Updated October 5, 2026. Quick answer: Yes. North Dakota starts from federal taxable income and taxes interest and dividends at low graduated rates, 0%, 1.95% and 2.50% for a single filer in 2025, and it lets a resident exclude part of qualified dividends: “qualified dividends from Form 1040 or 1040-SR, line 3a, by 40 percent”. Interest on U.S. obligations is subtracted.
How North Dakota treats dividends and interest
| Item | What the documents say |
|---|---|
| Treatment | Taxed on the graduated schedule |
| 2025 rates (single) | 0.00% up to $48,475, 1.95% from $48,475 to $244,825 and 2.50% above $244,825; the Tax Commissioner’s page says the figures are “each filing status for the 2025 tax year are as follows” |
| Indexing | The statute says “the rate applicable to each income bracket may not be changed” while the dollar amounts are indexed |
| U.S. obligations | ND-1 line 5 subtracts “Interest income from U.S. obligations.” and interest on securities “specifically exempted from state income tax by federal statute.” |
| Mutual funds | The statute reduces a fund distribution by the share attributable to obligations of the United States, of North Dakota and its political subdivisions, and other federally exempt securities |
| Other states’ bonds | No sentence in these documents says other states’ municipal bond interest is untaxed. The booklet starts from federal taxable income and the statute says a taxpayer is “only eligible for those adjustments or credits that are specifically provided” and lists no addback, which is an inference, not a printed rule |
A $20,000 example
Taxable dividends and interest of $20,000 taxed wholly at 1.95% would add $20,000 x 1.95% = $390; at 2.50%, $500; and income below $48,475 for a single filer is taxed at 0%. If all $20,000 were qualified dividends, the 40 percent exclusion subtracts $20,000 x 40 percent = $8,000 first.
What changes in 2026
The pages read print only 2025 brackets and no 2026 change.
Federal rules
The state’s treatment sits on top of the federal one. Qualified dividends and ordinary dividends are sorted out on the Form 1099-DIV, as the site explains in Box 1a and 1b: ordinary versus qualified dividends, and interest is reported as covered in 1099-INT Box 1. The IRS explains the federal side in Topic no. 403, Interest Received and Topic no. 404, Dividends.
Related: whether North Dakota taxes capital gains, whether North Dakota taxes pensions, how North Dakota taxes retirement income, dividends and interest tax by state, and how tax-exempt interest is reported.
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Answer againSources
- 2025 North Dakota Individual Income Tax Booklet: https://www.tax.nd.gov/sites/www/files/documents/forms/individual/2025-iit/2025-individual-income-tax-booklet.pdf
- Individual Income Tax (tax rate page): https://www.tax.nd.gov/individual/income-tax
- North Dakota Century Code chapter 57-38 (Income Tax): https://ndlegis.gov/cencode/t57c38.pdf
Sources: the primary documents linked above, read on October 5, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the plan administrator or the agency itself is the right place to confirm anything consequential.