North Dakota Retirement Income Tax: A Guide for Seniors (2026)

North Dakota stopped taxing Social Security benefits and charges some of the lowest income tax rates in the country.1 Since the 2021 tax year, the income cap that used to limit the state's Social Security deduction is gone, so benefits come off the return no matter how much else you earn. Other retirement income is still taxable here, but the rates are so low that the bill is usually small. The North Dakota retirement income tax is one of the gentlest in the nation for seniors.

This guide breaks down how Social Security, pensions, and IRA or 401(k) withdrawals are each treated, and why the low rates matter as much as the exemptions.

In This Guide

• North Dakota Retirement Income Tax at a Glance
• North Dakota Retirement Income Tax: How It Works
• Social Security
• Pensions
• IRAs and 401(k)s
• Putting It Together
• Frequently Asked Questions
• Next Steps

North Dakota Retirement Income Tax at a Glance

North Dakota's story has two parts, and both work in a retiree's favor. Social Security is effectively out entirely. Everything else, pensions and account withdrawals alike, stays on the return, but it runs through a rate schedule so low that it rarely produces a large bill. The table below lays out each income type.

North Dakota's graduated income tax starts with a 0 percent bottom bracket and tops out at just 2.5 percent.1 That top rate is among the lowest of any state that taxes income at all, which is why the absence of a dedicated pension exemption matters far less here than it would elsewhere.

North Dakota Retirement Income Tax: How It Works

North Dakota does not sort retirement income into the elaborate public-versus-private pension buckets that some states use. Instead it leans on two simple levers: a clean Social Security exemption and a very low rate schedule on everything else.

The Social Security change is the headline. Beginning with the 2021 tax year, the state removed the adjusted-gross-income limit that used to phase out its Social Security deduction.1 The North Dakota Office of State Tax Commissioner documents that change in its income tax history. With the cap gone, every filer can deduct the full amount of their benefits.

For pensions and account withdrawals, North Dakota offers no special senior carve-out. That sounds harsh until you look at the rates: a graduated schedule running from a 0 percent bottom bracket to a 2.5 percent top rate.1 A flat exemption matters less when the rate on the income it would have shielded is already tiny.

The low rates are recent. North Dakota replaced its old five-bracket income tax with a three-bracket schedule carrying overall lower rates, including a first bracket set at zero and a top rate cut to 2.5 percent.1 For tax year 2025 the three brackets work like this: taxable income up to $48,475 is taxed at 0 percent, income from there up to $244,825 is taxed at 1.95 percent, and anything above $244,825 is taxed at 2.5 percent.1 For most retirees, that means a large share of taxable retirement income falls in the 0 percent or 1.95 percent range, and only unusually high incomes reach the 2.5 percent top rate at all.

Social Security

Since the 2021 tax year, North Dakota has effectively exempted Social Security benefits in full.1 The deduction that delivers this used to come with an income cap, and that cap has been removed, so the deduction now covers everyone regardless of how high their other income runs.

This is a clean rule with no age test or income test attached. A retiree with a large pension keeps the same full Social Security exemption as a retiree living on benefits alone. For higher-income seniors who lost the deduction under the old cap, this is the single most valuable piece of the North Dakota retirement income tax.

Pensions

North Dakota taxes pension income, whether it comes from a government retirement system or a private employer.1 There is no separate public-pension exemption and no flat pension subtraction the way some neighboring states offer.

What softens this is the rate. Pension income that lands on your return is taxed on the same graduated schedule as any other income, and that schedule tops out at 2.5 percent.1 For a retiree whose pension would push them into the top bracket, the marginal cost is still modest by national standards. The practical upshot: North Dakota taxes more types of retirement income than some states, but it taxes all of them lightly.

IRAs and 401(k)s

Traditional IRA and 401(k) withdrawals are taxable in North Dakota and run through the same graduated schedule as pensions.1 There is no dedicated exclusion for account withdrawals, so the full distribution counts as North Dakota income in the year you take it.

Again, the low rates do the heavy lifting. A retiree drawing steadily from a 401(k) to cover living costs or care faces a state bill measured against a top rate of 2.5 percent rather than the 5, 6, or 7 percent common elsewhere. If you are weighing how much to draw from these accounts to cover care, retirement accounts for care walks through the tradeoffs.

Putting It Together

The practical takeaway is that North Dakota rewards retirees in a different way than the exemption-heavy states. It does not carve out pensions or account withdrawals, but it keeps Social Security fully off the return and then taxes whatever remains at rates so low the total bill stays small.

Picture a single retiree with $24,000 in Social Security and $40,000 in pension and IRA income. The $24,000 in Social Security is deducted in full, so it never enters the North Dakota calculation. The remaining $40,000 is taxable, but at the state's graduated rates, with the bottom bracket at 0 percent and the top at 2.5 percent. Even if the entire $40,000 were taxed at the 2.5 percent top rate, the state bill would be $1,000, and because the lower brackets are taxed at less than 2.5 percent (the bottom bracket at 0 percent), the actual figure is lower still.1 The figures here are hypothetical and shown only to illustrate how the low rate schedule shapes the result; they are not a real case and not a prediction of your own outcome.

This is general information rather than personalized tax advice, and the exact brackets and any year-to-year changes are worth confirming with the North Dakota Office of State Tax Commissioner or a tax professional before you plan withdrawals. If retirement savings are part of how you will fund care, building a senior care funding plan is a useful next step.

Next Steps

If you are retired in North Dakota, the math is simpler than in most states. Social Security comes off the top, and everything else is taxed lightly.

• Confirm the Social Security deduction applies; it carries no income limit for 2021 and later.
• Expect pensions and account withdrawals to be taxable, since there is no separate exemption.
• Anchor on the rates: the three-bracket schedule runs from a 0 percent bottom bracket through 1.95 percent to a 2.5 percent top rate.1
• Estimate your bill against that top rate, which keeps even fully taxable income modest.

If you are mapping out how to pay for care, how to pay for senior care covers the main routes.

Learn More

Find personalized help making sense of the North Dakota retirement income tax at brevy.com.

The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.