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 residents do not pay a state income tax to North Dakota, regardless of how much they earn or what type of work they do. However, the absence of income tax does not mean North Dakota has no state taxes at all — the state collects revenue through other methods.
If you live or work in North Dakota, you will still owe federal income tax to the U.S. government. Your employer will withhold federal tax from your paycheck just as they would in any other state. The difference is that North Dakota will not withhold a separate state income tax.
Key Takeaways
- North Dakota has no state income tax on wages, salaries, or personal income of any kind.
- You still owe federal income tax and must file a federal return each year if your income meets the threshold.
- North Dakota funds state services through sales tax, property tax, corporate taxes, and other levies instead of income tax.
- If you moved to North Dakota from another state, you do not need to file a state income tax return.
- Retirement income, including Social Security and pensions, is not taxed by North Dakota.
What taxes does North Dakota collect instead
Without income tax, North Dakota relies on other revenue sources to fund schools, roads, and state services. The state collects a sales tax of 5 percent on most goods and services. Many cities and counties add their own local sales tax on top of this, bringing the total to between 5 and 8.75 percent depending on where you shop.
North Dakota also collects property tax, which is assessed on real estate and sometimes on personal property like vehicles. Property tax rates vary by county and municipality. The state also taxes corporations, banks, and insurance companies, and collects excise taxes on items like fuel, alcohol, and tobacco.
These taxes together generate the revenue North Dakota uses for state operations. If you own a home or business in North Dakota, you will encounter property tax. If you buy goods in the state, you will pay sales tax at checkout.
How federal income tax works if you live in North Dakota
Even though North Dakota has no state income tax, you must still file a federal income tax return with the IRS if your income exceeds the annual threshold. For 2024, that threshold is $14,600 for a single filer and $29,200 for a married couple filing jointly, though these amounts change each year.
Your employer will withhold federal tax from each paycheck based on the W-4 form you complete when hired. You can adjust your withholding at any time by submitting a new W-4 to your employer. At the end of the year, you file Form 1040 with the IRS to report your income and either receive a refund or pay any remaining tax owed.
North Dakota does not interfere with this process — you deal directly with the federal government. You will not file a separate state return or owe anything to North Dakota based on your income.
Retirement income and Social Security in North Dakota
North Dakota does not tax Social Security benefits, pensions, or retirement account withdrawals. If you are retired and receiving Social Security, a pension from a former employer, or distributions from an IRA or 401(k), North Dakota will not take a state income tax on that money.
You may still owe federal income tax on some retirement income depending on your total income and the type of account. Social Security benefits are taxed by the federal government only if your combined income exceeds certain thresholds. Withdrawals from traditional IRAs and 401(k)s are taxed as federal income. But North Dakota adds nothing on top of the federal tax.
This makes North Dakota attractive to retirees, since the lack of state income tax means more of your retirement savings stays in your pocket.
Moving to North Dakota from another state
If you relocate to North Dakota from a state that has income tax, you will no longer owe that state's income tax once you establish North Dakota residency. Residency is typically established when you move your permanent home to the state, register your vehicle there, and update your address with the IRS.
In your first year after moving, you may owe income tax to your former state for the portion of the year you lived there. You will file a part-year resident return in that state showing income earned only during the months you lived there. North Dakota will not tax you for any part of the year.
Keep records of your move — a lease or deed, utility bills, and vehicle registration — in case either state questions when you became a resident. Most states accept the date you physically moved as your residency change date.
Self-employment and business income in North Dakota
If you are self-employed or own a business in North Dakota, you do not pay state income tax on your business profits. However, you still owe federal self-employment tax and federal income tax on your business income.
You will file Schedule C with your federal return to report business income and expenses. You will also pay self-employment tax (Social Security and Medicare tax) to the federal government, which is roughly 15.3 percent of your net profit. North Dakota will not add a state income tax on top of this.
North Dakota does tax corporations and certain business entities separately, so the structure of your business matters. A sole proprietorship or partnership does not pay a separate business tax, but an S-corporation or C-corporation may have different obligations. Consult a tax professional if you are unsure about your business structure.
Frequently Asked Questions
Do I still have to file taxes if I live in North Dakota?
Yes, you must file a federal income tax return with the IRS if your income exceeds the annual threshold, which is $14,600 for a single filer in 2024. You do not file a state return with North Dakota. Your employer withholds federal tax from your paycheck automatically.
What if I work in North Dakota but live in another state?
You owe income tax to the state where you live, not to North Dakota. Your employer will withhold tax based on your home state's rules. Some states have reciprocal agreements that allow you to file in your home state instead, but you should check with your home state's tax authority to be sure.
Are property taxes high in North Dakota since there is no income tax?
Property tax rates in North Dakota vary by county and municipality. Some counties have relatively low property taxes, while others are higher. The state average is moderate compared to other states, but your actual bill depends on your home's value and your local tax rate.
Is Social Security taxed in North Dakota?
No. North Dakota does not tax Social Security benefits. You may owe federal income tax on your benefits depending on your total income, but North Dakota will not take any state tax on them.
What happens if I move out of North Dakota?
Once you establish residency in another state, you no longer owe North Dakota income tax. If you move partway through the year, you may owe income tax to your new state for the months you lived there. Keep documentation of your move date in case either state questions your residency.