North Dakota Income Tax Calculator

North Dakota state tax quick facts Income tax: 1.1% - 2.9% Sales tax: 5% - 8.5% Property tax: 1.01% average effective rate Gas tax: 23 cents per gallon of regular gasoline and diesel

The booming economy in North Dakota in recent years has allowed the state to significantly cut taxes. The current income tax rates are the lowest in the country, ranging from 1.1% to 2.9%. The state’s sales taxes stand below the national average. When accounting for local rates, the average sales tax in the Roughrider State is 6.8%, 26th lowest in the country.

The average effective property tax rate in North Dakota is also just 1.01%. That’s below the national average. Of course, the financial impact of that tax and others in North Dakota depends on individual taxpayer circumstances.

Not a North Dakota taxpayer yet, but planning a move to the Peace Garden State? If you’re planning on using a mortgage to purchase a home, take a look at our comprehensive North Dakota mortgage guide to learn more about rates and the details of getting a mortgage in the state.

North Dakota Income Tax

After several rounds of tax cuts in recent years, North Dakota has some of the lowest state income tax rates in the country. The top marginal rate now sits at 2.9%. Not everyone pays that rate, however. Lower earners pay lower rates, depending on their income tax bracket. The table below shows brackets for all filing statuses in North Dakota.

North Dakota taxable income is pretty similar to federal taxable income. A number of items that are taxed federally can be subtracted from taxable income in North Dakota. Interest from U.S. government obligations such as U.S. savings bonds is exempt, as is active duty pay from the National Guard or U.S. armed forces. You can also subtract contributions to a North Dakota College SAVE account, up to $5,000 for single filers and $10,000 for joint filers. In addition, some capital gains can be excluded (see next section for more).

Social Security benefits are subject to the state income tax in North Dakota. It is one of just a handful of states that tax Social Security benefits. Consider hiring a professional accountant or looking into tax preparation software to help file your returns.

North Dakota Capital Gains Tax

Capital gains are included as taxable income in North Dakota; however long-term gains may be eligible for the North Dakota net long-term gain exclusion. The exclusion is equal to 40% of your net long-term gains. To calculate the exclusion, take the smaller of net long-term gains and net long-term gains less net short-term losses (these can be found on IRS form 1040, Schedule D) and multiply it by 0.4.

North Dakota Sales Tax

Sales taxes are one of North Dakota’s most important sources of revenue. The statewide sales tax rate is 5%, but many counties and cities collect additional local option sales taxes, with rates as high as 3.5%. That means the highest rate possible in North Dakota is 8.5%. The table below shows state and local rates for every county in the state, as well as the major cities.

The total tax rates above apply to “tangible personal property” sold in the state. This includes most consumer products and household goods. Some services are also taxed, including deliveries of taxable items, communications services and construction or assembly of a taxable item.

Motor vehicles are subject to a separate excise tax of 5%, and are not subject to the local tax rates shown above. Food that is purchased for consumption at home is exempt, but prepared food is not.

Other exemptions from the North Dakota sales tax include: prescription drugs, medical devices, electricity, bibles, textbooks, newspapers, water and diabetic equipment. On the other hand, some products, like gasoline and tobacco, face special excise taxes, as described in the following sections.

North Dakota Gas Tax

Want to drive from Fargo to Williston? It’s a beautiful drive, but you’ll want to keep in mind state and federal gas taxes you have to pay along the way. North Dakota’s gas tax is 23 cents per gallon, which ranks among the 14th lowest in the U.S. With the addition of the federal gas tax (which is 18.40 cents per gallon on regular fuel), the total tax is 41.40 cents per gallon.

North Dakota Cigarette Tax

North Dakota smokers pay some of the lowest cigarette taxes in the U.S. The state excise tax on a pack of cigarettes is 44 cents per pack, the third lowest state cigarette tax. In addition to that excise tax, the general sales tax still applies. Sales tax is applied to the total cost of the cigarettes, which includes the excise tax.

North Dakota Alcohol Tax

North Dakota collects a tax on alcoholic beverages, with rates varying depending on the type of alcohol being sold. Beer is taxed at a rate of 39 cents per gallon, which totals about 44 cents for a 12-pack. That’s the 17th highest beer tax in the country. The state’s wine tax, which is $1.06 per gallon (about 21 cents per bottle) ranks 19th highest in the U.S. The tax on liquor is $4.66, which is slightly below the U.S. average.

North Dakota Estate Tax

While North Dakota does have an estate tax statute, North Dakotans are currently not required to pay estate taxes. This is because of changes to the federal law, on which the North Dakota estate tax is based. North Dakotan gross estates that are greater than the federal exemption of $11.18 million must file a North Dakota estate tax return, but (barring any changes to the federal law) no taxes will be due.

Photo credit: ©iStock.com/ericfoltz

Although North Dakota ranks in the top 10 of U.S. states for the total value of its annual agricultural crop, less than 10% of people in the state are employed in agriculture. The development of the Bakken oil fields in western North Dakota has contributed to strong economic growth in the state in recent years. Hall of Fame basketball coach Phil Jackson played high school basketball in Williston, North Dakota, leading the team to two state titles.