North Dakota for retirees: Social Security and military pensions untaxed, everything else inside the 0% bracket

North Dakota does not tax Social Security, at any age and at any income. It does not tax military retirement pay, including reserve and National Guard retirement and the survivor’s share. It does tax pensions, traditional IRA withdrawals and 401(k) distributions as ordinary income, but it taxes them on a schedule whose first bracket is zero: a married couple owes nothing until North Dakota taxable income passes $82,800 for 2026, a single filer nothing until $49,575. Because Form ND-1 starts from federal taxable income, the federal standard deduction, the extra standard deduction for age and the $6,000 senior deduction have all come off before the state looks at the number. Put the pieces together and a retired couple with $40,000 of Social Security, a $30,000 pension and $25,000 of IRA withdrawals owes North Dakota nothing, and has room for a $40,000 Roth conversion before the first dollar of state tax appears.

The rest of this article is the arithmetic behind that sentence, and the places where it stops being true: a large pension, a big taxable brokerage account, a conversion that overshoots the bracket, or a part-time job that pushes the total past the line.

What comes off, and what stays in

Every subtraction is of the federally taxable amount, not the gross. If only $34,000 of a $40,000 Social Security benefit is taxed federally, $34,000 is what is in federal taxable income and $34,000 is what comes off on line 15.

Social Security. The line 15 subtraction has had no income limit since tax year 2021, when the Legislature’s special session repealed the $50,000 single and $100,000 joint AGI caps that applied for 2019 and 2020. The subtraction is automatic in the sense that no application or age test is involved, but it is not automatic in software: the preparer has to carry line 6b to line 15, and a return that skips it overstates North Dakota taxable income by the whole benefit.

Military retirement. Line 14 removes the taxable military retirement benefit shown on the 1099-R, for the retiree or for a surviving spouse receiving it, with no cap. Reserve and National Guard retirement qualifies. The 1099-R attaches to the return. Civil service and other federal civilian pensions do not qualify; they are ordinary pensions here.

Pensions and IRAs. There is no general retirement income subtraction and no age-based exclusion. A $60,000 state pension is $60,000 of North Dakota taxable income before the bracket is applied. What protects it is the width of the 0% bracket and the fact that the federal deductions have already come off. A single retiree with the $16,100 standard deduction, the age addition and the $6,000 senior deduction has roughly $24,000 of federal deductions and $49,575 of 0% bracket, so about $73,000 of pension and IRA income is untaxed by the state before any Social Security is counted. For a couple the equivalent figure is about $130,000.

The federal senior deduction reaches North Dakota

The $6,000 deduction for each person 65 or older, in effect federally for 2025 through 2028, is taken below the AGI line, alongside the standard or itemized deduction. In a state that starts its return from AGI it would be invisible. North Dakota starts from taxable income, so the deduction has already reduced the state starting figure by $6,000 per person, $12,000 for a couple, with no state entry and no add-back. The 2025 ND-1 booklet lists the larger standard deduction with its extra $6,000 for seniors among the federal changes that flow into the state return. The same is true of the extra standard deduction for age that has existed for years. For a retiree in the 1.95% bracket the senior deduction is worth $117 a year of state tax, on top of its federal value; for a retiree still in the 0% bracket it is worth nothing more, because there was nothing to save.

Roth conversions

A Roth conversion is a traditional IRA distribution reported on Form 1040 line 4b, and North Dakota taxes line 4b like any other IRA distribution: it stays in taxable income. The state cost of a conversion is therefore 0% until the couple’s North Dakota taxable income passes $82,800, 1.95% from there to $304,850, and 2.5% beyond. For most retirees that makes the state side of the conversion decision small, and often zero. A couple whose taxable income after the Social Security subtraction is $30,000 can convert $52,800 at no state cost at all, and the next $100,000 costs $1,950.

The planning point is to fill the 0% bracket every year rather than convert in one lump. A $200,000 conversion in a single year puts $147,200 of it into the 1.95% bracket and costs $2,870 of state tax; the same $200,000 converted at $50,000 a year over four years, by a couple with $30,000 of other taxable income, costs nothing. The federal side still governs the decision: a conversion raises AGI, which can make more Social Security taxable, raise Medicare premiums two years later through IRMAA, and above $150,000 of joint modified AGI begins to phase out the $6,000 senior deduction. Those effects are federal and are covered in Roth IRAs and IRMAA. North Dakota adds nothing to them except the bracket arithmetic above.

Capital gains in retirement

Retirees who live partly on a taxable brokerage account get the state’s most generous treatment of investment income. Forty percent of net long-term capital gain comes off on line 6, figured on the worksheet in the booklet from the smaller of Schedule D lines 15 and 16, and 40% of qualified dividends comes off on line 13. The remaining 60% is taxed at the ordinary bracket. For a couple already in the 1.95% bracket the effective state rate on a long-term gain is 1.17%; for a couple inside the 0% bracket it is zero. The sale of a home is governed by the federal exclusion, up to $250,000 single and $500,000 joint; any gain above it is a long-term gain here with the same 40% off. Short-term gains, and the ordinary income from selling a rental’s depreciation recapture, get no exclusion.

Relief on the property tax bill

North Dakota’s largest program for retirees is not on the income tax return. It is on the property tax statement, and it comes in three pieces, two of them with age tests.

The Primary Residence Credit was raised from $500 (verify) to $1,600 by the 2025 Legislature, which also capped most local property tax budget growth at 3% a year. The credits stack: the Homestead credit and any Disabled Veterans credit apply first, and the Primary Residence Credit covers up to $1,600 of what remains.

The household income test for the Homestead credit and the Renter’s Refund counts income the income tax ignores, Social Security included, and it is the household’s income, spouse and dependents too. A couple with $45,000 of Social Security and a $20,000 pension is at $65,000 and qualifies for the 50% tier; add a $10,000 IRA withdrawal and they are over. The Department’s page gives a renter’s example: $800 a month of rent, $9,600 a year, and $35,000 of income produces $1,920 minus $1,400, a $520 refund. Heat, utilities and furniture included in the rent are subtracted before the 20% is figured.

The Primary Residence Credit has no age or income test and the application window opens every January 1. The one approved during the January 1 to April 1, 2026 window appears on the property tax statement mailed in December 2026; the window for the 2027 statement opens January 1, 2027. The Department answers questions at 701-328-7988 for anyone without internet access.

Withholding and estimated payments in retirement

Most retirees never owe North Dakota tax and should not have it withheld from a pension or IRA. Those who do owe, because a pension or large RMDs carry them past the 0% bracket, usually owe a few hundred dollars and fall short of the estimated payment rules, which require both last year’s and this year’s tax to reach $1,000 after withholding. A retired couple would need roughly $134,000 of North Dakota taxable income to owe $1,000. Anyone above that line, typically a couple with a large pension and a big taxable account, pays in quarters with Form ND-1ES on April 15, June 15, September 15 and January 15, or asks the pension payer to withhold North Dakota tax.

Moving in, moving out

Federal law bars a state from taxing the retirement income of someone who no longer lives there, so a pension earned elsewhere and paid to a new North Dakota resident is North Dakota’s to tax, on North Dakota’s terms: Social Security and military retirement exempt, the rest inside the 0% bracket. In the year of the move, Schedule ND-1NR allocates pension and IRA payments by where the retiree lived when each was received, and the tax is the full-year tax times the North Dakota share of income. A retiree who leaves the state stops owing North Dakota tax on the pension the day residency ends. The residency rules, including the 210-day rule that catches people who keep a North Dakota home, are in Moving to North Dakota.