North Dakota state income tax
North Dakota has a state income tax. It is graduated, with a top marginal rate of 2.5%. Three brackets since tax year 2023 (HB 1158): 0% up to ~$48k-$81k (varies by filing status), 1.95% from there up to ~$245k-$298k, 2.50% above that. Exact dollar thresholds vary by filing status (single, married filing jointly, head of household, married filing separately) and are adjusted annually for inflation by the Tax Commissioner. Capital gains are taxed under special rules (see below).
Does North Dakota have a state income tax?
Yes. North Dakota taxes individual income on a graduated schedule topping out at 2.5%. Three brackets since tax year 2023 (HB 1158): 0% up to ~$48k-$81k (varies by filing status), 1.95% from there up to ~$245k-$298k, 2.50% above that. Exact dollar thresholds vary by filing status (single, married filing jointly, head of household, married filing separately) and are adjusted annually for inflation by the Tax Commissioner.
| Item | North Dakota |
|---|---|
| State income tax | Yes, graduated |
| Top marginal rate | 2.5% |
| Capital gains | Special rules, up to 1.5% |
| State sales tax | 5% (plus local) |
| Avg. property tax rate | 0.92% of home value |
| Estate / inheritance tax | None |
How does North Dakota tax capital gains?
North Dakota taxes capital gains under special rules rather than at the ordinary income rate. North Dakota taxes capital gains as part of ordinary income (top statutory rate 2.5%), but individuals may exclude 40% of net long-term capital gains (and qualified dividends) from North Dakota taxable income (Form ND-1, Line 6, 'Net long-term capital gain exclusion'; exclusion percentage set at 40% effective tax year 2013 per N.D.C.C. 57-38-30.3). That makes the effective top marginal rate on qualifying net long-term gains 1.5% (60% included x 2.5% top rate), versus the full 2.5% top rate that still applies to short-term gains and ordinary income. You still owe federal capital gains tax on top of any state tax. See how capital gains tax works in 2026.
What about retirement income in North Dakota?
Retirement income is taxed differently from wages in many states. For how North Dakota treats Social Security, pensions, and 401(k)/IRA withdrawals, see North Dakota retirement taxes.
Sources
- North Dakota income tax rates and brackets: North Dakota Department of Revenue / Taxation.
- North Dakota capital gains treatment: North Dakota tax authority.
- North Dakota sales tax: North Dakota Department of Revenue.