decades. “Live Free or Die” and all that—freedom from income tax.

But there’s a hidden cost to that freedom, and commercial property owners are paying it.

Without income tax or sales tax revenue, New Hampshire’s state government relies heavily on other sources: business taxes, meals and rooms tax (which varies by locality), and a statewide education property tax. Towns, meanwhile, rely almost entirely on property taxes.

Property taxes carry the entire burden.

That creates a system where assessors and town officials feel constant pressure to maximize taxable valuations. Higher assessments mean more revenue. And it means commercial properties—the most visible and contested assets—often get assessed above fair market value.

Let me explain why, and what it means for you.

New Hampshire’s Revenue Model: By the Numbers

Here’s how NH funding breaks down statewide:

Revenue Source	Approximate % of State Budget
Business enterprise tax (BET)	8%
Meals & rooms tax	3%
Statewide property tax for education	20%
Other (licenses, fees, misc)	5%
Federal funds	15%
Local property taxes (towns)	49%

Nearly half of all public funding in NH comes from local property taxes. That’s much higher than most other states. The national average is about 26%.

When schools need more money, towns can’t raise income tax or sales tax. They raise property taxes. When towns face budget shortfalls, they don’t have other revenue levers—they push to keep assessments high.

This creates systematic upward pressure on valuations.

The Mechanics: How This Drives Overvaluation

Here’s the practical impact on your commercial property:

Selectmen Incentives

Your town’s Selectmen are elected officials. They approve the budget, set the tax rate, and oversee the assessor. If the town needs $10M in revenue and property values only support $9.5M at a given tax rate, the Selectmen face a choice:

• Raise the tax rate (unpopular, voters notice immediately)
• Encourage the assessor to find “additional value” (quiet, less visible)

In most states, those are equally unattractive. In NH, the second option is the path of least resistance.

Selectmen rarely say to the assessor, “Please overvalue properties.” It’s more subtle. But there’s an understanding: if revenue is tight, assessments should be “thorough” and “current” and “not leave money on the table.”

Assessor Pressure

Assessors work for the town. They’re either hired by Selectmen or elected themselves. Either way, they feel the pressure. If the town needs more revenue and the assessor hands in assessments that result in a shortfall, they’re going to hear about it.

Assessors also face practical pressure: if they assess a property at $500,000 and a similar property (down the street) sold for $550,000, the Selectmen will ask why there’s a gap. It’s easier to assess both at $550,000 than to explain why one is $50,000 lower.

This creates a bias toward higher valuations, especially for properties where recent sales data suggests upside.

No Income/Sales Tax = No Tax Base Diversification

In states with income tax, lower property taxes are politically feasible because the state has another revenue source. Vermont and Massachusetts can tax income; they use property taxes less intensively.

In NH, there’s no alternative. The state legislature actually prohibited local sales tax to protect the “Live Free or Die” identity. So towns can’t say, “We’ll reduce property tax and make up the difference with local sales tax.”

Property tax is it. That concentrates pressure on valuations.

The Effect on Commercial Property Specifically

Residential property gets some protection:

• Homestead exemptions: Many NH towns have homestead property tax credits that reduce the effective tax burden on primary residences.
• Political sympathy: Voters are homeowners. Tax increases on homes are unpopular.

Commercial property gets none of that:

• No exemptions: Commercial property is taxed at full assessed value.
• No constituency: Commercial property owners (especially larger ones) are fewer and less politically active than homeowners.
• Easier to blame: “The big company can afford to pay more” is a narrative that plays well politically.
• Less visible: Most voters don’t know or care if a commercial property is paying $26,000 or $32,000 in taxes. But they care a lot if their home tax goes up $500.

The result: commercial properties are assessed more aggressively than residential properties. The gap between assessed value and market value is wider for commercial property.

Real-World Impact: The Assessment Ratio Gap

Assessment ratio = (Assessed Value ÷ Market Value) × 100

Here’s what I see across New Hampshire:

Property Type	Avg Assessment Ratio
Residential (primary residence)	82–87%
Residential (investment/secondary)	88–92%
Commercial	92–98%
Industrial	94–100%

Notice the gap: Commercial property is assessed 10–15 percentage points higher than residential. That’s not random. That’s the effect of the policy incentives I described.

A residential property assessed at 85% of market value is actually fairly treated. A commercial property assessed at 95% of market value is overvalued relative to what similar properties sell for in the market.

The Specific Burden on Certain Property Types

Some commercial property types feel this pressure more acutely:

Retail: Visible, high-value, easy to assess based on sales comps. Assessed aggressively.

Office: Professional buildings with stable tenants seem like safe bets for high valuation. Assessors don’t always account for tenant risk or lease expiration.

Industrial/warehouse: Fewer recent sales, so assessors rely on cost approach (which inflates value for older buildings). Also politically vulnerable—manufacturing is seen as “wealthy.”

Multifamily (5+ units): Treated as investment property, not residential. Assessed more aggressively. Cap rates used by assessors are often too low, inflating value.

Hospitality: Subject to seasonal and economic volatility, but assessors often assess to “peak” conditions rather than normalized income. This is rampant in tourist areas like Hampton.

The COVID Effect and Post-Pandemic Reassessment

The no-income-tax system also creates lag effects.

During COVID, commercial property values fell (fewer office tenants, less retail traffic). But New Hampshire’s property reassessment cycles are staggered. Some towns reassess every 5 years, some every 10 years. A town that reassessed in 2019 didn’t reassess again until 2024.

For five years, owners paid taxes on pre-COVID valuations. The town collected extra revenue. Once the reassessment happened in 2024, valuations adjusted—but by then many owners had overpaid for years.

In a state with income tax or sales tax, a revenue shortfall would be spread across the population and recovered over time. In NH, it’s concentrated on property owners and recovers on the reassessment cycle.

That’s a built-in structural unfairness, and it’s driven by the no-income-tax model.

What This Means for Your Abatement Case

Here’s the silver lining: the system’s bias toward high assessments creates opportunity for abatement.

Because the underlying incentive is to assess high, there’s systematic overvaluation. Your property is not being overassessed because the assessor is incompetent or malicious—it’s because the system incentivizes high assessments.

That means:

1. You’re not alone. If your commercial property is overassessed, so are many others. The problem is systematic.

2. The case is often provable. Because overvaluation is driven by system incentives (not unique circumstances), there are usually comparable sales and market data that clearly show the gap.

3. Selectmen and assessors aren’t hostile to abatements. They understand the system. They know their valuations are aggressive. When you present solid evidence of overvaluation, they’re often willing to grant an abatement because they understand the underlying pressure.

4. Your win rate is high. With solid comparable sales data, you’re fighting with the market, not against it. The market is the abatement applicant’s best friend.

The Policy Question: Should This Change?

Philosophically, New Hampshire’s reliance on property tax is unusual and arguably inequitable. A more balanced tax system (including income tax or broader-based business tax) would reduce pressure on property valuations.

But that’s a political question beyond the scope of this blog. Politically, “Live Free or Die” has strong brand power, and changing the tax system faces enormous resistance.

For property owners, the practical lesson is: the system is biased toward overvaluation, and abatement is the mechanism to correct it.

Your Path Forward

If you own commercial property in New Hampshire, understand this context: your property is probably overvalued relative to what comparable properties sell for, and it’s not your fault or unique to your property. It’s systemic.

That’s actually good news for you. It means:

• The overvaluation is provable with market data
• Selectmen understand the context
• Your abatement case is likely to be strong

Reach out to discuss your property. I can pull recent comparable sales and comparable tax rates for your town, and tell you whether your assessment is in the “normal” overvaluation range or above it.

The March 1 deadline is coming. This year’s abatement is the most valuable one to win—it’s the first year of savings. Don’t leave it on the table.

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Related: Learn about how specific property types get overassessed, and understand the deadline and filing process.