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Official Tax Guide

North Dakota Taxes 2025: Income, Sales, and Property Tax Guide

Complete guide to North Dakota state taxes. Income tax (1.1% - 2.9%), sales tax, and what you need to know before moving.

Updated January 15, 2026
5 min read

State Tax Guide 2025: North Dakota

Welcome to your essential tax guide for North Dakota. Whether you are relocating for work, family, or a lower cost of living, understanding the state's tax structure is crucial for financial planning. North Dakota is known for having a relatively low tax burden compared to the national average, featuring a progressive income tax and no local sales taxes.

This guide provides an overview of the tax landscape for 2025 based on current laws and rates.

1. Income Tax

North Dakota utilizes a progressive income tax system with relatively low rates. While there has been discussion about moving to a flat tax, as of 2025, the state retains a bracketed structure.

  • Tax Structure: Progressive (rates increase as income rises).
  • Tax Rates (2025 Estimate): 1.1% – 2.9%
    • North Dakota’s income tax brackets are relatively narrow. The highest rate of 2.9% kicks in at a relatively modest income level compared to other states.
  • Filing: Residents file North Dakota Form ND-1 alongside their federal tax return. The state generally conforms to federal definitions of taxable income, making filing straightforward for those familiar with IRS rules.

2. Sales Tax

North Dakota’s sales tax is a key feature of its revenue system, though it remains moderate compared to many other states.

  • State Rate: 5%
  • Local Taxes: None. Unlike many states where cities or counties add significant surcharges, North Dakota prohibits local sales taxes. This means the sales tax rate is uniform across the entire state at 5%.
  • Exemptions:
    • Groceries: Food for home consumption is exempt from sales tax.
    • Prescription Drugs: Generally exempt.
    • Clothing: Taxable, though occasional sales tax holidays may occur.

3. Property Tax

Property taxes in North Dakota are primarily levied by local jurisdictions (counties, school districts, and cities) to fund public services.

  • General Context: North Dakota property tax rates are generally considered moderate when compared to the national average.
  • Assessment: Property is assessed at a percentage of its market value.
    • Residential: 9% of market value.
    • Agricultural/Rural Land: 5% of market value.
  • Homestead Credit: North Dakota offers a property tax credit for owner-occupied primary residences (the "Homestead Credit"). Eligible homeowners can receive a credit of up to $1,500 annually against their property taxes, provided they meet income and residency requirements.

4. Other Taxes

Beyond income and sales tax, new residents should be aware of the following:

  • Gas Tax:
    • Gasoline: 23 cents per gallon.
    • Diesel: 23 cents per gallon.
    • Note: This is significantly lower than the national average, contributing to lower transportation costs.
  • "Sin" Taxes:
    • Tobacco: Cigarettes are taxed at a rate of $0.425 per pack. Other tobacco products are taxed at 28% of the wholesale price.
    • Alcohol: Taxes vary by type (beer, wine, spirits) but are generally moderate.
  • Inheritance/Estate Tax:
    • North Dakota does not have a state-level inheritance tax or estate tax. Beneficiaries generally do not pay state tax on inherited assets.
  • Oil Production Tax:
    • While not a direct tax on individuals, North Dakota imposes a significant oil extraction tax. This revenue largely funds the state’s budget and infrastructure, reducing the reliance on personal income and sales taxes.

5. Retiree Taxes

North Dakota is a retiree-friendly state regarding income tax.

  • Social Security: Social Security benefits are exempt from North Dakota state income tax.
  • Pensions & 401(k)s: Retirement income, including private pensions and distributions from 401(k)s and IRAs, is taxable. However, the rates are low (capping at 2.9%), and the state offers a low-income credit that may benefit some retirees.
  • Property Tax Relief: As mentioned, the Homestead Credit provides significant relief for qualifying senior homeowners.

6. Comparison to Neighbors

How does North Dakota compare to its immediate neighbors?

  • Minnesota (East): Minnesota has a significantly higher income tax structure (rates up to 9.85%) and allows local sales taxes. North Dakota is generally much more tax-friendly for high-income earners and shoppers.
  • Montana (West): Montana has no general sales tax (but allows local resort taxes) and has a progressive income tax with higher top rates (up to 6.75%). North Dakota has lower income tax rates but imposes a 5% sales tax.
  • South Dakota (South): South Dakota has no income tax and no local sales taxes (state rate is 4.5%). While South Dakota is slightly cheaper for income and sales tax, North Dakota offers a more robust Homestead property tax credit for seniors.
  • Canada (North): Provincial taxes in Canada are generally higher and include various consumption taxes (GST/HST) not present in the U.S.

Disclaimer: Tax laws are subject to change and can vary based on individual circumstances. The information provided in this guide is for educational purposes only and reflects 2025 estimates based on current legislation. We strongly recommend consulting with a Certified Public Accountant (CPA) or tax professional for advice specific to your financial situation before moving or filing taxes.