Calculating your take-home pay in the Peace Garden State involves navigating both federal requirements and North Dakota's unique tax structure. North Dakota is known for having some of the lowest individual income tax rates in the United States, which is a major benefit for residents in cities like Fargo, Bismarck, and Grand Forks.
How North Dakota State Income Tax Works
North Dakota utilizes a progressive tax system, but recent legislation has significantly simplified and lowered these rates. As of 2024, the state has eliminated income tax for many lower-income residents and capped the top rate at a modest 2.5%. Most North Dakotans fall into the 0% or 1.95% effective brackets after applying federal taxable income rules.
Key Deductions from Your ND Paycheck
FICA Taxes: This consists of Social Security (6.2%) and Medicare (1.45%). These are mandatory federal payroll taxes.
Federal Withholding: Based on your W-4 form, this is the amount sent to the IRS to cover your annual income tax liability.
ND State Withholding: This is calculated based on your federal taxable income. Because ND uses your federal tax base as a starting point, many federal deductions also reduce your state tax bill.
Local Taxes: Unlike some other states, North Dakota does not typically allow local municipalities (cities or counties) to levy their own separate income taxes.
Example Calculation
If you live in North Dakota and earn a gross annual salary of $60,000, paid bi-weekly as a single filer:
Gross Pay: $2,307.69 per pay period.
FICA: Approximately $176.54.
Federal Tax: Roughly $210.00 (varies by exemptions).
ND State Tax: Approximately $12.00 (thanks to the generous 0% threshold on initial earnings).
Estimated Take-Home: ~$1,909.15.
Frequently Asked Questions
Does North Dakota tax Social Security benefits?
As of recent tax law changes, North Dakota does not tax Social Security benefits for most residents, making it a tax-friendly state for retirees.
Are there local income taxes in Fargo?
No. Residents of Fargo, Bismarck, and other ND cities only pay federal and state income taxes.
How can I lower my North Dakota tax liability?
Contributing to a 401(k) or a Health Savings Account (HSA) reduces your taxable income at both the federal and state levels.