North Dakota Tax Guide 2026: Low 1.95–2.5% Income Tax, Oil Revenue & No Estate Tax

North Dakota's 2023 income tax reform cut rates to a 0% bottom bracket, 1.95% and 2.5%. For 2025 a single filer paid nothing on the first $48,475 of North Dakota taxable income, 1.95% up to $244,825 and 2.5% above that; married and head-of-household filers have the same rates with larger brackets.

North Dakota's oil-producing economy (Bakken formation) provides significant tax revenue that allows the state to maintain very low personal income taxes. The Legacy Fund (funded by oil and gas tax revenues) and the state's history of budget surpluses mean North Dakota can maintain competitive tax rates while funding services — a unique fiscal position compared to most states.

North Dakota Income Tax: Post-2023 Reform Rates and Oil Revenue Context

North Dakota's 2023 reform was one of the most dramatic income tax reductions in any US state in recent memory. Prior to 2023, North Dakota had rates up to 2.9% with multiple brackets. The 2023 reform collapsed this to a 0% bottom bracket followed by just two rates:

North Dakota Income Tax Rates Post-2023

The brackets are indexed to inflation each year, so the 2026 thresholds are higher than those shown. North Dakota taxable income starts from federal taxable income, so the federal standard deduction applies. For example, a single filer with $100,000 of wages pays about $653 of North Dakota income tax for 2026, and one with $150,000 pays about $1,628.

Oil Revenue and the Legacy Fund

North Dakota is a major US oil producer, centred on the Bakken formation. Oil and gas taxes, including extraction taxes and production taxes, are a large source of state revenue. The Legacy Fund — established by a 2010 constitutional amendment — accumulates 30% of oil and gas tax revenue. The fund has grown to more than $10 billion. This revenue allows North Dakota to maintain low income and property taxes while funding state services.

Retirement Income in North Dakota

North Dakota's very low income tax rates mean that even retirement income that is not explicitly exempt is taxed minimally. A single retiree with $100,000 of IRA distributions and no other income owes about $653 in North Dakota tax for 2026 (federal standard deduction, no other adjustments), thanks to the 0% bottom bracket. North Dakota fully exempts Social Security benefits from state income tax for all income levels (changed in 2021 — previously Social Security was taxed).

North Dakota Property Tax, Sales Tax, and Complete Tax Picture

North Dakota's property taxes are near the national average at approximately 0.92% effective rate (Tax Foundation, 2024 data). The state sales tax is 5% — relatively low — with local additions and grocery exemptions.

Effective rates vary by county and city, so check your own county's rate.

North Dakota's 5% state sales tax is among the lower rates nationally. Including local additions, the average combined rate is about 7.09% (Tax Foundation, 1 Jan 2026). North Dakota exempts groceries (most food items) from sales tax — keeping the effective consumption burden low.

North Dakota vs Neighboring States

North Dakota's combination of very low income tax (1.95–2.5%), moderate sales tax, and near-average property tax keeps its state tax burden low, though South Dakota has no income tax at all.