Does North Dakota Tax Overtime in 2026?
Unknown - North Dakota has not confirmed whether it conforms to the federal overtime deduction. As of August 2026, the North Dakota Office of State Tax Commissioner has not issued guidance on the OBBBA overtime deduction (IRC §225). However, the practical impact for most workers is minimal: North Dakota's 2026 tax reform created a 0% rate on the first $48,475 of taxable income, meaning many workers owe $0 in ND income tax on overtime regardless of conformity. Only workers with taxable income above $48,475 face ND rates of 1.95%–2.5%.
How North Dakota's Overtime Tax Treatment Works
North Dakota computes state taxable income starting from federal adjusted gross income (AGI) with North Dakota-specific modifications. ND generally conforms to the Internal Revenue Code for many purposes, but the specific treatment of new OBBBA provisions like the overtime deduction (IRC §225) has not been officially confirmed.
If North Dakota does conform, the federal overtime deduction would reduce federal AGI, and that lower AGI would flow through as the starting point for the North Dakota return. If ND does not conform, an addition modification would add the overtime deduction back to income.
The practical reality: North Dakota's 2026 tax reform dramatically reduced the stakes of this question. The new three-tier rate structure (0% on the first $48,475, then 1.95% and 2.5%) means that a single filer earning up to about $64,575 in gross income owes zero North Dakota income tax. Many workers who earn overtime fall below this threshold and would owe $0 regardless of conformity.
For workers whose income exceeds the zero-bracket threshold - common in the oil and gas sector, where wages are higher - the maximum state tax savings from conformity would be at the 1.95% rate. On a $12,500 overtime deduction, that is at most about $244 in state tax savings, compared to $2,750 in federal savings.
Federal Overtime Deduction Quick Reference
| Detail | Value |
|---|---|
| IRC Section | §225 (OBBBA) |
| Maximum deduction | $12,500 overtime ($25,000 MFJ) |
| Deduction type | Above-the-line (Schedule 1-A) |
| FICA still applies? | Yes (Social Security 6.2% + Medicare 1.45%) |
| MFS eligible? | No (MFJ or Single/HoH only) |
| Effective dates | Jan 1, 2025 – Dec 31, 2028 |
| North Dakota treatment | Does not conform |
| What qualifies? | Overtime premium only (the 0.5x above regular rate), FLSA non-exempt employees |
Worked Examples Comparing Federal and North Dakota Treatment
Example 1: Oil field worker (single filer, $55,000 income, $8,000 overtime premium)
Qualifying overtime premium: $8,000
Overtime deduction claimed: $8,000 (capped at $12,500)
Estimated federal tax savings: $960.00
North Dakota return:
North Dakota has not confirmed OBBBA conformity, but at this income level the conformity question is moot. After the $16,100 standard deduction, ND taxable income is $38,900 - well within the 0% bracket (first $48,475). This worker owes $0 in ND income tax on overtime regardless of conformity.
Example 2: Refinery operator (single filer, $85,000 income, $12,500 overtime premium - federal cap reached)
Qualifying overtime premium: $12,500
Overtime deduction claimed: $12,500 (capped at $12,500)
Estimated federal tax savings: $2,750.00
North Dakota return:
North Dakota has not confirmed OBBBA conformity. Without the overtime deduction, ND taxable income is $68,900 ($85,000 minus $16,100), putting $20,425 in the 1.95% bracket for about $398 in state tax. If ND does conform, taxable income drops to $56,400, with only $7,925 in the 1.95% bracket for about $155. Potential ND savings from conformity: approximately $244. Even without conformity, ND's low rates keep the state tax impact minimal.
Oil and Gas Workers – Where ND Conformity Matters Most
North Dakota's economy is heavily driven by the oil and gas industry, particularly in the Bakken formation region. Workers in this sector - roughnecks, drillers, pump operators, refinery technicians - frequently earn substantial overtime, often pushing their gross income above $80,000 or even $100,000. These workers are the most likely to have taxable income above the $48,475 zero-bracket threshold where conformity would make a difference.
Even for these higher-earning workers, the savings are modest by national standards. A Bakken worker earning $100,000 with $12,500 in overtime would save approximately $244 in ND tax if the state conforms - compared to $2,750 in federal savings on the same overtime. This is a fraction of what workers in states like New York, Vermont, or Rhode Island would save.
North Dakota's Near-Zero Tax Structure
North Dakota's 2026 tax reform is among the most aggressive rate reductions in the country. By creating a 0% bracket covering nearly $49,000 in taxable income, the state effectively eliminated income tax for the majority of its residents. The remaining rates of 1.95% and 2.5% are among the lowest in the nation for states that still impose an income tax.
This structural change means that for most North Dakota workers, the OBBBA conformity question - for both tips and overtime - has negligible financial impact.
No Local Income Taxes
North Dakota has no local income taxes, which further reduces the stakes. Unlike states such as New York (where NYC adds 3%–4% on top), there are no additional local layers that could magnify the impact of non-conformity in North Dakota.
Related Tools
- No Tax on Overtime Calculator - calculate your federal overtime deduction
- North Dakota Tax Guide - full state tax overview
- North Dakota Paycheck Calculator
- Does North Dakota Tax Tips?
- W-2 Code TP: Tips Reporting Guide
- W-2 Code TT: Overtime Reporting Guide
- All 51 States: Tips & Overtime Tax Map