What’s new in North Dakota for 2026: the federal law flows through, the brackets move up

The biggest North Dakota income tax change of 2026 was passed in Washington. Form ND-1 begins with federal taxable income, line 15 of Form 1040, and the Office of State Tax Commissioner’s own instructions say federal changes to taxable income flow into the state return by default. So the new federal deductions for tips, overtime, people 65 and older, car-loan interest and the $40,000 cap on state and local taxes all reduce North Dakota tax for 2026, with nothing to add back and nothing to elect. The Legislature did not meet in regular session in 2026 and did not decouple from any of it. Beyond that, the three brackets were indexed upward, employers stopped withholding North Dakota tax on exempt military pay, and the property tax credit on a primary residence is $1,600. The rates themselves, 0%, 1.95% and 2.5%, did not move.

If you filed a North Dakota return last year, this year’s will look the same. The difference is in the number carried over from the federal return on line 1b, which for a tipped worker, an hourly employee with overtime, or a couple in their late sixties will be smaller than it would have been under the old federal law. For most North Dakota households the state tax on that difference is 1.95%, and for a great many it is nothing, because the first $49,575 of a single filer’s taxable income and the first $82,800 of a joint return’s is taxed at 0%.

The 2026 brackets

North Dakota indexes its bracket thresholds every year, and the Department published the 2026 figures in the 2026 Form ND-1ES. The rates stay the same; the dollar bands move up.

Source: 2026 Form ND-1ES rate schedules. “Taxable income” here is North Dakota taxable income, Form ND-1 line 18: federal taxable income plus the state additions, minus the state subtractions. The last column is what the Department’s schedule shows as the tax owed by someone whose income reaches the bottom of the 2.5% band.

The 2025 thresholds were lower; the exact 2025 figures are in the 2025 Form ND-1 booklet’s rate schedules. The practical effect of the indexing is that a household whose income kept pace with inflation pays about the same state tax as last year, and a household whose income stood still pays a little less.

The federal law of July 2025 reaches Form ND-1

The 2025 Form ND-1 booklet’s What’s New section says it plainly: North Dakota taxable income follows federal taxable income, so federal changes flow through by default, and it names the higher standard deduction, the $40,000 state and local tax deduction limit and the tip and overtime exclusions as changes that carry over. It adds that federal credit changes do not affect North Dakota credits. The rule is the same for every item in the July 2025 federal law that changes line 15 of the 1040.

The federal rules, limits and phase-outs are federal matters and are covered in the federal articles linked below. The point for North Dakota is simpler: if a deduction lowered line 15 of your Form 1040, it lowered your North Dakota tax.

The Tax Commissioner’s office has put a price on the pass-through. Its estimates for the state revenue cost, reported in April 2026, were about $13 million a year for the overtime deduction, $4 million for the senior deduction and $1 million for tips (verify). Those are small numbers against the state budget, which is one reason nobody in Bismarck has moved to stop them.

Military pay: no more state withholding

Active-duty, reserve and National Guard pay has been exempt from North Dakota income tax for several years, claimed on Form ND-1 line 11. What changed is the paycheck. The 2025 booklet announces that beginning with tax year 2026, qualifying military pay is exempt from North Dakota withholding, so servicemembers will stop seeing state tax taken out and stop having to file for its return. An employee who wants withholding anyway, for example a Guard member with other North Dakota income, can still ask for it.

The same booklet confirms the military retirement exclusion on line 14 for retired servicemembers and for surviving spouses of retired servicemembers: the taxable military retirement benefits reported on federal line 5b come off in full. Retirement pay from the reserves and National Guard counts.

Property tax: the $1,600 Primary Residence Credit

This is not on the income tax return, but it is the largest state tax change most North Dakota homeowners felt in 2026. The 2025 Legislature raised the Primary Residence Credit from $500 to up to $1,600 a year, and the Department opened the first application window at the new amount on January 1, 2026, closing April 1, 2026. The credit has no age or income test; the home has to be owned and occupied as the primary residence, and there is one credit per household. It is applied to the property tax statement, not paid in cash, and cannot exceed the tax due. The application is online only, at tax.nd.gov/prc, and has to be made every year. The 2027 window is expected to open January 1, 2027 (verify). The same 2025 law capped most local property tax budget increases at 3% a year (verify).

The older programs continue alongside it. The Homestead Property Tax Credit, for homeowners 65 or older or permanently and totally disabled with household income of $70,000 or less, removes up to $9,000 of taxable value (100% for income to $40,000, 50% for $40,001 to $70,000) and is applied for with the county by March 31. The Renter’s Refund, same age, disability and income tests, pays up to $600 and is filed with the Department by May 31. A homeowner can stack the Homestead credit and the Primary Residence Credit; the Department applies the Homestead credit first and the Primary Residence Credit to whatever remains, up to $1,600.

Withholding tables for 2026

The Department issued 2026 withholding tables with the same two rates, 1.95% and 2.5%, and a $5,050 annual allowance. North Dakota has no state withholding certificate; employers work from the federal Form W-4. If your 2025 refund from the state was large, the reason is usually that the tables withhold on wages alone while the return takes off Social Security, military retirement, 40% of long-term gains and the College SAVE deduction. There is no state form to fine-tune that; the adjustment, if you want one, is made on the federal W-4.

What did not change

The rates. 0%, 1.95% and 2.5%, as set in 2023. No bill to change them could pass in 2026 because the Legislature was not in regular session; the next session begins in January 2027.

Social Security. The taxable portion is subtracted in full on line 15 at any income, as it has been since the 2021 special session removed the old income limits.

The 40% exclusion of net long-term capital gain on line 6 and of qualified dividends on line 13.

The College SAVE deduction of $5,000 per return, $10,000 married filing jointly, on line 12. Rollovers from another 529 plan do not count.

The marriage penalty credit on line 22 for two-earner joint filers. It is indexed, so the 2026 thresholds and maximum will differ from 2025’s ($81,036 of joint taxable income, $47,550 for the lower earner, maximum about $312). The 2026 figures will appear in the 2026 Form ND-1 booklet, expected around the turn of the year; they are “to come” as of this writing.

No state earned income credit, child credit or dependent care credit. The 2025 federal law changed the federal versions of these; North Dakota never had its own, and the booklet is explicit that federal credit changes do not reach the state return.

No decoupling. North Dakota did not break from any of the new federal deductions or from 100% bonus depreciation, and had no session in which to do so. Whether the 2027 Legislature takes any of it up is an open question (verify).

The November 3, 2026 ballot

Nothing on it concerns taxes. The two statewide questions are Constitutional Measure 1, which would require a 60% vote to adopt constitutional amendments, and Constitutional Measure 2, a citizen-initiated measure for free school breakfast and lunch (verify). No income tax or property tax measure qualified. The 2024 measure to abolish property taxes, which failed, was not refiled.