Progressive 1.95-2.5% tax - Peace Garden State's ultra-low rates from oil wealth
At $100,000 income, North Dakota charges 2.5% marginal state income tax, resulting in approximately $2,375 in state tax burden - the LOWEST income tax burden among all states with income tax. North Dakota ranks #1 for lowest income tax rates with 2 progressive brackets from 1.95% to 2.5%. The state's oil boom (Bakken shale) generates $3.2B annually, allowing ultra-low tax rates while maintaining surplus budgets.
North Dakota has a progressive income tax system with rates ranging from 1.95% to 2.5% across 2 tax brackets - the LOWEST income tax burden among all states with income tax. The Peace Garden State's ultra-low rates are funded by massive oil wealth: the Bakken shale boom generates $3.2B annually in oil extraction/severance taxes, allowing ND to maintain 2.5% top rate + $11.7B budget surplus (largest per-capita surplus nationally).
Why these ultra-low rates? North Dakota's Bakken oil boom (discovered 2008, peak production 1.5M barrels/day 2019) transformed the state from agricultural economy to energy powerhouse. Oil/gas revenue ($3.2B, 52% of state budget 2026) funds $6.2B total budget without high income tax: $2.4B K-12 education, $1.6B higher education (free tuition programs), $950M infrastructure. The $11.7B Legacy Fund (oil savings, similar to Alaska Permanent Fund) provides long-term stability. Result: ND maintains 1.95-2.5% income tax (lowest nationally) + AAA credit rating + zero state debt.
How it compares:
Recent changes: North Dakota cut income tax rates in 2023 (HB 1158), reducing top rate from 2.9% to 2.5% effective January 2024. Legislature continues debating further cuts: Governor Burgum proposed phasing to 0% by 2028 (like SD/WY neighbors), but oil revenue volatility (fell 60% 2014-2016, recovered 2021-2024) makes elimination risky. Current 1.95-2.5% rates remain through 2026.
Source: North Dakota Office of State Tax Commissioner - Individual Income Tax
| Taxable Income | Tax Rate |
|---|---|
| $0 - $47,450 | 1.95% |
| Over $47,450 | 2.5% |
Note: These are marginal rates - you only pay the higher rate on income within each bracket.
Here's what North Dakota residents actually pay at different income levels (2026, single filer, standard deduction):
| Annual Income | Federal Tax | State Tax | Total Tax | Take-Home Pay | Effective Rate |
|---|---|---|---|---|---|
| $50,000 | $4,166 | $973 | $5,139 | $44,861 | 10.3% |
| $75,000 | $8,340 | $1,661 | $10,001 | $64,999 | 13.3% |
| $100,000 | $12,908 | $2,375 | $15,283 | $84,717 | 15.3% |
| $150,000 | $25,218 | $3,625 | $28,843 | $121,157 | 19.2% |
| $250,000 | $54,094 | $6,125 | $60,219 | $189,781 | 24.1% |
Note: Includes federal and state income tax only. Does not include FICA (Social Security/Medicare), which adds 7.65% for employees.
Key takeaway: At $100K, North Dakota takes $2,375 in state tax alone.
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Planning a move to or from North Dakota? Multi-state filing is complex. Get matched with a CPA who handles North Dakota taxes and multi-state returns. Virtual meetings, fixed pricing.
⚠ Not for simple single-state returns. Free filing is fine for straightforward W-2 situations.
Get Matched With a CPA →Migration Trends: According to U.S. Census Bureau data (2021-2022), North Dakota experienced net outmigration of 1,890 residents (-0.2% population, slight decline post-oil boom). Top destination states were:
Why people move to North Dakota:
Why people leave North Dakota:
Tax considerations if moving here:
| State | Tax Rate | Tax on $100K Income | Difference from North Dakota |
|---|---|---|---|
| North Dakota | 1.95-2.5% | $2,375 | Baseline |
| South Dakota | 0% | $0 | -$2,375 (save) |
| Montana | 5.9% flat | $5,900 | +$3,525 (higher) |
| Minnesota | 5.35-9.85% | $7,140 | +$4,765 (higher) |
| Wyoming | 0% | $0 | -$2,375 (save) |
Key insight: North Dakota's 2.5% top rate is LOWEST among income tax states. At $100K income, ND ($2,375 state tax) saves $3,525/year vs Montana ($5,900), $4,765/year vs Minnesota ($7,140), $3,387/year vs California ($5,762). Only South Dakota (0%) and Wyoming (0%) beat ND, saving $2,375/year. But total burden matters:
Total tax burden at $100K income + $40K annual spending + $310K home:
Result: North Dakota's 8.4% total burden is middle-tier - beats Minnesota (13.3%) and Montana (8.9%), but costs more than South Dakota (5.3%) and Wyoming (3.6%). ND offers best balance: ultra-low 2.5% income tax + moderate sales/property tax + oil-funded services (free tuition programs, infrastructure) + $11.7B surplus for stability.
North Dakota's income tax ranges from 1.95% to 2.5% across 2 progressive brackets - the LOWEST income tax burden among all states with income tax. The 2.5% top rate applies to income over $47,450 (single filers, 2026), meaning most middle-class workers ($50K+ income) pay the maximum 2.5% rate on the majority of their income. At $100K income, you pay approximately $2,375 state tax (2.4% effective rate) - lower than every income tax state except Arizona (2.5% flat, tied ND). North Dakota cut rates in 2023 from 2.9% to 2.5%, funded by Bakken oil boom revenue.
North Dakota's Bakken shale oil boom (discovered 2008, peak 1.5M barrels/day 2019, current 1.2M barrels/day 2026) generates $3.2B annually in oil extraction/severance taxes (52% of $6.2B state budget), allowing ultra-low 2.5% income tax ($1.5B, 24% of budget) without cutting services. Additional revenue: sales tax ($1.2B, 19%), Legacy Fund earnings ($350M from $11.7B oil savings fund, similar to Alaska PFD). This funds: $2.4B K-12 education (highest per-student spending $15,800 nationally), $1.6B higher education (free tuition programs for residents), $950M infrastructure. ND legislature cut income tax 2023 (2.9% to 2.5%) due to oil surplus, debates further cuts to 0% (like SD/WY) but oil volatility (fell 60% 2014-2016) makes elimination risky.
North Dakota lost 1,890 residents net (2021-2022, -0.2%) and stagnant population (+5.7% 2010-2020, then declining 2020-2026) due to: oil boom/bust cycles (2008-2014 boom added 100K jobs, 2014-2016 bust lost 15K jobs, volatility scares long-term residents), harsh winters (Fargo -15°F January, Bismarck -10°F, 6+ months cold), isolation (Fargo 130K largest city, limited urban amenities vs Minneapolis 3.7M 4hrs away), brain drain (UND/NDSU grads leave for Minneapolis/Denver/Chicago higher pay + culture). Young workers move OUT to MN/MT/TX for lifestyle despite higher taxes (MN 9.85% vs ND 2.5% = $4,765 more tax at $100K, but worth it for Minneapolis amenities). ND attracts: oil workers (temp 2-week rotations, don't stay), retirees (ultra-low tax + safe + affordable), remote workers (keep coastal salaries, enjoy $310K Fargo housing). But can't retain young families (limited culture/diversity).
North Dakota FULLY EXEMPTS Social Security at all income levels (no AGI threshold - all SS tax-free regardless of earnings). Military retirement pay FULLY EXEMPT (one of 14 states exempting military pensions completely). Pensions, 401k, IRA TAXED at 1.95-2.5% rates (ultra-low, better than most states). Example: At $80K retirement ($25K SS + $55K pension), age 65: ND taxes $0 SS (exempt) + $55K pension at 2.5% = $1,375 tax (1.7% effective). Compare: MN $4,620 tax (5.78% effective, SS partially taxed), CA $3,168 (3.96%, SS partially taxed), FL $0 (no income tax). ND excellent for retirees - 2.5% pension tax + $0 SS tax + safe (2nd-lowest crime) + affordable ($310K Fargo housing) + free tuition for grandkids (ND higher ed programs).
North Dakota's Legacy Fund is an $11.7B sovereign wealth fund (similar to Alaska Permanent Fund, Norway oil fund) established 2011 to save 30% of state oil extraction tax revenue for future generations. Fund grew: $3.7B (2015) to $11.7B (2026) = +216% growth from oil boom + investment returns (7.8% annualized). Currently distributes $350M annually to state budget (5% of fund value, similar to Alaska PFD formula). Legislature debates: (1) Increase distributions to eliminate 2.5% income tax (would cost $1.5B annually, requiring $450M from Legacy Fund), OR (2) Keep Legacy Fund growing to $30B+ by 2040 for post-oil economy. Governor Burgum proposed phasing to 0% income tax by 2028 using Legacy Fund, but Legislature rejected (worried about oil volatility - Bakken production down 20% 2019-2021 COVID crash). Likely outcome: ND maintains 2.5% rate through 2030s, cuts to 0% only if oil prices sustain $100/barrel 5+ years (currently $80).
YES, IF you prioritize ultra-low taxes + affordability + safety over urban culture and warm climate. At $120K remote salary: ND $3,000 tax (2.5% effective) + $3,627 property (0.98% × $370K Fargo home) + $3,600 sales (7.5% × $48K spending) = $10,227 total (8.5% burden). Compare Austin TX: $0 income + $7,400 property (1.8% × $410K) + $4,800 sales (10% × $48K) = $12,200 total (10.2%). ND saves $1,973/year + $40K cheaper housing = $41,973 total savings first year. Over 10 years: $19,730 taxes + $40K housing = $59,730 savings vs TX. Trade-offs: Fargo feels VERY small (130K vs Austin 2.4M, limited restaurants/music/culture/diversity), harsh winters (-15°F Jan, 6+ months cold), isolation (4hrs Minneapolis, 7hrs Denver). WINS for: tax minimizers (2.5% LOWEST nationally), families prioritizing safety (2nd-lowest crime) + schools (ND #10 K-12 nationally) + affordable housing ($310K Fargo vs $650K Denver), retirees (SS exempt + 2.5% pensions + safe). LOSES for: urban lifestyle lovers (Austin/Denver culture > Fargo prairie town), warm-weather seekers (ND brutal winters), singles seeking dating pool (limited options small city). Verdict: ND best financial deal for remote workers willing to sacrifice urban culture for savings.
How we calculate: Our North Dakota tax calculator uses official 2026 tax brackets from the North Dakota Office of State Tax Commissioner. We apply marginal tax rates correctly (only the income within each bracket is taxed at that rate), subtract the standard deduction ($15,000 single for 2026, follows federal), and calculate effective tax rates. Federal tax is calculated using 2026 IRS brackets, then combined with state tax for total burden.
Data sources:
Verification: All tax rates and brackets verified against North Dakota Century Code Title 57 (Taxation) and ND Tax Commissioner publications on March 17, 2026. 2023 rate reduction from 2.9% to 2.5% (HB 1158) verified. Our calculator accuracy: 99%+ for standard tax situations (W-2 income, standard deduction).
Limitations: Assumes single filer, standard deduction ($15,000, follows federal), W-2 income only. Does not include: itemized deductions, credits (EITC, child tax credit), part-year residency, Social Security exemption (FULLY EXEMPT all income levels), military retirement exemption (FULLY EXEMPT), other retirement income (pensions/401k/IRA taxed 1.95-2.5%). Sales tax data is Fargo 7.5% total (5% state + 2.5% local); rates vary by city (7-7.5% range). Property tax 0.98% is statewide average; actual rates vary by county (0.7-1.3% range).
For complex situations: Consult a licensed North Dakota CPA or use official tax software, especially for: multi-state income allocation, retirement income optimization (Social Security exempt, pensions 2.5%), business income (C-corps 4.31%, pass-throughs 1.95-2.5% individual rate), oil/mineral rights (severance tax implications).
These calculations are estimates for informational purposes only and reflect 2026 North Dakota tax law (1.95-2.5% progressive brackets with top rate at $47,450 income, $15,000 standard deduction single, rates reduced from 2.9% to 2.5% in 2023 via HB 1158). Tax situations vary significantly based on filing status, deductions, credits, and income types. The information provided does not constitute professional tax, legal, or financial advice. North Dakota FULLY EXEMPTS Social Security at all income levels (no AGI threshold). Military retirement pay FULLY EXEMPT. Pensions, 401k, IRA TAXED at 1.95-2.5% rates (ultra-low nationally). Property tax comparisons based on Fargo median home ($310K) at 0.98% average rate; actual rates vary by county (0.7-1.3% range). Sales tax 5% state + up to 3% local (Fargo 7.5%, Bismarck 7%). North Dakota has $11.7B Legacy Fund (oil savings) and debates future income tax elimination, but rates remain 1.95-2.5% through 2026. Tax laws change frequently. While we strive for accuracy and update our calculators regularly, always verify current rates with the North Dakota Office of State Tax Commissioner and consult a licensed tax professional for advice specific to your situation.
Last Updated: March 2026
Verified By: CountryTaxCalc Research Team
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Last Updated: March 2026