What actually happens
An employee who lives in Massachusetts and performs work in New Hampshire sits in two tax systems at once. The residence state claims the right to tax all of a resident's income wherever earned; the work state claims the right to tax income sourced within its borders. Absent an agreement, both claims stand, and the conflict is resolved after the fact through a credit on the resident return rather than up front in payroll.
Unemployment insurance goes to one state only
Income tax can be split between states. Unemployment insurance cannot. Under the localization test used by every state, an employee whose services are performed entirely in New Hampshire is covered by New Hampshire for unemployment purposes, and all wages are reported there — regardless of where they live, where you are headquartered, or which state's income tax you withhold. New Hampshire's 2026 taxable wage base is $14,000. The four-factor test in order.
What you have to register for
| Obligation | State | Agency |
|---|---|---|
| Income tax withholding | Massachusetts | Massachusetts Department of Revenue |
| Unemployment insurance | New Hampshire | New Hampshire Employment Security |
Frequently asked
Do New Hampshire and Massachusetts have a reciprocal tax agreement?
No. There is no reciprocal agreement between New Hampshire and Massachusetts. New Hampshire has no wage income tax, so the question does not arise in practice.
Which state's income tax should be withheld?
Massachusetts. New Hampshire imposes no wage income tax, so the residence state's claim is the only one that survives.
Which state gets the unemployment insurance wages?
New Hampshire. Unemployment coverage is never split between states for a single job. The localization test assigns the whole job to the state where services are performed, which here is New Hampshire, regardless of residence or where the employer is headquartered.