North Dakota Payroll Taxes and Withholding Guide (2026)

What Makes North Dakota Payroll Different

Federal payroll tax is the same in every state. What changes from one state to the next is the second layer: state income tax withholding, employer unemployment taxes, any local wage taxes, and any state social-insurance premiums. North Dakota's second layer is one of the lightest among states that tax wages: a low-rate income tax with a wide zero band, and nothing else on the employee side.

Three things set North Dakota apart. First, there is no state withholding certificate; the employer reads the filing status from the federal Form W-4. Second, North Dakota has reciprocity with two neighbours, Minnesota and Montana, which matters in the Fargo-Moorhead and Grand Forks metro areas and along the western border. Third, a separately paid bonus can be withheld at a flat 1.50%. Otherwise the state side is clean: no local wage tax, no state disability or paid family leave deduction, and no employee unemployment line. The federal baseline behind all of this is explained in the how payroll taxes work guide.

Employee Withholding Overview in North Dakota

A North Dakota employee sees federal taxes and a state income tax. There is no employee unemployment line, no state disability or paid-leave line, and no local wage line; the only state item is the income tax, and below the zero band it is $0.

The federal lines work identically to any other state. For Social Security, the 2026 wage base is $184,500, after which Social Security stops for the year. Medicare has no cap. What is unique to North Dakota is a low graduated state income tax withheld on the federal W-4 filing status, and nothing else on the state side.

How Is North Dakota State Income Tax Withheld?

North Dakota publishes its withholding method each year in the Office of State Tax Commissioner's Income Tax Withholding Rates and Instructions booklet. For a Form W-4 for 2020 or later, or a new hire with no W-4, the percentage method is a five-line worksheet: enter the taxable wages for the pay period, multiply by the number of pay periods in the year, apply the annual table for the Step 1(c) filing status, divide by the number of pay periods, and round to the nearest dollar.

The married-filing-jointly zero band ($57,500) is essentially the same as the single band, not double it, so the married column does not leave a two-earner household short on the state line. North Dakota also publishes per-frequency wage-bracket tables read from $25 wage lines; an employer using them may land about a dollar away from the annualized computation, and both reconcile on your North Dakota Form ND-1 return. The North Dakota paycheck calculator uses the annual table above. Federal withholding is set separately by the same Form W-4, covered in the W-4 withholding explained guide.

North Dakota Uses the Federal Form W-4

North Dakota does not have its own withholding certificate. The Office of State Tax Commissioner states that the state relies on the federal Form W-4 to calculate the amount to withhold, and the booklet carries two sets of methods depending on which version of the W-4 the employer has on file.

Because the 2020-and-later worksheet uses only the filing status and the wages, the federal Step 2 checkbox, Step 3 dependent credits, and Step 4 adjustments change federal withholding but not the North Dakota line. An employee who expects to owe North Dakota tax at filing, for example because of a spouse's income or side income, can ask the employer to withhold an extra amount each pay period; the employer is asked to accommodate the request if possible. To see how the filing status changes take-home pay, use the North Dakota paycheck calculator.

Reciprocity With Minnesota and Montana

North Dakota has reciprocal income tax agreements with Minnesota and Montana. Under them, wages earned in North Dakota by a resident of either state are exempt from North Dakota income tax and are taxed only by the home state, so cross-border commuters are not withheld for two states.

The exemption is not automatic. The employee completes Form NDW-R, Reciprocity Exemption From Withholding For Qualifying Minnesota and Montana Residents Working in North Dakota, and gives it to the North Dakota employer. The form must be renewed at the beginning of each year by giving the employer a new NDW-R on or before February 28. Under the Minnesota agreement, the employee must also return to a home in Minnesota at least once every month to qualify. In the other direction, a North Dakota resident working in Minnesota or Montana uses that state's reciprocity form and pays North Dakota tax as a resident. A resident of any other state who works in North Dakota has North Dakota tax withheld and files a North Dakota nonresident return.

Wages Exempt From North Dakota Withholding

The Office of State Tax Commissioner's withholding guideline lists several kinds of wages that are not subject to North Dakota income tax withholding even when federal withholding applies. The ones that most often affect a North Dakota payroll are:

• Wages paid by a farmer or rancher to an employee solely for agricultural labor (N.D.C.C. § 57-38-60(10)).
• Wages paid to an enrolled member of a federally recognized tribe who lives on a reservation and performs the services on a reservation.
• Wages of a Minnesota or Montana resident with Form NDW-R on file (reciprocity, above).
• Wages of an eligible civilian spouse of a service member, with Form NDW-M filed with the employer and renewed by January 31 each year.
• Wages of a nonresident under the mobile workforce exclusion (N.D.C.C. § 57-38-59.3): the nonresident has no other North Dakota-source income for the year, is in North Dakota to perform employment duties for no more than 20 days in the year, and lives in a state with a substantially similar exclusion or no individual income tax.

Wages that are exempt from federal income tax withholding are also not subject to North Dakota withholding. For anything outside these categories, North Dakota tax is withheld on the regular table.

Employer Payroll Obligations in North Dakota

North Dakota employers carry the federal employer taxes plus state unemployment insurance through Job Service North Dakota. The federal side, covered in the employer payroll tax obligations guide, includes the matching 6.2% Social Security and 1.45% Medicare plus Federal Unemployment Tax (FUTA).

The North Dakota unemployment taxable wage base is $46,600 per employee for 2026 (up from $45,100 in 2025), set each year at 70% of the statewide average annual wage, so the employer unemployment tax stops once an employee's year-to-date wages pass $46,600. A new employer stays on the new-employer rate until it has six quarters of coverage (ten for construction), then moves to an experience rate. These are employer costs and are never deducted from employee pay. Employers register a North Dakota withholding account through Taxpayer Access Point (TAP). Model the combined cost-to-hire with the employer payroll tax calculator.

North Dakota Has No Employee Unemployment Deduction

A handful of states, including Pennsylvania and New Jersey, take a small unemployment contribution directly from employee wages. North Dakota is not one of them. Unemployment insurance is funded by employers through Job Service North Dakota, so there is no employee unemployment line on a North Dakota pay stub.

North Dakota also has no state disability insurance and no paid-family-and-medical-leave payroll deduction, so the only employee-side state item is the income tax. Workers who move to North Dakota from a state that does deduct one of those (Minnesota Paid Leave, California SDI, New Jersey UI/DI) will not see the same line here. Cities and counties do not add a wage tax either: the taxing powers of home rule cities under N.D.C.C. § 40-05.1-06 cover property, sales and use, lodging, and restaurant taxes, not wages.

North Dakota Supplemental Wage Withholding

Supplemental wages are payments outside regular salary: bonuses, commissions, overtime pay, accumulated sick leave, severance, awards, prizes, back pay, and taxable fringe benefits. North Dakota treats as supplemental anything the IRS treats as supplemental for federal withholding, and Section 3 of the 2026 booklet gives two options when the payment is separately paid or separately identified.

• Option 1: withhold a flat 1.50% of the supplemental wages.
• Option 2: add the supplemental wages to the regular wages for the current (or most recent) payroll period, compute withholding on the total with the regular method, and subtract the withholding on the regular wages.
• Not separately identified: if a bonus is combined with regular wages in one payment and not separately identified, it is withheld in the usual way through the tables.

The booklet's own example: a $1,000 bonus is withheld $15.00 under Option 1 ($1,000 × 1.50%). Federal income tax withholding on supplemental wages is a separate calculation set by the IRS, often the 22% federal flat supplemental rate, and Social Security and Medicare still apply under their own rules. For the federal supplemental math, use the Bonus Tax Calculator.

North Dakota Filing and Payment Frequency

North Dakota employers report and remit withheld income tax on Form 306, Income Tax Withholding Return, quarterly: by April 30, July 31, October 31, and January 31. An employer that filed and paid all four quarters on time in the prior year and withheld less than $1,000 in total that year can ask the Office of State Tax Commissioner to file one annual Form 306, due January 31. Form 306 must be filed even for a period with no wages, and it must be filed electronically if prior-year withholding was $1,000 or more or a third-party payroll provider files for the employer.

The annual reconciliation is satisfied by electronically filing Forms W-2 (and any Forms 1099 showing North Dakota tax) by January 31, which fulfils the Form 307 transmittal requirement. Unemployment tax is reported and paid separately through Job Service North Dakota. The federal deposit schedule is covered in the payroll tax deadlines guide.

How Take-Home Pay Works in North Dakota

The calculation sequence runs from gross pay down to net pay. Because North Dakota withholding starts from taxable wages, the same pre-tax deductions that reduce federal wages also reduce the North Dakota base.

1. Start with gross wages for the pay period.
2. Subtract federal pre-tax deductions (401(k), Section 125 health premiums) to find taxable wages for federal and North Dakota tax.
3. Apply federal income tax withholding using the Form W-4 and IRS Publication 15-T.
4. Annualize the taxable wages, apply the North Dakota annual table for the W-4 filing status, divide by pay periods, and round to the nearest dollar (or $0 with Form NDW-R on file).
5. Subtract Social Security (6.2%) and Medicare (1.45%) on FICA wages. The remainder is net pay; there is no employee unemployment line, no state disability line, and no local wage line.

To see exact figures for a specific salary, filing status, and pay frequency, use the North Dakota paycheck calculator or the general take-home pay calculator for a full pre-tax benefits stack.

North Dakota Payroll Quick Facts (2026)

Frequently Asked Questions