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North Dakota State Taxes: What You’ll Owe in the 2026 Tax Season

Valerie Bauman,

AARP

Published May 21, 2026

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North Dakota ranks 11th on the Tax Foundation’s 2026 State Tax Competitiveness Index, largely because the state has a relatively low graduated income tax and recently placed a 3 percent cap on annual local property tax increases.

The big picture:

Income tax: The state has three income brackets, which have varying thresholds depending on a taxpayer’s filing status. The tiers range from 0 percent to 2.5 percent.
Property tax: The statewide average property tax was 0.92 percent of a home’s assessed value in 2024, the most recent data available from the Tax Foundation. However, actual rates vary by county.
Sales tax: North Dakota has a combined state and local average sales tax of 7.09 percent, according to the Tax Foundation. The statewide rate is 5 percent, while the average local rate is 2.09 percent.

How is income taxed?

The state has three income brackets, which have varying thresholds depending on a taxpayer’s filing status. The tiers range from 0 percent to 2.5 percent.

What about investment income?

Investment income, including capital gains, is taxed in North Dakota if subject to federal tax. The state allows a 40 percent deduction on long-term capital gains and qualified dividends. Taxpayers in the 2.5 percent income tax bracket would be taxed at a rate of 1.5 percent on investment income, while those in the 1.95 percent bracket would be taxed at 1.17 percent.

Are Social Security benefits taxed?

North Dakota does not tax Social Security.

How is property taxed?

The statewide average property tax was 0.92 percent of a home’s assessed value in 2024, the most recent data available from the Tax Foundation. However, actual rates vary by county, with the lowest being 0.26 percent in Sioux County, while the highest was 1.11 percent in Cass County. The lowest median property taxes paid was $387 in Slope County, while the highest was $3,564 in Cass County.

What about sales and other taxes?

Sales tax: North Dakota has a combined state and local average sales tax of 7.09 percent, with a statewide rate of 5 percent and an average local rate of 2.09 percent. Exemptions include prescription drugs, certain medical devices and most food at grocery stores. A full list can be found here.
Gas and diesel: Gasoline and diesel are taxed at 23 cents per gallon. Diesel that has been dyed has an additional 4 cents per gallon tax.
Vehicle tax: The state imposes a 5 percent excise tax on the purchase of vehicles. Local sales tax doesn’t apply to the purchase or transfer of vehicles. The state also has annual registration fees, which can be calculated here.
Alcohol: Purchases of alcohol in the state are subject to a 7 percent gross receipts tax. Additionally, wholesalers and distributors pay taxes that can be passed onto the consumer in the shelf price.
Lottery: The lottery must report winnings of $600 or more to the IRS and will withhold 24 percent for federal taxes and state income tax of 2.5 percent for any winnings of $5,000 or more.

Will my heirs or estate have to pay inheritance and estate tax?

North Dakota doesn’t have an estate or inheritance tax.

Are there any tax breaks for older residents?

Homestead property tax credit: Residents who are 65 and older, or those who can prove they are permanently and totally disabled, may be eligible for this program. Homeowners must live and be invested in the property and not have a total household income that exceeds $70,000. The state grants a 100 percent reduction in taxable value to those with income of $0 to $40,000, but there is a limit. The maximum reduction for that group would be $9,000 — which is 4.5 percent of the market value of a property with an actual market value of $200,000. Those with income of $40,001 to $70,000 may receive a 50 percent reduction, with a maximum reduction of taxable value of $4,500, and a maximum reduction of actual market value of $100,000.
Renters refund: This program is available to residents who are 65 and older, or those who can prove they are permanently and totally disabled. It provides a partial refund on rent up to $600. Renters must have a total household income that does not exceed $70,000. To calculate the refund amount, take 20 percent of a resident’s annual rent and subtract that from 4 percent of their income. The balance is the amount the renter will receive back. For example, if a renter with income of $35,000 annually pays $800 per month, that’s $9,600 per year in rent. Then take 20 percent of $9,600 ($1,920) and subtract 4 percent of $35,000 ($1,400) to find the total refund is $520.
Primary residence credit: Homeowners in North Dakota may receive up to $1,600 in credit against their property taxes through this program. There are no age or income requirements; residents must own a home and reside in it as their primary residence. Only one of these credits is granted per household.

Are military retirement pensions taxed?

No, as the state allows military retirees to deduct 100 percent of their pensions from their state taxable income.

What is the deadline for filing taxes in 2026?

North Dakota’s annual deadline for filing state taxes was April 15. Residents can file for an extension until Oct. 15 and are automatically granted a state extension when they receive a federal extension. However, residents were still expected to estimate and pay their taxes due by April 15.

More AARP Financial Resources

AARP Retirement Calculator Determine if you are saving enough to retire when — and how — you want.
AARP Social Security Calculator Figure out when to claim and how to maximize your Social Security benefits.
AARP Tax Tools Explore resources to help you calculate and prepare taxes.

Valerie Bauman is a journalist and author with two decades of experience working for publications, including Newsweek, Bloomberg and The Associated Press. Throughout her career, she’s covered politics and the law, including pharmaceutical litigation, mass torts and election law.