North Dakota does not have a state income tax

North Dakota is one of nine states with no state income tax on wages, salaries, or other personal income. This means you do not owe North Dakota state income tax on money you earn, regardless of how much you make or where you work. If you live and work in North Dakota, you will not file a state income tax return to the state.

However, no state income tax does not mean no taxes at all. North Dakota collects revenue through other methods: sales tax, property tax, corporate tax, and various fees. If you work in North Dakota or live there, you still owe federal income tax to the IRS, and you may owe taxes to other states if you work across state lines.

Key Takeaways

  • North Dakota residents do not pay state income tax on wages, salaries, or investment income.
  • You still owe federal income tax to the IRS even though North Dakota has no state tax.
  • North Dakota funds state services through sales tax (5.5 percent statewide), property tax, and corporate taxes instead.
  • If you work in another state while living in North Dakota, you may owe income tax to that state, not North Dakota.
  • Retirees in North Dakota do not pay state tax on Social Security, pensions, or retirement account withdrawals.

What you still owe in federal taxes

The absence of state income tax does not reduce your federal tax burden. You must file a federal income tax return with the IRS if your income exceeds the threshold set by the IRS for your filing status. For 2024, that threshold is $14,600 for a single filer under 65 and $23,200 for a married couple filing jointly under 65. These numbers change each year.

Federal tax rates, deductions, and credits work the same in North Dakota as everywhere else. Your W-2 forms, 1099 forms, and other income documents go to the IRS. You can file your federal return online, by mail, or through a tax preparer. The IRS does not care which state you live in — only your total income matters.

How North Dakota funds state services without income tax

North Dakota replaced income tax revenue with other sources. The state sales tax is 5.5 percent, and most purchases are taxable. Cities and counties can add local sales tax on top of that, raising the total to between 5.5 and 7.5 percent depending on where you shop. Groceries are taxed at a lower rate (2 percent) in North Dakota.

Property tax is the second major revenue source. North Dakota homeowners and renters (through their landlords) pay property tax to their county. The rate varies by county and by property type. Businesses pay corporate income tax at a rate of 4.4 percent on net income. The state also collects taxes on oil and gas extraction, which is significant in western North Dakota.

Working across state lines: which state taxes you

If you live in North Dakota but work in another state, that other state may tax your income. Most states tax income earned within their borders, regardless of where the worker lives. For example, if you live in North Dakota and work in Minnesota, Minnesota will tax your wages. You would file a Minnesota state return and claim a credit on your federal return for taxes paid to Minnesota.

The reverse is also true: if you live in another state and work in North Dakota, you do not owe North Dakota income tax because North Dakota has none. However, you still owe income tax to your home state. A few states have reciprocal agreements that reduce or eliminate tax on workers who cross the border, but North Dakota does not participate in these agreements.

Retirement income and Social Security in North Dakota

North Dakota does not tax Social Security benefits, pension income, or withdrawals from retirement accounts like 401(k)s and IRAs. This applies to both state and local taxes. If you are retired and receiving a pension from a former employer, that income is not subject to North Dakota state tax. The same is true for distributions from a traditional or Roth IRA.

You still owe federal tax on most retirement income. Social Security benefits may be taxable at the federal level depending on your total income, and traditional IRA and 401(k) withdrawals are taxed as ordinary income by the IRS. North Dakota simply does not add a state layer on top of the federal tax.

Self-employment and business income

If you are self-employed or own a business in North Dakota, you do not owe North Dakota state income tax on your business profits. However, you must pay federal self-employment tax (Social Security and Medicare) and federal income tax on your net business income. You file Schedule C with your federal return to report business income and expenses.

North Dakota does tax corporations at 4.4 percent on net income. If your business is structured as a corporation (not a sole proprietorship or LLC), you file a corporate return with the state. If your business is a sole proprietorship, partnership, or pass-through entity like an LLC or S-corp, the business itself does not owe North Dakota tax, but you may owe federal tax on your share of the profits.

Moving to or from North Dakota

If you move to North Dakota during the year, you do not owe North Dakota state income tax for that year or any year after. If you move away from North Dakota, you do not owe North Dakota tax on income earned after you leave. Your federal tax obligation depends on your citizenship and residency status, not on which state you live in.

When you move, update your address with the IRS and with your employer's payroll department. Your employer uses your address to determine which state tax forms to send you. If you move from a state with income tax to North Dakota, you may need to file a final return in your former state for the portion of the year you lived there.

Frequently Asked Questions

Do I still have to file taxes if I live in North Dakota?

You must file a federal return with the IRS if your income exceeds the threshold for your filing status. You do not file a state return to North Dakota. You may also owe taxes to another state if you worked there during the year.

What if I work in North Dakota but live in another state?

You do not owe North Dakota income tax because North Dakota has none. You owe income tax to your home state. File a return in your home state and claim a credit for any taxes withheld by North Dakota employers (though North Dakota employers do not withhold state tax).

Are property taxes high in North Dakota to make up for no income tax?

North Dakota property tax rates vary by county. The state does not publish a single statewide rate. Compare your county's rate to neighboring states to see how it ranks. Sales tax and corporate tax also fund state services alongside property tax.

Is Social Security taxed in North Dakota?

North Dakota does not tax Social Security benefits at the state level. You may owe federal tax on your benefits depending on your total income. Check with the IRS or a tax preparer about your federal obligation.

Do I need to file a state return when I move to North Dakota?

No. North Dakota has no state income tax, so you never file a state return there. If you moved from another state, you may need to file a final return in that state for the months you lived there.