North Dakota does not have a state income tax

North Dakota is one of nine states that does not collect income tax on wages, salaries, or other personal income. This means you will not owe North Dakota state income tax on money you earn, regardless of whether you work in the state or live there year-round.

However, North Dakota does collect other taxes — including sales tax, property tax, and corporate income tax. The absence of state income tax does not mean you pay nothing to the state; it means your earnings themselves are not taxed at the state level.

Key Takeaways

  • North Dakota residents and workers do not pay state income tax on wages, salaries, or self-employment income.
  • North Dakota collects sales tax (currently 5 percent statewide, plus local additions), property tax, and corporate income tax instead.
  • If you work in North Dakota but live in another state, you still do not owe North Dakota income tax on your earnings.
  • Federal income tax is separate from state income tax and applies to all workers regardless of which state has no income tax.

What taxes North Dakota does collect

Without state income tax, North Dakota funds state services through other revenue sources. The state collects a sales tax of 5 percent on most purchases, though individual cities and counties can add their own local sales tax on top of that rate. Some counties add 1 to 2 percent, so the total you pay at checkout varies by location.

North Dakota also collects property tax on real estate and tangible personal property. Property tax rates vary by county and municipality. The state additionally taxes corporate income and has taxes on specific industries, such as oil and gas production.

Residents may also owe taxes on retirement income in certain circumstances, though North Dakota offers some exemptions for military pensions and other retirement sources. If you receive Social Security, that income is not taxed by North Dakota.

How this affects your federal taxes

The fact that North Dakota has no state income tax does not change what you owe to the federal government. You still file a federal tax return and pay federal income tax based on your income, filing status, and deductions — the same as someone living in a state that does collect income tax.

On your federal return, you may be able to deduct state and local taxes (called SALT) paid to North Dakota, though the federal deduction is capped at $10,000 per year. Since North Dakota has no income tax, your SALT deduction would come only from property tax and sales tax you paid during the year.

If you work in North Dakota but live elsewhere

If you live in another state and work in North Dakota, you do not owe North Dakota state income tax on your wages. North Dakota does not tax the income of non-residents who work within the state.

However, you will owe income tax to the state where you live. That state may tax your income even if you earned it in North Dakota. You should file a resident return in your home state and report all income, regardless of where it was earned. Some states offer credits for taxes paid to other states, so check your home state's rules to avoid double taxation.

If you live in North Dakota but work elsewhere

If you are a North Dakota resident but work in another state, you will owe income tax to that state on the income you earned there. You will not owe North Dakota state income tax because North Dakota does not have one.

You should file a resident return in the state where you worked and report your out-of-state income. North Dakota does not require a state income tax return because there is no state income tax to report. However, you may still need to file other North Dakota tax forms if you own property, operate a business, or owe other state taxes.

Other states without income tax

North Dakota is part of a small group of states with no income tax. The complete list includes Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. Each of these states funds government operations through sales tax, property tax, corporate tax, and other revenue sources instead.

Some of these states, like Alaska, have additional revenue from natural resource extraction. Others rely more heavily on sales and property taxes. The mix varies, but all nine states share the feature of not taxing individual income.

Frequently Asked Questions

Do I have to file a North Dakota tax return?

No. Since North Dakota has no state income tax, there is no state income tax return to file. However, you may need to file other forms if you own property, operate a business, or owe other North Dakota taxes like property tax or sales tax on business purchases.

Will I pay more in sales tax because there is no income tax?

North Dakota's 5 percent base sales tax is comparable to other states, though the total you pay varies by location because cities and counties add their own rates. Whether you pay more or less overall depends on your spending habits and the state you are comparing it to.

Are retirement accounts taxed differently in North Dakota?

North Dakota does not tax Social Security income. Military pensions and some other retirement income may also be exempt. However, withdrawals from traditional IRAs and 401(k)s are not subject to North Dakota tax because the state does not tax income. Consult a tax professional about your specific retirement income sources.

If I move to North Dakota, do I owe back taxes?

No. You only owe income tax to states where you actually lived or worked during the tax year. Moving to North Dakota does not create a tax debt. However, you may owe taxes to your previous state for the portion of the year you lived there.

Does North Dakota tax business income?

North Dakota does not tax individual income, but it does tax corporate income. If you operate a business as a sole proprietor or partnership, your business income is not subject to North Dakota state tax. C corporations and certain other business structures do owe North Dakota corporate income tax.