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North Dakota Retirement Tax Friendliness

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Overview of North Dakota Retirement Tax Friendliness

North Dakota residents only pay state income taxes on their Social Security retirement benefits if their federal AGI surpasses specific limits. Beyond these caps, Social Security is taxed the same way it is federally. 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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    Jennifer Mansfield, CPA, JD/LLM-Tax, is a Certified Public Accountant with more than 30 years of experience providing tax advice. SmartAsset’s tax expert has a degree in Accounting and Business/Management from the University of Wyoming, as well as both a Masters in Tax Laws and a Juris Doctorate from Georgetown University Law Center. Jennifer has mostly worked in public accounting firms, including Ernst & Young and Deloitte. She is passionate about helping provide people and businesses with valuable accounting and tax advice to allow them to prosper financially. Jennifer lives in Arizona and was recently named to the Greater Tucson Leadership Program. more
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North Dakota Retirement Taxes

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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.

Unlike most other states, North Dakota does not exempt Social Security retirement benefits from taxation. So basically any Social Security that is taxed federally is also subject to the North Dakota state tax. Likewise, 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's one of just a handful of states that taxes Social Security, income from retirement accounts and pension income. 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 6.94%, 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?

Any Social Security retirement income taxed at the federal level will also be subject to the North Dakota income tax. The general rule for determining if Social Security is taxable federally is to add one half of your annual Social Security benefits to your income from all other sources. If that total is greater than $25,000 (for single filers, heads of household and qualifying widows and widowers) or $32,000 (for joint-filers), then some of your Social Security benefits may be taxable. This is the same way that the federal government taxes Social Security benefits.

A Social Security benefit exclusion is available in North Dakota for the taxable portion of Social Security benefits reported on your federal tax return. This applies if your adjusted gross income (AGI) on your North Dakota tax return is $50,000 or less ($100,000 or less if married filing jointly). 

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%
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%
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%
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%

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 $5,625. 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 $5,625. 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?

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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 6.94%.

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 does institute an estate tax, which is based on the federal estate tax. So if you have an estate with a value greater than the federal exemption amount ($11.58 million for 2020 and $11.7 million for 2021), then you will need to file a North Dakota estate tax return. However, because of changes to the federal law, you won’t actually have to pay any estate taxes in North Dakota.