Tax in North Dakota: a complete guide
If you’re moving to North Dakota or simply want to get your head around how tax works in the state, this guide will give you all the details you need, from how much people pay to how it will impact your overall cost of living.
North Dakota income tax
As you’re probably already aware, if you’re a taxpaying US citizen, federal tax laws apply to you regardless of the state you choose to call home, and following tax law is essential. There are seven different federal income tax brackets as of 2023, which primarily dictate how much you’ll owe each tax year.
Additionally, North Dakota charges state income tax. In 2023, these marginal income tax brackets will reduce from five to three, taking the rates between 1.10 percent and 2.90 percent to 1.95 percent and 2.5 percent. The new marginal tax brackets are broken down as follows:
| Scenario | Taxable income | State income tax amount |
|---|---|---|
| Scenario | Taxable income | State income tax amount |
| A single filer | $0–$44,725 | $0, and 0 percent over $0 |
| $44,725-$222,975 | $0, and 1.95 percent over $44,725 | |
| $225,975 + | $3,534.38, and 2.50 percent over $225,975 | |
| Married filing jointly | $0–$74,740 | $0, and 0 percent over $0 |
| $74,740-$275,100 | $0, and 1.95 percent over $74,740 | |
| $275,100+ | $3,906.83, and 2.50 percent over $275,100 | |
| Married filing separately | $0–$37,375 | $0, and 0 percent over $0 |
| $37,375-$137,550 | $0, and 1.95 percent over $37,375 | |
| $137,550 + | $1953.41, and 2.50 percent over $137,550 | |
| Head of Household | $0–$59,950 | $0, and 0 percent over $0 |
| $59,950-$250,550 | $0, and 1.95 percent over $59,950 | |
| $250,550 + | $3,716.70, and 2.50 percent over $250,550 |
EY Tax News Update
North Dakota also charges state corporate tax. These brackets are broken down as follows:
| Taxable income amount | Tax rate |
|---|---|
| Taxable income amount | Tax rate |
| $0+ | 1.7 percent |
| $25,000+ | 4.34 percent |
| $50,000+ | 5.2 percent |
North Dakota sales tax
North Dakota imposes a five percent statewide sales tax rate for retail sales. Similarly to income tax, local jurisdictions and areas can charge their own sales tax, up to 3.5 percent. This means depending on where you live in North Dakota, you could pay sales tax of up to 8.5 percent.
Certain items are exempt from sales tax, including groceries, prescription drugs, and diapers, as of July 1, 2023.
Meanwhile, other items are subject to different state sales tax rates. These include:
Alcohol is taxed at seven percent.
New farm machinery for agriculture production is taxed at three percent.
New mobile homes are taxed at three percent.
North Dakota property tax
If you plan to buy a home in North Dakota, you must pay property tax and understand how it works in the state.
Property tax is dependent on where you live in the state. They are based on the value of your property. This is determined by local assessors annually. This value equals 50 percent of market value, with the taxable value at nine percent for residential property. This means residential property taxes are based on 4.5 percent of market value.
North Dakota motor tax
All vehicle purchases in North Dakota fall under the sales tax umbrella.
Whether buying new or used, you must pay that five percent sales tax and any applicable local sales taxes before registering a vehicle in your ownership. You may also incur additional costs, including registration, title, and plate fees.
As for fueling your new vehicle? Retailers and consumers must pay a motor vehicle fuel tax of 23 cents per gallon.
North Dakota estate tax
Estate tax might massively reduce the amount you can leave to your next of kin, and inheritance tax could reduce the amount they can receive. Thankfully, there are only 13 states currently levying an estate tax (and six currently levying an inheritance tax), and North Dakota is not one of them.
Regardless of where you reside in the US, however, you must follow federal rules and requirements.
North Dakota retirement tax
Colorado is considered marginally retiree-friendly.
As in many states, Social Security benefits are tax-free. However, other retirement income, such as withdrawals from your retirement accounts, including your 401(k) or IRA, is taxed.
Seniors in North Dakota can also avail of a number of tax benefits, including the homestead credit, a property tax relief program that can reduce property taxes for seniors. There are also several sales tax exemptions aimed at helping seniors.
For those on a fixed income in retirement, North Dakota has a relatively low cost of living compared to many other states, making it an attractive destination. Housing, healthcare, and other expenses are generally more affordable in North Dakota than other regions. You can also check out the complete guide to retirement in North Dakota here.
For further tax guidance and to ensure you’re not paying more tax than you need to, it’s wise to speak to an expert. A financial advisor can help you handle all your tax queries and ensure you’re not paying more tax than needed.
Senior Content Writer
Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.