The rule in New Hampshire
The rule comes from N.H. Rev. Stat. Ann. § 275:43(V).
Use-it-or-lose-it. We found no New Hampshire statute or agency rule on use-it-or-lose-it policies, so the employer’s written policy usually decides.
What to check in your policy
Your handbook or offer letter decides. If it promises payout, that promise can usually be enforced. If it says unused time is forfeited, or says nothing, you may not be owed it. Keep a copy of the policy that was in force when you earned the time.
Tax on a New Hampshire payout
A payout is taxable wages. Take 80 unused hours at $25.00 an hour, worth $2,000.00. Paid on top of regular wages, it is a supplemental payment, so many employers withhold $440.00 of federal income tax at the flat 22% rate, plus $124.00 of Social Security and $29.00 of Medicare, leaving about $1,407.00.
New Hampshire does not tax wage income, so that is close to what you receive. Withholding is not the final tax; any difference is settled on your return.
Questions people ask
Does New Hampshire require employers to pay out unused PTO?
Not by law. New Hampshire treats vacation pay, personal days, holiday pay and sick pay as wages when they are part of the employer's policy or practice. Whether unused vacation is paid when you leave depends on that policy or practice.
Is use-it-or-lose-it vacation legal in New Hampshire?
Usually, if the written policy says so. We found no New Hampshire statute or agency rule on use-it-or-lose-it policies, so the employer’s written policy usually decides.
How is a PTO payout taxed in New Hampshire?
Federally, a payout on top of regular wages is a supplemental payment: many employers withhold 22% for income tax, plus Social Security and Medicare. New Hampshire does not tax wage income, so no state income tax is withheld.