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North Dakota Retirement Tax Friendliness

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Overview of North Dakota Retirement Tax Friendliness

Although many North Dakota residents paid state income taxes on their Social Security retirement benefits prior to the 2021 tax year, they no longer have to due to changes in state tax law. However, most forms of private retirement account income is taxable at the state level. Sales and property tax rates in North Dakota are close to the national average.

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You will pay of North Dakota state taxes on your pre-tax income of
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Quick Guide to Retirement Income Taxes
is toward retirees.
Social Security income is taxed.
Withdrawals from retirement accounts are taxed.
Wages are taxed at normal rates, and your marginal state tax rate is %.
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North Dakota Retirement Taxes

Photo credit: ©iStock.com/omersukrugoksu

North Dakota has one of the lowest population densities of any state. That means there are ample open spaces to explore, whether by foot, car, RV or snowmobile. If you plan on settling down in the state permanently for your retirement, you’ll have plenty of chances to see the Roughrider State, but you’ll also need to pay the North Dakota retirement taxes.

As of the 2021 tax year, North Dakota exempts Social Security retirement benefits from taxation. However, income from retirement accounts or a pension is taxable, although a portion of pension income may be deductible.

When it comes to sales and property taxes, retirees in North Dakota pay rates close to the national average. Thanks to the state’s relatively cheap housing, however, retirees may find buying a home in North Dakota to be an affordable proposition.

A financial advisor in North Dakota can help you plan for retirement and other financial goals. Financial advisors can also help with investing and financial planning - including taxes, homeownership, insurance and estate planning - to make sure you are preparing for the future.

Is North Dakota tax-friendly for retirees?

North Dakota is a somewhat tax-friendly destination for retirees. It recently became one of the states to stop taxing Social Security, though it still taxes most income from retirement accounts and pensions. That being said, income tax rates in North Dakota are quite low. The highest tax rate for any North Dakota taxpayer is just 2.9%.

North Dakota’s total state and average local sales tax rate is 6.96%, which ranks in the bottom half of U.S. states. Property tax rates are slightly below average, as are median home values.

Is Social Security taxable in North Dakota?

As of the 2021 tax year, North Dakota no longer taxes the Social Security retirement benefits of its residents.

Are other forms of retirement income taxable in North Dakota?

Income from a retirement account, like a 401(k) or an IRA, is taxable, as is private and public pension income. Otherwise, retirement income is taxed at the rates shown in the table below:

Income Tax Brackets

Single Filers
North Dakota Taxable IncomeRate
$0 - $40,1251.10%
$40,125 - $97,1502.04%
$97,150 - $202,6502.27%
$202,650 - $440,6002.64%
$440,600+2.90%
Married, Filing Jointly
North Dakota Taxable IncomeRate
$0 - $67,0501.10%
$67,050 - $161,9502.04%
$161,950 - $246,7002.27%
$246,700 - $440,6002.64%
$440,600+2.90%
Married, Filing Separately
North Dakota Taxable IncomeRate
$0 - $33,5251.10%
$33,525 - $80,9752.04%
$80,975 - $123,3502.27%
$123,350 - $220,3002.64%
$220,300+2.90%
Head of Household
North Dakota Taxable IncomeRate
$0 - $53,7501.10%
$53,750 - $138,8002.04%
$138,800 - $224,7002.27%
$224,700 - $440,6002.64%
$440,600+2.90%

How high are property taxes in North Dakota?

Property tax rates in North Dakota are slightly less than than the national average. As a result, most North Dakotans pay about $2,000 per year in property taxes. That’s because home values in the state, on which property taxes are based, are relatively low.

In fact, in many North Dakota counties, the median home value is less than $210,000. That means property taxes should be low. The deal gets even better for seniors, who may qualify for the North Dakota homestead credit.

What is the North Dakota homestead credit?

The homestead credit is a property tax relief program that can significantly reduce property taxes for qualifying seniors. To qualify, you must be at least 65 years old, own and occupy your home, have total income (including Social Security) of less than $42,000 and have total assets, including your home, worth no more than $500,000.

Eligible seniors will receive a credit equal to between 10% and 100% of their property taxes, up to a maximum of $6,000. If your income is $22,000 or less, your taxable value is reduced by 100%, meaning your property taxes are fully credited up to the maximum of $6,000. From there, the credit decreases for every $4,000 in additional income. The most you can earn in order to still claim some of the homestead credit is $42,000.

How high are sales taxes in North Dakota?

Photo credit: ©iStock.com/sakakawea7

The statewide sales tax rate in North Dakota is 5%. Cities and counties can collect sales taxes as high as 3.50%, which means the highest possible rate you will face in North Dakota is 8.50%. The average total rate is 6.96%.

There are a number of exemptions designed to help reduce the impact of sales taxes on the elderly in North Dakota. These include exemptions for prescription drugs, medical equipment and groceries.

What other North Dakota taxes should I be concerned about?

North Dakota technically institutes an estate tax, but residents don't actually have to pay it due to changes in federal law. However, the estates of North Dakota decedents are still required to file a state estate tax return within 15 months of their death.