Key Takeaways
• North Dakota’s 2025 tax rates simplify to three brackets: 0%, 1.95%, and 2.5%, effective January 1, 2025.
• The reform caps the top tax rate at 2.5%, making it one of the lowest in the United States.
• All taxpayers must use updated 2025 withholding tables; employers must update payroll systems accordingly.
North Dakota has made important changes to its state income tax rates and brackets for the 2025 tax year. These updates, which took effect following a 2023 legislative reform, are designed to make the state’s tax system simpler and more affordable for residents. The new system features just three tax rates—0%, 1.95%, and 2.5%—and applies to all taxpayers, regardless of when they filed their federal withholding form. This update explains what has changed, who is affected, when the changes take effect, what actions are required, and what these changes mean for people living and working in North Dakota.
Summary of What Changed
The most significant change for 2025 is the reduction and simplification of North Dakota’s state income tax rates and brackets. Before 2025, North Dakota had five tax brackets with higher rates. Now, there are only three brackets, and the top rate is capped at 2.5%. This makes North Dakota’s income tax one of the lowest in the United States 🇺🇸.
The change is the result of House Bill 1158, passed in 2023. Lawmakers wanted to make the tax code easier to understand and lower the tax burden for most residents. The new rates and brackets apply to income earned in 2025 and are used when filing state tax returns in 2026.
Who Is Affected by the 2025 Tax Changes
These changes affect all individuals and families who live or work in North Dakota and are required to file a state income tax return. This includes:
- Single filers
- Married couples filing jointly
- Heads of household
- Employers and payroll departments responsible for withholding state income tax from employee paychecks
The new tax rates and brackets apply to everyone, regardless of whether they filed their federal Form W-4 before or after 2020. While there are some small differences in how withholding is calculated, the actual tax rates and income brackets are the same for all taxpayers.
Effective Dates
The new tax rates and brackets are effective for the 2025 tax year. This means:
- Income earned from January 1, 2025, through December 31, 2025 is subject to the new rates.
- Taxpayers will use these rates when they file their 2025 North Dakota state tax returns in 2026.
- Employers must use the updated withholding tables for all paychecks issued in 2025.
2025 North Dakota State Income Tax Rates and Brackets
The 2025 tax system is progressive, which means people with higher incomes pay a higher rate on the portion of their income above certain thresholds. Here are the details for each filing status:
Single Filers
– $0 – $55,975: 0% tax rate (no state income tax owed)
– $55,975 – $252,325: 1.95% tax rate on the amount over $55,975
– Over $252,325: $3,828.83 plus 2.5% of the amount over $252,325
Married Filing Jointly
– $0 – $55,488: 0% tax rate
– $55,488 – $164,038: 1.95% tax rate on the amount over $55,488
– Over $164,038: $2,116.73 plus 2.5% of the amount over $164,038
Head of Household
– $0 – $76,200: 0% tax rate
– $76,200 – $282,700: 1.95% tax rate on the amount over $76,200
– Over $282,700: $4,026.75 plus 2.5% of the amount over $282,700
Standard Deduction
Before applying these brackets, taxpayers can subtract the standard deduction from their income. For 2025, the standard deduction is about $15,000 for single filers and $30,000 for married couples filing jointly. This means you only pay tax on income above these amounts.
Required Actions for Taxpayers and Employers
If you live or work in North Dakota, here’s what you need to do:
For Individuals and Families
– Check your income: See which bracket your taxable income falls into after subtracting the standard deduction.
– Review your paycheck withholding: Make sure your employer is using the updated 2025 withholding tables. This helps avoid surprises at tax time.
– File your 2025 state tax return using the new rates: When you file in 2026, use the new brackets and rates to calculate your tax.
For Employers and Payroll Departments
– Update payroll systems: Make sure you are using the 2025 North Dakota withholding tables for all employees.
– Follow federal Form W-4 procedures: North Dakota’s withholding rules match the federal Form W-4 changes made in 2020, so use the latest version for new hires or changes.
– Communicate with employees: Let workers know about the new rates and how they may affect take-home pay.
Implications for Pending Applications and Ongoing Tax Matters
If you have a pending application or ongoing tax issue from a previous year, the new rates do not apply to income earned before January 1, 2025. For example:
- 2024 tax returns: Use the old rates and brackets for income earned in 2024.
- Amended returns for earlier years: If you are correcting a past return, use the rates that were in effect for that year.
- Estimated tax payments for 2025: If you pay estimated taxes, use the new 2025 rates for payments covering income earned in 2025.
How the 2025 Changes Affect Different Groups
Low-Income Residents
– If your taxable income is below the 0% threshold, you pay no state income tax. This is a big benefit for people with lower earnings, as it means more take-home pay.
Middle-Income Earners
– If your income falls in the middle bracket, you pay a modest 1.95% on the amount above the threshold. This is lower than in many other states and helps keep more money in your pocket.
High-Income Earners
– The top rate is just 2.5%, which is among the lowest in the country. Even if you earn a high income, your state tax bill will be lower than in most other states.
Employers
– The simpler bracket structure makes payroll calculations easier and reduces the risk of mistakes. Employers must use the updated withholding tables for 2025, which are available from the North Dakota Office of State Tax Commissioner.
Tax Professionals and Payroll Services
– Accountants and payroll providers have updated their systems to reflect the new rates and brackets. This helps ensure accurate tax withholding and filing for clients.
Why Did North Dakota Make These Changes?
The 2023 reform (H.B. 1158) was passed to make North Dakota more competitive and attractive for workers and businesses. Lawmakers wanted to:
- Simplify the tax code: Fewer brackets and lower rates make it easier for people to understand their tax bill.
- Lower the tax burden: More people pay no state income tax, and those who do pay less than before.
- Encourage economic growth: Lower taxes can help attract new residents and businesses to North Dakota.
Stability and Future Outlook
As of July 2025, there are no announced changes to the state income tax rates or brackets for the rest of the year. The current policy is expected to remain stable, giving residents and employers certainty as they plan for the future.
How North Dakota Compares to Other States
North Dakota’s top state income tax rate of 2.5% is one of the lowest in the United States 🇺🇸. Many states have higher rates, and some have more complicated tax systems with many brackets. This makes North Dakota an attractive place for people who want to keep more of their earnings.
Practical Examples
Let’s look at a few examples to see how the new rates work:
Example 1: Single Filer with $50,000 Taxable Income
– Standard deduction: $15,000
– Taxable income: $50,000 (after deduction)
– Since $50,000 is below the $55,975 threshold, this person pays no state income tax.
Example 2: Married Couple Filing Jointly with $100,000 Taxable Income
– Standard deduction: $30,000
– Taxable income: $100,000 (after deduction)
– $100,000 is above the $55,488 threshold, so they pay 1.95% on the amount over $55,488.
– Calculation: $100,000 – $55,488 = $44,512
– Tax owed: 1.95% of $44,512 = $868.99
Example 3: Head of Household with $300,000 Taxable Income
– Standard deduction: $15,000 (if single head of household)
– Taxable income: $300,000 (after deduction)
– $300,000 is above the $282,700 threshold, so they pay $4,026.75 plus 2.5% of the amount over $282,700.
– Calculation: $300,000 – $282,700 = $17,300
– Tax owed: $4,026.75 + (2.5% of $17,300) = $4,026.75 + $432.50 = $4,459.25
Key Takeaways for Immigrants and New Residents
If you are new to North Dakota or considering moving there, it’s important to know how the state income tax system works:
- You may pay no state income tax if your income is below the 0% threshold.
- If you earn more, you’ll pay one of the lowest state tax rates in the country.
- The system is simple and easy to understand, which can help you plan your finances.
- Employers handle most of the withholding, so your paycheck should already reflect the correct amount of state tax.
Where to Find Official Information and Forms
For the most accurate and up-to-date information, visit the North Dakota Office of State Tax Commissioner website. Here, you can find:
- Official tax forms and instructions
- Withholding tables for employers
- Updates on tax policy and legislative changes
If you need to file a state income tax return, you’ll use the North Dakota Individual Income Tax Form, which is available on the official site. As reported by VisaVerge.com, staying informed through official government sources is the best way to ensure you meet all requirements and avoid mistakes.
Frequently Asked Questions
Do I need to file a North Dakota state tax return if I have no taxable income?
If your income is below the standard deduction and the 0% bracket, you may not need to file. However, check the official guidelines or speak with a tax professional to be sure.
What if I work in North Dakota but live in another state?
You may still need to file a North Dakota state tax return for income earned in the state. Check with the North Dakota Office of State Tax Commissioner for details.
Are there any local or city income taxes in North Dakota?
No, North Dakota does not have local or city income taxes. You only need to pay state and federal income taxes.
What if I have questions about my withholding or tax return?
Contact your employer’s payroll department or the North Dakota Office of State Tax Commissioner for help.
Conclusion and Next Steps
The 2025 changes to North Dakota’s state income tax rates and brackets make the system simpler and more affordable for most residents. With only three brackets and a low top rate of 2.5%, many people will pay less tax than before. If you live or work in North Dakota, check your income and withholding to make sure you’re prepared for the new system. Employers should update payroll systems and communicate changes to employees. For more information, visit the official North Dakota tax website or speak with a tax professional.
By understanding these changes and taking the right steps, you can make sure you’re following the law and keeping more of your hard-earned money.
Learn Today
Tax Bracket → A range of income taxed at a specific rate under a progressive tax system.
Withholding Tables → Employer reference charts to calculate state income tax deducted from employee paychecks.
Standard Deduction → A fixed income amount subtracted from taxable income, lowering tax liability.
Progressive Tax → A tax structure where higher income amounts are taxed at higher rates.
House Bill 1158 → 2023 North Dakota law reforming state income tax rates and brackets for 2025.
This Article in a Nutshell
North Dakota simplifies its 2025 state income taxes, cutting five brackets to three with a 2.5% top rate. Residents benefit from lower taxes and simpler filing. Employers must update payroll systems and employees should verify withholding to avoid surprises in 2026 tax returns.
— By VisaVerge.com
