North Dakota Tax Rates

This post provides an overview of the primary taxes levied at the state level in North Dakota. The state is known for its relatively low individual income tax rates and lack of an estate or inheritance tax. For individuals or businesses seeking comprehensive support with tax filings, compliance, or strategic planning, indinero offers expert services. We encourage all who utilize this summary to explore the tailored tax support available through indinero.

Individual Income Tax

North Dakota utilizes a graduated state individual income tax system, with rates that are low compared to the national average.

  • State Rates (2025): The system has four main brackets, with rates ranging from a low of 0.00% on the first segment of income to a top marginal rate of 2.50% on income over a high threshold. The intermediate rate is 1.95%.
    • The 0.00% bracket provides a significant exemption on the lowest tier of taxable income.
    • The top rate of 2.50% applies to taxable income over $244,825 for single filers and $298,075 for married couples filing jointly (2025 rates).
  • Local Income Tax: North Dakota does not impose a local or county income tax.
  • Retirement Income: Social Security benefits are not taxable in North Dakota. Income from pensions, 401(k) distributions, and IRAs is generally taxable, but military retirement pay is fully exempt.

Sales and Use Tax

Sales tax combines a standard state rate with substantial local additions, resulting in a variable combined rate.

  • State Rate: The general state sales tax rate is 5.00% on the retail sale of most tangible personal property and certain services.
    • There are special rates for some items, such as a 7.0% gross receipts tax on alcohol and a 3.0% tax on new farm machinery and mobile homes.
  • Local Taxes: Cities and counties may levy additional local sales and use taxes, with a maximum local rate allowed up to 3.50%.
  • Combined Rate: The combined state and local sales tax rate can range from the state base of 5.00% up to approximately 8.50% in the highest-taxed municipalities. The average combined rate is around 7.08%.
  • Exemptions: Key exemptions include groceries (unprepared food for home consumption) and most professional services.
  • Use Tax: A state use tax of 5.00% plus the applicable local rate applies to taxable items purchased outside of North Dakota but used, stored, or consumed in the state if North Dakota sales tax was not collected.

Property Tax (Ad Valorem Tax)

Property taxes in North Dakota are collected exclusively at the local level by counties, school districts, and cities. The effective property tax rate is generally near the national average.

  • Assessment: The assessed value of all real property in North Dakota is equal to 50% of the market value.
  • Taxable Value: The taxable value is then calculated by applying a percentage ratio (the classification rate) to the assessed value, which is typically 9% for residential property.
  • Tax Calculation: The final tax is determined by applying the local mill rate (set by local budgets) to the taxable value.
  • Exemptions: All personal property (e.g., inventory, machinery, equipment, vehicles) is exempt from property taxation, with the exception of certain oil/gas refineries and utilities.
  • Credits and Exemptions: Significant relief is provided through programs like the Senior Citizen and Disabled Homeowners Property Tax Credit and the Disabled Veterans Credit.

Corporate Income Tax

North Dakota imposes a graduated corporate income tax on corporations doing business or deriving income from the state.

  • Tax Rates: The corporate income tax uses a graduated structure with three tiers:
    • 1.41% on the first $25,000 of taxable income.
    • 3.55% on income between $25,000 and $50,000.
    • 4.31% on income over $50,000.
  • Pass-Through Entities: S corporations and partnerships do not pay income tax at the entity level; instead, the income is passed through to the owners and taxed at the low individual income tax rates.
  • Apportionment: For multi-state corporations, North Dakota determines taxable income using an equally weighted three-factor apportionment formula (property, payroll, and sales).

Unique and Excise Taxes

  • Oil and Gas Taxes: The state levies significant taxes on oil and gas production, including the Oil Extraction Tax and the Oil and Gas Gross Production Tax, which are in lieu of property taxes on the oil and gas interests.
  • Motor Vehicle Excise Tax: Instead of state and local sales taxes, the purchase of licensed motor vehicles is subject to a 5.0% motor vehicle excise tax on the purchase price or fair market value.
  • No Estate or Inheritance Tax: North Dakota does not impose a state-level estate tax or inheritance tax.

R&D Offer Quiz

Step 1 of 3

Answer to find out if you're eligible for R&D tax credits.

Do the activities performed relate to a new or improved business component’s function, performance, reliability, quality, or composition?(Required)
For Example: A mid-sized packaging company develops a slightly modified cardboard box design to improve its stacking strength (reliability) for warehouse storage, involving minor adjustments to the corrugation pattern to reduce collapse under standard weight loads.
Is your company trying to discover information to eliminate uncertainty concerning the capability or method for developing or improving a business component?(Required)
For Example: A furniture manufacturer investigates whether a cheaper wood adhesive can hold joints as effectively as the current one during assembly, testing bond strength to resolve doubts about its capability in standard production lines.
Do the activities performed constitute a process of experimentation?(Required)
For Example: An auto parts supplier runs a series of bench tests on different lubricant formulations to find one that reduces friction in engine bearings more effectively, systematically comparing wear rates over simulated operating cycles.