North Dakota Tax on Capital Gains

North Dakota taxes capital gains through its state income tax system.

Gains are generally included in taxable income and taxed at the same rates that apply to other income.

How Capital Gains Are Taxed in North Dakota

Capital gains usually come from selling assets such as:

• Stocks
• Mutual funds
• Real estate
• Business interests
• Land or other investments

Short-term capital gains from assets held one year or less are typically taxed as ordinary income.

Long-term capital gains from assets held more than one year may qualify for special tax treatment that can reduce the taxable amount.

North Dakota Long-Term Capital Gains Deduction

North Dakota allows many taxpayers to exclude a portion of qualifying net long-term capital gains from state taxable income.

A common deduction is 40% of qualifying net long-term gains, which lowers the amount subject to tax.

Example
You sell investments for a $10,000 long-term gain.
40% excluded = $4,000
Taxable amount = $6,000

North Dakota Income Tax Rates

North Dakota is known for relatively low state income tax rates. Depending on income and filing status, rates range from 0% at lower income levels to a modest top rate compared with many states.

Because the taxable gain may also be reduced by the long-term gain deduction, the effective tax cost can be fairly low.

Capital Gains on Home Sales

If you sell your primary home, federal home sale exclusions may reduce or eliminate taxable gain:

• Up to $250,000 for single filers
• Up to $500,000 for married filing jointly

If the gain is fully excluded federally, there may be little or no North Dakota tax due. If some gain remains taxable, North Dakota may also tax that portion.

Is North Dakota a Good State for Capital Gains?

North Dakota can be attractive for investors because:

• Low-income tax rates
• Potential 40% long-term gain exclusion
• No estate tax
• No inheritance tax

Electronic Filing Recommendation 💻

• E-file federal and North Dakota returns for faster processing
• Keep records of purchase price, improvements, and sale price
• Confirm whether your gain qualifies for the state deduction
• Use software that handles state capital gains adjustments

Summary

North Dakota taxes capital gains, but the overall tax burden is often lower than in many states.

With relatively low tax rates and a possible deduction for qualifying long-term gains, many taxpayers may pay less than expected.