North Dakota taxes for early retirees: a 0% bracket wide enough to drive a combine through

By Tom, CPA · Updated October 29, 2026

TL;DR: For 2026 North Dakota taxes nothing on the first $82,800 of taxable income for married couples ($49,575 single), then 1.95%, and 2.5% above $304,850. It starts from federal taxable income, excludes Social Security and military retirement, and excludes 40% of net long-term capital gains. Homeowners can get a Primary Residence Credit of up to $1,600.

Educational only, not tax, legal, or investment advice. Examples are illustrations, not predictions. Rules and limits change; verify current figures and talk to a qualified professional about your situation.

North Dakota has oil, wheat, wind, and the kind of winters that make Minnesotans say "jeez, that's cold." It also has one of the lowest income taxes of any state that has one: since 2024 a 0% bracket that covers most early retirees' entire income, a top rate of 2.5%, tax-free Social Security and a 40% exclusion for long-term capital gains.

This guide covers North Dakota's rules for early retirees: the brackets, what's taxed and excluded, property tax credits, sales tax, estate tax and estimated payments. Starring Prairie Paul, retired at 51 and wearing shorts at 20 degrees, and Fargo Fiona, who has a Roth conversion plan and a block heater.

CPA Warning Label: North Dakota's 0% bracket starts from federal taxable income, so a big Roth conversion can push you into the 1.95% rate quickly. Still, 1.95% is about the cheapest state-taxed Roth conversion in America outside the no-tax states.

Income tax rates: 0%, 1.95% and 2.5%

The Office of State Tax Commissioner's 2026 rate schedules, published with the 2026 Form ND-1ES:

The brackets are indexed each year. For comparison, the 2025 0% bracket topped out at $80,975 for couples and $48,475 single, so 2026 gives you a little more room.

North Dakota's return starts with federal taxable income, so the federal standard deduction is already built in: $32,200 for married couples and $16,100 single for 2026. That means a married couple can have about $115,000 of ordinary income, before any North Dakota adjustments, before paying a cent of North Dakota tax, using the 2026 bracket.

What North Dakota taxes and excludes

• Social Security: excluded. Any Social Security benefits in federal taxable income are subtracted on the ND-1.
• Military retirement: the taxable amount of military retirement pay is deductible.
• Long-term capital gains: you can exclude 40% of net long-term capital gain, including mutual fund capital gain distributions. Short-term gains don't qualify.
• IRA and 401(k) withdrawals, pensions and Roth conversions: taxed as ordinary income, though for most early retirees they'll land in the 0% bracket.
• Dividends and interest: taxed, apart from interest on U.S. obligations, which states can't tax.

There's also a deduction for some public safety retirement benefits, but it's narrowly targeted, such as for retired peace officers with long service in North Dakota.

Illustrations: Paul pays nothing, Fiona pays a little

Illustration 1: Prairie Paul and his wife, both 55, file jointly for 2026. Assumptions: $60,000 of traditional IRA withdrawals and $40,000 of long-term capital gains, 2026 federal standard deduction, and the 2026 North Dakota brackets. Federal taxable income is $100,000 minus $32,200, or $67,800. The 40% capital gains exclusion removes $16,000, leaving North Dakota taxable income of $51,800. That's under $82,800, so the tax is $0. Paul celebrated by buying a second parka, which in North Dakota counts as a necessity.

Illustration 2: Fargo Fiona and her husband, both 58, do a big Roth conversion year: $120,000 of conversions and IRA withdrawals plus $60,000 of long-term gains. Federal taxable income is $180,000 minus $32,200, or $147,800. The exclusion removes 40% of $60,000, or $24,000, leaving $123,800. Tax is 1.95% of the $41,000 over $82,800, or $799.50, using the 2026 brackets. That's 0.44% of their income. In Minnesota, next door, the same couple would owe several thousand dollars.

Property tax credits

North Dakota property taxes are local, but the state now pays part of homeowners' bills:

• Primary Residence Credit: up to $1,600 against property tax on the home you own and live in, with no age or income limits. One credit per household. You must apply online at tax.nd.gov/prc each year between January 1 and April 1, and the credit appears on your property tax statement. The credit can't exceed the property tax due on the home.
• Homestead Property Tax Credit: for owners 65 or older, or permanently and totally disabled, with household income of $70,000 or less. With income up to $40,000, taxable value is reduced 100%, up to $9,000 of taxable value ($200,000 of true and full value). With income from $40,001 to $70,000, it's 50%, up to $4,500 ($100,000 of true and full value). There's no asset limit, which is rare and very FIRE-friendly. Apply with the local assessor by April 1.

An early retiree with a large portfolio and low taxable income could qualify for the homestead credit at 65. Income, not assets, is what's tested, so check how your income is measured for the credit.

Sales tax and estate tax

The state sales tax is 5% on most retail sales, and cities and counties can add local taxes. North Dakota has no estate tax and no inheritance tax, so only the federal estate tax could apply, at $15 million per person for 2026.

Residency and estimated payments

North Dakota taxes residents on all income. The booklet defines residence in terms of domicile, your permanent home that you intend to return to. Part-year residents report income from the time they were residents plus North Dakota-source income. If you're moving from a high-tax state, see our residency change guide.

For 2026, you must pay North Dakota estimated tax if all of these apply: you're required to pay federal estimated tax for 2026, your 2025 North Dakota net tax liability was $1,000 or more, and you expect to owe $1,000 or more after withholding, and your withholding will be less than the smaller of 90% of your 2026 tax or 100% of your 2025 tax (per the 2026 Form ND-1ES). Many early retirees with $0 North Dakota tax never cross the $1,000 line.

Common North Dakota mistakes early retirees make

• Assuming 0% means no return. If you have a federal filing requirement and North Dakota income, you'll generally still file a North Dakota return, even if the tax is $0. Check the booklet's filing requirements.
• Applying the 40% exclusion to short-term gains. It covers net long-term gains only. Selling a fund you've held for 11 months gets no exclusion.
• Skipping the Primary Residence Credit application. Up to $1,600 doesn't show up unless you apply between January 1 and April 1. Set a reminder for New Year's Day, after the hangover.
• Waiting until 65 to read the homestead rules. The income limit uses income, not assets, so plan your withdrawals and Roth conversions in the years you'll apply.
• Treating the brackets as fixed. They're indexed every year. Use the current year's table, not the one from a blog post written in a blizzard (including this one; check the 2026 forms).
• Forgetting the federal side. North Dakota's low rates don't change federal tax on IRA withdrawals, Roth conversions or Social Security.

Paul has none of these mistakes on his record. He does keep shoveling his neighbor's driveway at 5 a.m. without asking, which is a different kind of problem.

Planning moves for an early retiree in North Dakota

• Fill the 0% bracket with Roth conversions. Each year, convert up to the top of the 0% bracket (after the federal standard deduction) and pay no North Dakota tax on it. Federal tax still applies.
• Use the 1.95% bracket for bigger conversions. Even large conversions cost less than 2% at the state level.
• Apply for the Primary Residence Credit every year. It isn't automatic; the application window is January 1 to April 1.
• Watch the federal side. North Dakota excludes Social Security, but federal tax may not; see our tax torpedo guide.

Comparing states? See Minnesota, Colorado and Illinois, then try the state tax move calculator.