Retiring in North Dakota: What the State Actually Takes

On the ordinary retirement profile — $34,000 of Social Security and $61,000 of plan distributions — North Dakota takes $0 a year in state income tax.

That is the number people compare, and it is the smallest of three. Property tax adds about $2,888 on the state's $313,885 median home, and insurance another $3,510. The three together come to $6,398, placing North Dakota 16th of 50.

A note before you start. This is general education, not tax advice. Every North Dakota figure comes from this site's own fifty-state income-tax dataset and its retirement tax engine, computed for a single filer aged 70 unless stated otherwise; property tax, median home price and insurance figures come from the site's core state dataset. Rates are for tax year 2026. Property tax is assessed locally in most states, so the effective rate here is a statewide figure rather than your county's.

1. What North Dakota takes from retirement income

On Social Security. North Dakota exempts Social Security benefits in full, with no income threshold, no age condition, and no phase-out. The mechanism is a subtraction on Form ND-1 line 15 of 'the taxable portion of your Social Security benefits reported on Form 1040 or 1040-SR, line 6b' — so the exemption is of the federally taxed portion, and a retiree whose benefits are not federally taxable gets no further North Dakota benefit. One edge the instructions spell out and summaries drop: taxable Tier 1 Social Security equivalent benefits reported on a Form RRB-1099 do not go on this line; they belong on line 8 with other Railroad Retirement Board benefits, which are separately exempt. A retiree receiving both must split line 6b in proportion to the gross amount of each type.

On 401(k) and IRA distributions. North Dakota has NO general exclusion for 401(k), 403(b), 457, or traditional IRA distributions. They are embedded in federal taxable income, which is where the North Dakota return starts, and they are taxed at the graduated rates above. The narrow exception is not an account-type rule: Form ND-1 line 9 excludes certain retirement benefits of a licensed peace officer with at least 20 years of licensed status or who was medically retired, and only benefits issued by the employer's retirement plan. Everyone else pays.

2. The rule that decides your North Dakota bill

The asymmetry is sharp and deliberate. A North Dakota private pension and a North Dakota state or local government pension are both fully taxable at the graduated rates. military retirement is exempt in full — Form ND-1 line 14 excludes 'the amount of taxable military retirement benefits that you reported on Form 1040 or Form 1040-SR, line 5b,' with no dollar cap, no age trigger, and no years-of-service test. The scope is broader than 'military' usually means: it covers retired members of the U.S. armed forces and their reserve components, the Army National Guard and Air Force National Guard, a surviving spouse of a deceased retired service member, and — a real edge case worth keeping — retirement benefits received for federal civil service employment as a dual status military technician under Title 32 or Title 10. The one non-military crack in the wall is the licensed peace officer exclusion at line 9, which is why publicPension is 'taxed' rather than 'partial-exclusion': it reaches one occupation, not public employees generally.

North Dakota's structure makes it one of the mildest income tax states in the country for a retiree without being a no-tax state: a zero-rate first bracket runs to $49,575 of North Dakota taxable income for a single filer and $82,800 for a joint one, and taxable income is measured after the federal standard deduction, so a couple can have well over $115,000 of gross income before any North Dakota tax at all.

The zero bracket is the thing to get right in any calculation. North Dakota is not a flat 1.95% state and it is not a 2.5% state; most residents pay 0% on a large first slice and 1.95% on the rest.

3. What North Dakota charges at three income levels

The same state, three retirements. All figures are for a single filer aged 70.

Read down the middle column. The exemption that makes a modest retirement free here is worth nothing to an affluent one — the bill goes from $0 to $1,449 as income rises. That is a phase-out, and it is the single most misreported feature of state retirement taxation.

A married couple with $48,000 of Social Security and $62,000 of distributions pays $0.

4. Property tax, and why it lands harder in retirement

An effective rate of 0.9% on the state's $313,885 median home is about $2,888 a year.

For a retiree this is a harder cost than income tax, and the reason is structural: property tax is levied on the house, while retirement income falls. A bill sized to a working income arrives every year after the income has gone.

It is also assessed locally almost everywhere, so a statewide effective rate conceals real variation between counties. Treat the figure above as the state's shape rather than as your bill.

North Dakota does have a homestead provision, and it is the one lever on this line worth understanding.

North Dakota does not have a single broad ad-valorem homestead exemption. It offers several separate property tax relief programs for owner-occupied residences: a Primary Residence Credit for owner-occupants generally, a Homestead Property Tax Credit targeted at qualifying elderly (65+) or permanently/totally disabled homeowners with limited income, and a Disabled Veteran's Property Tax Credit for veterans with a service-connected disability rating of 50% or greater (credit applied against the first $120,000 of true and full valuation, scaled to disability percentage). Specific current dollar credit amounts for the Primary Residence Credit and Homestead Property Tax Credit could not be confirmed on a live tax.nd.gov page during this research pass; homeowners should confirm current amounts directly with the ND Office of State Tax Commissioner or their county assessor. Most require annual application by February 1.

Two things about homestead rules catch people out after a move. They almost always require the property to be your primary residence, which a snowbird splitting the year has to be able to demonstrate. And several states require an application to the county rather than granting it automatically — a benefit you qualify for and never claimed is worth nothing.

5. Insurance, the line nobody prices

Average home insurance in North Dakota: $3,510 a year — 38th cheapest of the fifty states.

This is the line almost no retirement comparison includes, and across the country it varies more than income tax does: from Hawaii's $900 to Florida's $8,375, a ninefold spread.

For a retiree it behaves like a second property tax. It rises independently of income, a fixed-income household absorbs the whole increase, and it is a condition of the mortgage if you still have one.

6. What retiring in North Dakota actually costs

Income tax on the typical retirement profile, plus property tax and insurance on each state's own median home. North Dakota is shown against its own neighbours in the ranking, and against the extremes.

North Dakota comes to $6,398, 16th of 50.

Income tax is 0% of that total, which is the whole point: the number everybody checks contributes nothing to the number that matters.

One large caveat, and it matters. Each row uses that state's own median home, and those differ a great deal. So this compares the typical house in each state, not the same house in each state — buying below a state's median improves its figure materially.

7. The exemption shrinks as your income rises

North Dakota's exemption is not a flat one. It shrinks as income rises, from $0 on a modest retirement income to $1,449 on an affluent one. North Dakota has NO general exclusion for 401(k), 403(b), 457, or traditional IRA distributions. They are embedded in federal taxable income, which is where the North Dakota return starts, and they are taxed at the graduated rates above. The narrow exception is not an account-type rule: Form ND-1 line 9 excludes certain retirement benefits of a licensed peace officer with at least 20 years of licensed status or who was medically retired, and only benefits issued by the employer's retirement plan. Everyone else pays. A phase-out is a marginal rate in disguise. Inside the phase-out band an extra dollar of income costs the ordinary rate plus the exemption it withdraws — so the real cost of a larger withdrawal is higher than the headline schedule suggests.

8. What a Roth conversion costs in North Dakota

Converting $50,000 to a Roth costs an extra $884 in North Dakota tax — 1.8 cents on the dollar.

These are computed, not read off the bracket table, which matters because a conversion large enough to be worth making usually leaves the bracket it started in.

The state's share is the part you can move. Convert in a year you are resident somewhere with no income tax and it is zero; convert here and it is 1.8%. The federal tax is due either way.

9. What part-time work costs here

$20,000 of part-time work costs an extra $299 in North Dakota tax — an effective 1.5% on the earnings.

Compare that with the 1.8% a Roth conversion costs. Earned income is the cheaper dollar here, which is unusual.

Two federal rules apply on top and neither depends on your state. Earnings can raise the taxable share of Social Security, and claiming before full retirement age exposes you to the federal earnings test.

10. The order to draw your accounts in

The order you draw accounts in is worth real money, and the right order depends on the state.

North Dakota applies the same treatment whenever you withdraw, so the order is a federal question rather than a state one — with the exception that the marginal rate is 0%, and a year of unusually high withdrawals pays that on the excess.

Smoothing withdrawals across years therefore beats lumping them, modestly. Take a large one-off distribution in a single year and it climbs the bracket schedule; spread the same amount over three and more of it stays low.

Required minimum distributions overrule all of this from 73 onward. Once they begin you must take the calculated amount whether the order suits you or not, which is the argument for drawing down or converting the pre-tax balance in the years before.

11. Or move across the state line

For most people the real alternative to North Dakota is not Wyoming — it is the state on the other side of the line, near the same family, the same doctors and the same weather.

South Dakota is the cheapest of the group at $6,351, $47 below North Dakota. Whether that is worth a move is a question about your life rather than your spreadsheet — but it is the comparison worth running, because it is the one you could actually act on.

One thing this table cannot show is the county. Property tax is set locally, and the spread inside a single state is routinely wider than the gap between two neighbouring states. A border move to a cheaper state and an expensive county can leave you worse off.

12. If you are moving to North Dakota from somewhere else

The eight most populous states people leave, measured against North Dakota on the same three lines.

North Dakota is cheaper than 6 of these eight. That is the case for the move, on these lines.

A move is not free, and this table does not price it. Transaction costs on both houses run to several per cent of the sale price, and at typical values that is often more than the first two or three years of the saving.

North Dakota charges no transfer tax on the purchase, which is one closing cost you will not meet here and do meet in most states. Closing costs here run about 2% to 5% of the price — $6,278 to $15,694 on the median home, which is the real entry fee for the annual saving this article has been describing.

13. What North Dakota does not exempt you from

The federal system, entirely. This is the commonest misunderstanding about state retirement taxation, and it is worth stating plainly.

Required minimum distributions still apply. The amount is federal — your prior-year balance divided by an IRS life expectancy factor — and identical in all fifty states. A state changes what the distribution costs you, not whether you must take it.

Social Security is still federally taxable, on the federal provisional-income calculation, whatever your state does with it.

IRMAA still applies, with its two-year lag. A large conversion or distribution raises a Medicare premium two years later regardless of address.

And capital gains are still federally taxed. What North Dakota adds on top is a separate question from what the federal system takes.

14. Establishing that you actually live here

Any state tax advantage is worth nothing until North Dakota is your domicile, and the state you left may disagree about when that happened.

High-tax states audit departing residents. The question is not whether you own a home here; it is whether you genuinely abandoned the old domicile. Days spent in each state, voter registration, vehicle registration, where your doctors are and where you claim a homestead all bear on it.

The snowbird case is the risky one. Splitting the year between two states while keeping a home in both is exactly the profile a residency audit is built for. If a plan depends on the saving, count the days from the first year rather than reconstructing them afterwards.

15. Who North Dakota actually suits

Someone on a modest retirement income. North Dakota charges $0 at the modest profile — the exemption does its work at the bottom of the range.

It suits an affluent retiree least. At the affluent profile the bill is $1,449, and whatever exclusion helps a modest income has stopped helping by then.

It suits a homeowner less than a renter, because $3,510 of average insurance attaches to the property rather than to the income.

16. What to check before you decide

Get your county's actual property tax rate, not the state average. Property tax is levied locally almost everywhere, and the spread inside a state is often wider than the spread between states.

Get a real insurance quote on a real address. $3,510 is the state average; construction, roof age and exposure move it a long way.

Work out your own income tax rather than using the profile above. $95,000 split one way is not $95,000 split another, and in North Dakota the mix between Social Security and distributions changes the answer.

And check what your current state actually charges you before assuming it is worse. On these three lines the ranking surprises people in both directions.

Frequently asked questions

Does North Dakota tax Social Security? No. North Dakota exempts Social Security benefits in full, with no income threshold, no age condition, and no phase-out. The mechanism is a subtraction on Form ND-1 line 15 of 'the taxable portion of your Social Security benefits reported on Form 1040 or 1040-SR, line 6b' — so the exemption is of the federally taxed portion, and a retiree whose benefits are not federally taxable gets no further North Dakota benefit. One edge the instructions spell out and summaries drop: taxable Tier 1 Social Security equivalent benefits reported on a Form RRB-1099 do not go on this line; they belong on line 8 with other Railroad Retirement Board benefits, which are separately exempt. A retiree receiving both must split line 6b in proportion to the gross amount of each type.

Does North Dakota tax 401(k) or IRA withdrawals? North Dakota has NO general exclusion for 401(k), 403(b), 457, or traditional IRA distributions. They are embedded in federal taxable income, which is where the North Dakota return starts, and they are taxed at the graduated rates above. The narrow exception is not an account-type rule: Form ND-1 line 9 excludes certain retirement benefits of a licensed peace officer with at least 20 years of licensed status or who was medically retired, and only benefits issued by the employer's retirement plan. Everyone else pays.

What about pensions — private, government, or military? A $50,000 pension costs $0 if private, $0 if a government pension, and $0 if military retired pay.

What does retiring in North Dakota actually cost? Income tax of $0 on the typical profile, plus about $2,888 of property tax and $3,510 of insurance on the median home — $6,398, which is 16th of 50.

Is North Dakota a cheap state to retire in? On these three lines it ranks 16th of 50. Whether that makes it cheap for you depends far more on the house than on the tax code.

Does the exemption phase out? Yes. It is worth most at a modest income — $0 — and nothing by the affluent profile, where the bill is $1,449.

What does a Roth conversion cost in North Dakota? An extra $884 in state tax on $50,000 converted, and $1,859 on $100,000. That is 1.8% of the amount converted, on top of the federal tax.

Does part-time work get taxed differently from my 401(k) withdrawals? $20,000 of part-time earnings costs $299 in state tax, an effective 1.5%.

Would a neighbouring state be cheaper than North Dakota? South Dakota is the cheapest of North Dakota and its neighbours at $6,351 against North Dakota's $6,398.

Do required minimum distributions change if I move here? No. The required amount is a federal calculation and identical in every state. What changes is what the distribution costs once taken.

Does this article include local income tax? No local income tax applies to retirement income in North Dakota on the figures used here.

Will North Dakota's treatment still apply in ten years? State legislatures revise retirement taxation regularly — several states have changed theirs in the past three years. Figures here are for tax year 2026 and are worth re-checking before a move.

What to do next

Two numbers decide this and neither is the one in the headline: your county's actual property tax rate, and a real insurance quote on a real address.

• Retirement state tax calculator — what any state charges on your income, cited per state
• RMD calculator — the distribution you must take, which no state changes
• Home insurance premium estimator — the line this article says decides it
• The Relocation Tax Playbook — establishing domicile, and the states that contest it