North Dakota State Tax: A Comprehensive Guide

Comprehensive North Dakota Personal Tax Guide

North Dakota imposes a state income tax on its residents and part-year residents. The state also taxes income earned by nonresidents from North Dakota sources. The state uses a progressive tax system, with rates increasing alongside taxable income.

North Dakota State Tax Rate

North Dakota’s income tax rates are tiered into five brackets based on your taxable income. The tax rates for the most recent tax year are:

For the 2024 tax year, the tax brackets for single filers are:

  • 1.10% on taxable income up to $44,725
  • 2.04% on taxable income between $44,726 and $99,950
  • 2.27% on taxable income between $99,951 and $183,100
  • 2.64% on taxable income between $183,101 and $228,800
  • 2.90% on taxable income over $228,800

For married couples filing jointly, the brackets are:

  • 1.10% on taxable income up to $74,700
  • 2.04% on taxable income between $74,701 and $165,150
  • 2.27% on taxable income between $165,151 and $340,100
  • 2.64% on taxable income between $340,101 and $431,900
  • 2.90% on taxable income over $431,900

North Dakota Income Tax Brackets

For single filers and those filing separately, the tax brackets are adjusted annually. For married couples filing jointly, the brackets are double those for single filers. The rates ensure that those with higher incomes pay a larger percentage of their income in taxes.

Example Calculation

Let’s say Joe earns $50,000 annually in taxable income:

  1. 1.10% on the first $44,725:
    • Tax: $44,725 × 0.0110 = $491.98
  2. 2.04% on the remaining $5,275 ($50,000 - $44,725):
    • Tax: $5,275 × 0.0204 = $107.61

Total Tax Liability: $491.98 + $107.61 = $599.59

The progressive structure ensures that taxpayers contribute fairly according to their financial capacity.

North Dakota Tax Filing Requirements

Filing state taxes correctly and on time is crucial to avoid penalties. North Dakota’s tax filing requirements are determined by your residency status, income level, and income sources.

Who Needs to File

  • Residents of North Dakota must file a state tax return if they have any taxable income.
  • Part-year residents must report all income earned during their residency and income from North Dakota sources.
  • Nonresidents must file if they earned income from North Dakota sources, such as wages, rental income, or business income.

Filing Deadlines and Extensions

The typical deadline for North Dakota state tax returns is April 15th. If the deadline falls on a weekend or holiday, the due date is extended to the next business day. You can apply for a filing extension, but note that an extension does not defer the time for paying taxes owed.

How to File

You can file your return electronically through the North Dakota Tax Division’s e-file system or by mail. Electronic filing is recommended for faster processing and refunds. Most taxpayers will use Form ND-1 for individual income tax returns.

North Dakota-Specific Income Tax Laws and Information

Taxation on Oil and Gas Income

North Dakota is known for its oil and gas production, and income derived from these activities is subject to taxation. Oil and gas royalty income and working interest income are considered North Dakota-sourced income. Nonresidents earning oil and gas income from the state must file a return and report the earnings appropriately.

Agricultural Income

North Dakota is also a major agricultural state. Income from farming activities, such as crop sales or livestock, must be reported. Special deductions may be available for agricultural producers, such as depreciation on farm equipment.

North Dakota State Income Tax Forms

To file your taxes, you'll need to use the correct forms, such as:

  • Form ND-1: Individual income tax return
  • Schedule ND-1TC: For tax credits
  • Schedule ND-1SA: For itemized deductions
  • Form ND-1NR: For nonresident and part-year resident returns

Ensure you are using the most up-to-date versions of these forms, which can be accessed on the North Dakota Tax Division website.

North Dakota Tax Credits and Deductions

North Dakota offers a variety of credits and deductions to help reduce your tax liability. Understanding which ones you qualify for can lower your tax bill.

North Dakota Standard Deduction

The standard deduction amounts are aligned with the federal standard deduction:

  • Single or Married Filing Separately: $14,600
  • Married Filing Jointly: $29,200
  • Head of Household: $21,900

You can choose between the standard deduction and itemizing your deductions based on what maximizes your tax savings.

North Dakota-Specific Tax Credits

  • Angel Investor Credit: Taxpayers who invest in qualifying businesses can claim a credit of up to 45% of their investment.
  • College SAVE Credit: Contributions to North Dakota’s College SAVE plan qualify for a state tax credit.
  • Renaissance Zone Credit: Residents who invest in approved projects within designated zones can claim a credit to encourage development.

North Dakota Property Tax

Property taxes in North Dakota are determined and collected by local governments. They are based on the assessed value of the property and the local mill rate.

Understanding Property Tax Rates

The property tax rate is determined by local government entities such as counties, cities, and school districts. Rates are typically expressed as mills, where one mill equals $1 in taxes per $1,000 of assessed property value. Property taxes in North Dakota fund various local services, such as schools and infrastructure.

Property Tax Exemptions

North Dakota offers several exemptions and reductions to eligible property owners:

  • Homestead Credit for Senior Citizens: Seniors meeting certain age and income requirements can receive a reduction in their property tax liability.
  • Veterans Exemption: Qualified veterans may receive a partial exemption based on their service status.
  • Farm Residence Exemption: Certain farm properties may qualify for reduced property assessments, lowering their tax liability.

Paying North Dakota State Taxes

Timely payment of state taxes is essential to avoid penalties. North Dakota provides several payment methods to accommodate taxpayers.

Payment Options

  • Electronic Funds Transfer (EFT): Direct payment from a bank account.
  • Credit/Debit Card: Online payment processing.
  • Check or Money Order: Mailed with a completed tax return or voucher.

Installment Plans

If you cannot pay your entire tax balance in full, North Dakota allows for installment plans. It's essential to apply as soon as possible to reduce interest and penalties.

North Dakota Tax Withholding

Proper tax withholding ensures you pay taxes throughout the year, preventing a hefty year-end bill. Employers withhold state income taxes from employees’ paychecks based on their Form NDW-4.

Adjusting Withholding

If your income or filing status changes, submit an updated Form NDW-4 to your employer to adjust your withholding. This ensures accurate withholding and helps avoid underpayment penalties.

North Dakota Tax for Nonresidents

Nonresidents earning income in North Dakota must file a return and report that income. This includes wages, rental income, and business income sourced from the state.

Filing Requirements for Nonresidents

Nonresidents with income sourced from North Dakota must file Form ND-1NR. It’s critical to report all North Dakota-based earnings and exclude non-North Dakota income from the state return.

North Dakota Self-Employment Tax

Self-employed individuals in North Dakota are responsible for state income taxes on their business earnings, along with federal self-employment tax.

Reporting and Calculating Self-Employment Tax

Self-employed individuals must accurately track income and expenses to determine their net taxable income. Filing the correct schedules, such as Schedule ND-1CE for business expenses, ensures that deductions are accounted for.

Estimated Tax Payments

Self-employed individuals must make quarterly estimated payments if they expect to owe more than $500 in taxes. This helps avoid penalties and interest for underpayment.

North Dakota Business Tax Credits

North Dakota encourages economic development through various business tax credits:

  • Research Expense Credit: For expenses related to qualifying research and development.
  • Automation Tax Credit: For investments in automation equipment to improve efficiency.
  • Workforce Recruitment Credit: For businesses hiring employees in targeted industries or regions.

Amending North Dakota State Tax Returns

If you discover an error on your filed North Dakota return, it’s essential to amend it promptly.

How to Amend

File an amended return using Form ND-1A. Provide the correct information along with an explanation of why you are amending the return.

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