Part 1: How Property Taxes Work in New Hampshire — A General Overview

This will be a three part series for the Thanksgiving week to explain how New Hampshire's property tax system works. We hope everyone has a great holiday week! Property taxes in New Hampshire are often debated but widely misunderstood. With no broad-based income or sales tax, the state leans heavily on local property taxes to fund schools, town services, and county obligations. That makes it essential for taxpayers to understand how assessments work—and why a higher assessment does not automatically mean a higher tax bill.

For each town, there are four main parts to a tax bill (in order of largest to smallest):

1. Local School Spending

2. Local Town Spending

3. State School Aid

4. County Spending

These comprise the total tax revenue needed to be raised by the town to meet its obligations.

To break down the basics more clearly, consider the fictional town of Graniteborough, a small community of 8 homes and 2 local businesses, each beginning with the exact same assessed value. The town needs to raise $100,000 to fund its municipal operations, schools, and county obligation for the year (this is how you know it is fictional!).

Because all 10 properties start at equal value, each one is responsible for 10% of Graniteborough’s total levy. That means every property owner—homeowners and businesses alike—pays $10,000 in property taxes.

This simple setup allows us to examine how assessments shift the distribution of taxes without affecting the total amount raised.

Assessments Explained

A property assessment is an estimate of a property’s fair-market value. New Hampshire requires municipalities to maintain reasonably accurate and proportional assessments, which is why towns periodically conduct revaluations.

A key point: Assessments do not decide how much money a town raises. They decide how the burden is divided among taxpayers.

Towns set their spending during town meeting, school district meeting, or SB2 ballot votes. That spending determines the total levy. Assessments only determine how that levy is shared.

If all assessments doubled tomorrow but spending stayed the same, Graniteborough would still need only $100,000. The tax rate would simply be cut in half. Tax bills would be unchanged.

Graniteborough’s New Revaluation

At least every five years, every New Hampshire town must conduct a revaluation. Our town of Graniteborough conducts a revaluation as mandated by state law. Real estate values have not moved uniformly, and homes appreciated (increased) at different rates.

For this example:

• 4 homes increase in value by 10% (Residentials 1-4)

• 4 homes increase by 40% (Residentials 5-8)

• Both businesses remain unchanged (Businesses 1-2)

Importantly, every residential property went up, but not equally. Because the town, school district, and county have miraculously not increased spending, Graniteborough still needs only $100,000, so the total amount raised does not change

What changes is each property’s share of the tax base.

Why Some Homes Pay Less Even Though Their Assessment Increased

At first glance, it seems logical that if your assessment goes up, your tax bill must go up. But that’s not how the really system works.

Here’s the key: It is the relative change in value that determines your tax bill.

A home that increased 10% now represents a smaller share of the town’s total value compared to homes that increased 40%. Even though its assessment went up 10%, it rose less than the town’s overall growth.

So homes that rose only 10% will actually see their tax bills go down, because they now make up a smaller percentage of the total assessed value than before.

Homes that rose 40% will see their share go up, because they appreciated faster than their neighbors.

This is the purpose of a revaluation:To realign each property’s tax responsibility to reflect the market.

So now:

• Residentials 1-4 pay $9,167

• Residentials 5-9 pay $11,667

• Businesses pay $8,333

When One Business Closes

Now consider a second scenario. After revaluation, one of Graniteborough’s 2 businesses closes and is removed from the tax rolls entirely.

Graniteborough still needs $100,000 to fund its operations, schools, and county costs. But instead of 10 taxpayers sharing the burden, only 9 remain.

Even if no assessments change, the remaining 9 properties must now divide the full $100,000 among them. Instead of paying $10,000 each, the average share rises to roughly $11,111.

This example illustrates a real-world phenomenon seen in many New Hampshire towns: When major commercial taxpayers close, relocate, or successfully appeal their assessments, residents often feel the immediate impact.

Fewer taxpayers sharing the same required spending means higher bills for everyone who remains.

Assessments vs. Spending

Many property-tax debates in New Hampshire conflate assessments with spending. But the Graniteborough examples make the distinction clear:

• Assessments determine the distribution of the tax burden.

• Spending determines the size of the tax burden.

A homeowner could see a large assessment increase but pay the same amount if the total levy stays flat.

Conversely, a homeowner whose assessment barely changes might pay significantly more if school or town budgets increase.

The driver of rising property taxes is almost always increased local and school spending, not the revaluation process.

Why Revaluations Matter

New Hampshire law requires municipalities to keep assessments within 10% of market value. If valuations drift out of alignment, inequities grow:

• Some taxpayers end up paying too much.

• Others end up paying too little.

• Properties with similar market value may be taxed very differently.

Revaluations correct these imbalances. They do not raise additional revenue for the town. Only budget decisions can do that.

Local Control Drives the System

Because New Hampshire relies on local property taxes more heavily than other states, communities hold significant authority—and responsibility. Annual town meetings, school district meetings, deliberative sessions, and ballot votes determine how much a town spends each year, which as we will see in part 2, directly impacts the tax bill for all residents.

Spending decisions create the levy. Assessments determine how that levy is shared

.

Those two concepts are often confused, but understanding the difference is crucial to understanding how property taxes work.

Part 2 will examine how municipal, school, and county budgets shape the tax rate in Graniteborough and other New Hampshire communities.