How North Dakota income tax works: federal taxable income, a 0% bracket, then 1.95% and 2.5%

North Dakota’s income tax is three brackets, and the first one is zero. For 2026 a single filer pays nothing on the first $49,575 of North Dakota taxable income, a joint return pays nothing on the first $82,800, and most households never get past that line. Above it the rate is 1.95%, and above $250,400 single or $304,850 joint it is 2.5%. The second thing to know explains almost everything else about the return: Form ND-1 starts from federal taxable income, line 15 of Form 1040, not from adjusted gross income. Every federal deduction that comes off below the AGI line, the standard deduction, itemized deductions, the $6,000 senior deduction, the new deductions for tips, overtime and car-loan interest, the qualified business income deduction, is already gone before North Dakota looks at the number. There is no state standard deduction, no personal exemption, no itemize-or-not choice, and no local income tax anywhere in the state.

The consequence is that a federal deduction is worth the same in Bismarck as in Washington, automatically, with no state entry. A tipped worker who owes no federal tax on $8,000 of tips owes no North Dakota tax on them either. The state return is short because the federal return has already done the work.

Who files

A full-year resident who has to file a federal return has to file Form ND-1, whether or not any tax is due and wherever the income came from; most filers in the 0% bracket have withholding to recover anyway. A nonresident files if there is North Dakota-source income; a part-year resident files if there was income while a resident or North Dakota-source income while a nonresident. Both attach Schedule ND-1NR. Residents of Minnesota and Montana who earn only wages here are the exception under the reciprocity agreements, covered in Moving to North Dakota. The filing status is the one used on the federal return. Form ND-EZ is the short version for full-year residents with no additions, subtractions, credits or estimated payments, and the Office of State Tax Commissioner accepts either.

Where it starts: federal taxable income

Line 1a of the ND-1 asks for federal adjusted gross income, but that figure is for information and for the nonresident ratio. The line that counts is 1b, federal taxable income from Form 1040 line 15. Taxable income is AGI after the standard or itemized deduction, after the 20% qualified business income deduction, and after the deductions Congress created in 2025: $6,000 per person 65 and older, qualified tips, qualified overtime, and interest on a loan for a new American-built car. All of them reduce line 15 and so reduce line 1b. The 2025 ND-1 booklet says so in as many words, listing the larger standard deduction with its extra $6,000 for seniors, the $40,000 SALT deduction and the tip and overtime exclusions among the federal changes that reach the North Dakota return. There is no add-back for any of them.

The federal standard deduction for 2026 is $16,100 single and $32,200 joint. A single worker earning $60,000 with nothing else has federal taxable income of $43,900, which is under $49,575, so North Dakota tax is zero before any state subtraction is even considered. The 0% bracket does the work a state exemption would do, and it does it on top of the federal deduction rather than instead of it.

Conformity is rolling: North Dakota taxable income is federal taxable income as the federal law defines it each year, plus state additions and minus state subtractions. Federal changes to credits do not carry over, because a credit does not change taxable income. A federal change to a deduction carries over the same day.

The additions

For a household return there is usually nothing to add. Line 2 takes back a charitable gift deducted federally if the same gift is being used for the state’s planned gift or endowment fund credit. Line 3 picks up the other additions from Schedule ND-1SA, mostly recaptures and business items. North Dakota has not decoupled from federal depreciation, so there is no bonus depreciation add-back.

The subtractions

This is where the return gives money back. Lines 5 through 16 are the state’s own list, and three of them do most of the work.

Nonresidents and part-year residents apply the 40% exclusions on lines 6 and 13 only to gain and dividends reportable to North Dakota. Line 7 exempts the reservation income of an enrolled tribal member living on a North Dakota reservation all year, and line 10 is the Servicemembers Civil Relief Act adjustment for nonresident military.

Social Security, line 15. Whatever part of Social Security was taxed federally comes off here in full, at any age and any income; the income limits that applied in 2019 and 2020 were repealed in the 2021 special session. Pensions, IRAs and 401(k) withdrawals have no line of their own; they stay in taxable income and rely on the 0% bracket. The full picture is in North Dakota for retirees.

Capital gains and dividends, lines 6 and 13. Forty percent of net long-term capital gain, as the federal Schedule D shows it, comes off on line 6 using the worksheet in the instructions; 40% of qualified dividends comes off on line 13. The other 60% is taxed at the ordinary rates. A $20,000 long-term gain is $12,000 of North Dakota taxable income, which costs $234 if the filer is already in the 1.95% bracket and nothing if not. Short-term gains get no exclusion.

College SAVE, line 12. Deposits to the state’s own 529 plan are deductible up to $5,000 a year on a single return and $10,000 on a joint one. Rollovers from another state’s plan do not count. Because the federal return asks nothing about 529 deposits, this is the subtraction most often forgotten.

The rates

Federal taxable income, plus additions, minus subtractions, is North Dakota taxable income on line 18. Full-year residents look it up in the tax table in the booklet; the table is built from the rate schedule below, which the Department published for 2026 with Form ND-1ES.

The thresholds are indexed each year. At the top of the 1.95% bracket a single filer owes $3,916.09 and a joint return owes $4,329.98; the 2.5% rate applies only to income above those lines.

The rates are marginal. A joint return with $100,000 of North Dakota taxable income owes 1.95% of the $17,200 above $82,800, which is $335, not 1.95% of $100,000. A joint return with $400,000 of taxable income owes $4,329.98 plus 2.5% of $95,150, which is $6,709, an effective rate under 1.7%. Wages, interest, rent, the taxable 60% of gains and dividends, pensions and IRA withdrawals are all taxed on the same schedule. No city, county or school district in North Dakota adds an income tax; the school district code on the ND-1 is for statistics.

The credits

North Dakota’s credits are nonrefundable and most households use none of them. Line 21 is the credit for income tax paid to another state, from Schedule ND-1CR, one schedule per state. Line 22 is the marriage penalty credit, which exists because the joint brackets are less than twice the single brackets: a two-earner couple whose joint taxable income and lower earner’s qualified income both exceed thresholds set each year gets a credit figured on a worksheet, up to a statutory $300 indexed for inflation. For 2025 the thresholds were $81,036 and $47,550 and the worksheet’s maximum reads $312; the 2026 figures are to come with the 2026 booklet. Line 23 is the total from Schedule ND-1TC: the adoption credit (10% of the federal credit, limited to half the North Dakota tax), the family member care credit, the partnership long-term care premium credit of up to $250 per insured spouse, and credits for gifts to endowment funds, private schools and pregnancy centers. There is no state earned income credit, child credit or dependent care credit; see Credits and breaks for North Dakota families.

Withholding and estimated payments

North Dakota has no withholding certificate of its own. Employers use the federal Form W-4 and the Department’s 2026 withholding tables, in which one allowance is worth $5,050 a year. For a wage earner with no other income the result is usually close, and often it is more than the tax, since the tables cannot know the filer will land in the 0% bracket. Starting in 2026, employers stop withholding North Dakota tax from military pay that qualifies for the line 11 exclusion, though a servicemember can ask for withholding anyway.

Estimated payments are required only when four things are all true: a federal estimated payment is required, last year’s North Dakota tax was $1,000 or more, this year’s tax after withholding is expected to be $1,000 or more, and withholding will be less than the smaller of 90% of this year’s tax (two-thirds for a qualified farmer) or 100% of last year’s. At these rates, $1,000 of tax means roughly $134,000 of joint taxable income, so most households never make one. Those who do pay a quarter each on April 15, June 15 and September 15, 2026 and January 15, 2027 with Form ND-1ES. Underpayment interest is 12% a year, figured on Schedule ND-1UT.

How to file

The 2026 return is due April 15, 2027. A federal extension is honored automatically: fill in the Extension circle on the ND-1 and file by October 15, 2027, with no state form. A state-only extension takes Form 101 by April 15 with good cause shown. Either way the extension is of time to file, not to pay, and interest at 12% a year runs from April 15 on any balance; Form ND-1EXT prepays it. Late payment without an extension draws a 5% penalty (minimum $5) plus 1% a month interest, and a late return costs 5% a month up to 25%. If the IRS changes a federal return, an amended ND-1 is due within 90 days, because every federal change to taxable income is a change to North Dakota taxable income. Refund status is on ND TAP, the Department’s online portal.

What trips people up

• Social Security left in North Dakota income because the software did not carry line 6b to line 15.
• Military retirement left in income. It comes off on line 14 in full, with the 1099-R attached.
• The 40% exclusions on lines 6 and 13 skipped. Nothing on the federal return prompts them.
• A College SAVE deposit nobody mentioned, because the federal return did not ask.
• A two-earner couple who never checked the marriage penalty credit worksheet.
• The extension treated as an extension to pay. Interest runs from April 15.
• A federal audit adjustment with no amended ND-1 within 90 days.
• Looking for the Primary Residence Credit on the income tax return. It is a property tax credit, applied for online between January 1 and April 1, and never touches Form ND-1.