North Dakota Tax Guide 2026

Personal income tax — near-flat at low rates

HB 1158 of 2023 (signed by Gov. Burgum) dramatically REDUCED North Dakota's personal income tax. The prior 5-bracket structure (top 2.9%) was simplified to 3 brackets: • 0% on first $44,725 (single) / $74,750 (MFJ) • 1.95% from $44,725 to $225,975 (single) / $74,750 to $275,100 (MFJ) • 2.5% above (the new 'top rate') The TOP rate of 2.5% is the LOWEST top personal income tax rate of any state that imposes one. Effectively, ND is closer to a no-income-tax state than to a meaningful-income-tax state — a single filer earning $50,000 owes only ($50,000 − $44,725) × 1.95% = $103 in ND income tax. Standard deduction conforms to federal — $15,000 single / $30,000 MFJ for 2026. Personal exemption: replaced by SD conformity post-TCJA. No state-level QBI deduction (ND conforms to federal §199A — flows through). No state AMT. The legislature has discussed full income tax repeal but has not enacted it — North Dakota's oil/gas revenue gives the state fiscal flexibility but full elimination would require structural reform.

Social Security and retirement

N.D. Cent. Code §57-38-30.3 (HB 1149 of 2021) provides 100% Social Security exemption with NO income test — every dollar of Social Security benefits is excluded from ND taxable income regardless of filing status or AGI. Military retirement: 100% EXEMPT. Qualified retirement income (pensions, IRAs, 401(k)): NO general state exclusion (taxed as ordinary income at brackets) — but since the top rate is only 2.5%, the effective burden is low. Federal civil service pension: also taxed as ordinary income; no separate exclusion.

Capital gains 40% deduction

N.D. Cent. Code §57-38-01.2(7) allows individuals to deduct 40% of net long-term capital gain — similar to New Mexico's framework. Effective rate on qualifying LTCG at the top bracket: 2.5% × 60% = 1.5% — among the lowest effective state LTCG rates in the US for income-tax-imposing states. Short-term gains: no preference; taxed at ordinary brackets.

Sales tax and economic context

State rate 5% (N.D. Cent. Code §57-39.2-02.1). Cities and counties add up to 3.5% local-option — combined averages 6.97% statewide. Notable cities: • Fargo: 7.5% combined • Bismarck: 7% • Grand Forks: 7.25% • Minot: 7.5% • Williston: 8.5% (high local from oil-boom infrastructure needs) Groceries: EXEMPT (unprepared food). Prescription drugs: exempt. Clothing: taxable. Farm equipment: exempt. Economic nexus (N.D. Cent. Code §57-39.2-02.2): $100,000 in cumulative sales (transaction count eliminated by 2019 reform).

Property tax and oil/gas

Statewide average effective property tax ~0.99% — close to national average. Counties: Cass (Fargo) ~1.11%, Burleigh (Bismarck) ~0.96%, Grand Forks ~1.18%, Williams (Williston, oil belt) ~0.62% (low because high-value oil and gas property dilutes residential effective rate). Homestead Credit Program (N.D. Cent. Code §57-02-08.1): income-tested property tax refund for elderly (65+) and permanently disabled. Residential property tax credit (HB 1158 of 2023): $500 credit for owner-occupied primary residences — a new flat credit reducing effective burden meaningfully on modest-value homes. Disabled Veterans: full exemption up to $8,100 of taxable value. OIL & GAS: • 5% Oil Extraction Tax + 5% Oil and Gas Gross Production Tax = 10% combined production levy (NDCC §57-51) • Revenue funds general state operations AND the Legacy Fund — a constitutionally protected sovereign wealth fund (N.D. Const. Art. X §26, ratified 2010) holding 30% of oil/gas revenues for future generations • Legacy Fund balance: $9B+ as of 2024 (growing) The oil revenue is the primary reason ND can afford 0%/1.95%/2.5% income tax brackets and full Social Security exemption without raising other taxes.

Business considerations

Corporate income tax (N.D. Cent. Code §57-38-30): 3 brackets: • 1.41% on first $25,000 • 3.55% from $25,000 to $50,000 • 4.31% above Very low compared to most states — supports ND's business-friendly positioning. LLC fee: $50 + $50 annual report (N.D. Cent. Code §10-32.1-115 framework). Apportionment: 3-factor evenly-weighted (or single-sales-factor election available). PTET: ND enacted PTET via SB 2367 of 2021 — entity-level election at top individual rate (2.5%); refundable credit to owners. Modest federal SALT benefit given low rate. No estate, inheritance, or gift tax. Unemployment tax: 0.08%–9.97% on $43,800 wage base. The combination of near-zero income tax, oil-revenue fiscal cushion, no estate tax, low property tax, and low corporate tax makes ND attractive for high earners — particularly those with significant LTCG or oil/gas royalty income.

Worked example: Lars Halverson, Williston-based oil-services LLC owner (single, 2026)

Lars operates a single-member LLC providing oil-field services in the Bakken. Net SE income $325,000. Receives $48,000 of oil/gas royalty income (passive). Owns a $475,000 Williston home.

Federal: SE tax (on services portion) + federal income tax + §199A 20% QBI (oil services likely non-SSTB; royalties may also qualify) + depletion deductions on oil/gas royalties. North Dakota: Federal AGI flow: $325,000 (services) + $48,000 (royalties, after depletion ~$36,000) = ~$361,000 Less standard deduction: $15,000 Less federal QBI conformity (~$65,000 reasonable estimate): $65,000 ND taxable: $281,000 Tax (2026 brackets, single): First $44,725 × 0% = $0 $44,725 to $225,975 ($181,250) × 1.95% = $3,534 Above $225,975 ($55,025) × 2.5% = $1,376 Total ND income tax: $4,910 For comparison, California on the same scenario: ~$28,000 state income tax. Lars saves $23,000 by being in ND vs CA. Property tax on $475k Williston home @ ~0.62%: ~$2,945/yr (less $500 residential credit → $2,445). Oil & gas extraction/production: paid at the wellhead by the operator (10% combined) — affects Lars indirectly through reduced royalty per BBL, not as a separate Lars-paid tax. North Dakota total annual state burden: ~$7,355 + sales tax on Williston purchases (8.5%).

Statute references

• Personal income tax (3-bracket, top 2.5%) — N.D. Cent. Code §57-38-30.3 (HB 1158 of 2023)
• Social Security 100% exemption — N.D. Cent. Code §57-38-30.3 (HB 1149 of 2021)
• Capital gains 40% deduction — N.D. Cent. Code §57-38-01.2(7)
• Sales tax 5% — N.D. Cent. Code §57-39.2-02.1
• Economic nexus (Wayfair) — N.D. Cent. Code §57-39.2-02.2
• Corporate income tax (3-bracket) — N.D. Cent. Code §57-38-30
• Oil and Gas Production / Extraction taxes — N.D. Cent. Code §57-51
• Legacy Fund (constitutional) — N.D. Const. Art. X §26
• Homestead Credit — N.D. Cent. Code §57-02-08.1

Related pages

• State Tax Comparison →
• Capital Gains Tax →
• QBI §199A Deduction →