Tax Year 2026Updated July 13, 2026

Does North Dakota Tax Tips in 2026?

Unknown - North Dakota has not confirmed whether it conforms to the federal tips deduction. As of August 2026, the North Dakota Office of State Tax Commissioner has not issued guidance on the OBBBA tips deduction (IRC §224). However, the practical impact for most tipped workers is minimal: North Dakota's 2026 tax reform created a 0% rate on the first $48,475 of taxable income, meaning most tipped workers owe $0 in ND income tax on their tips regardless of conformity. Only workers with taxable income above $48,475 face ND rates of 1.95%–2.5%.

How North Dakota's Tips 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 tips deduction (IRC §224) has not been officially confirmed.

If North Dakota does conform, the federal tips 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 tips 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 ($48,475 + $16,100 standard deduction) owes zero North Dakota income tax. Since most tipped workers earn below this threshold, they would owe $0 in ND tax on their tip income regardless of whether ND conforms to the federal deduction.

For the minority of tipped workers whose income exceeds the zero-bracket threshold, the maximum state tax savings from conformity would be at the 1.95% rate - far less than the federal savings and far less than what's at stake in high-tax states.

Federal Tips Deduction Quick Reference

Detail	Value
IRC Section	§224 (OBBBA)
Maximum deduction	$25,000 tips
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

Worked Examples Comparing Federal and North Dakota Treatment

Example 1: Hotel server (single filer, $35,000 income, $12,000 in tips)

Federal return:
Qualified tip income: $12,000
Tips deduction claimed: $12,000 (capped at $25,000)
Estimated federal tax savings: $1,440.00

North Dakota return:
North Dakota has not confirmed OBBBA conformity, but at this income level the conformity question is largely moot. After the $16,100 standard deduction, ND taxable income is $18,900 - well within the 0% bracket (which covers the first $48,475). This worker owes $0 in ND income tax on tips regardless of whether ND conforms to the federal deduction.

Example 2: Oil field worker (single filer, $72,000 income, $25,000 in tips - federal cap reached)

Federal return:
Qualified tip income: $25,000
Tips deduction claimed: $25,000 (capped at $25,000)
Estimated federal tax savings: $5,500.00

North Dakota return:
North Dakota has not confirmed OBBBA conformity. Without the tips deduction, ND taxable income is $55,900 ($72,000 minus $16,100 standard deduction), putting $7,425 in the 1.95% bracket for about $145 in state tax. If ND does conform, taxable income drops to $30,900 - entirely in the 0% bracket, saving roughly $145. Even in the worst case, ND's state tax impact is minimal due to the generous zero-rate bracket.

North Dakota's Near-Zero Tax Makes This a Minor Issue

North Dakota's 2026 tax reform is one of the most aggressive in the country. The state effectively eliminated income tax for the vast majority of its residents by creating a 0% bracket covering the first $48,475 of taxable income. After the standard deduction ($16,100 for single filers), a worker needs to earn over $64,575 before owing any North Dakota income tax at all.

For tipped workers, this means the OBBBA conformity question is largely academic. A restaurant server earning $40,000, or even $60,000, owes nothing in ND income tax regardless of how tip income is treated. Only higher-income tipped workers - such as fine-dining servers in Fargo or Bismarck who earn well above average - would see any difference.

Contrast with High-Tax States

To put this in perspective: a tipped worker earning $70,000 with $25,000 in tips faces roughly $145 in potential ND tax if the state does not conform. The same worker in New York City could face $2,250 or more in combined state and city tax. North Dakota's low rates make this one of the least consequential unknown-conformity states for tipped workers.

Oil and Gas Sector Context

While North Dakota's economy is heavily driven by oil and gas (where overtime deductions may be more relevant), the tipped workforce is smaller and concentrated in hospitality in cities like Fargo, Bismarck, and Grand Forks. The combination of a small tipped workforce and near-zero tax rates makes this a low-stakes issue for North Dakota.

Related Tools

No Tax on Tips Calculator - calculate your federal tips deduction
North Dakota Tax Guide - full state tax overview
North Dakota Paycheck Calculator
Does North Dakota Tax Overtime?
W-2 Code TP: Tips Reporting Guide
W-2 Code TT: Overtime Reporting Guide
All 51 States: Tips & Overtime Tax Map

Frequently Asked Questions

Does North Dakota conform to the federal OBBBA tips deduction?

As of August 2026, North Dakota has not issued official guidance on whether it conforms to the federal OBBBA tips deduction (IRC §224). North Dakota generally conforms to the Internal Revenue Code for many purposes, but the specific treatment of the OBBBA tips provision has not been confirmed by the North Dakota Office of State Tax Commissioner.

Does the conformity question even matter in North Dakota given the 0% bracket?

For most tipped workers, the practical impact is minimal. North Dakota's 2026 tax reform created a 0% rate on the first $48,475 of taxable income (after the $16,100 standard deduction, that covers gross income up to about $64,575). Since most tipped workers earn less than this, they owe $0 in ND income tax regardless of conformity. Only higher-income tipped workers whose taxable income exceeds $48,475 would see any difference.

What are North Dakota's income tax rates for 2026?

North Dakota restructured its income tax for 2026 into three tiers: 0% on the first $48,475 of taxable income, 1.95% on $48,475–$244,825, and 2.5% above $244,825 (single filers). These are among the lowest income tax rates of any state that imposes an income tax. The generous zero-rate bracket means most North Dakota residents owe little to no state income tax.

If ND does conform, how much would tipped workers save?

Very little in most cases. Because of the zero-rate bracket, only tipped workers with taxable income above $48,475 would save anything at all. Even then, the savings would be at 1.95%, far less than the federal savings. For example, a worker with $70,000 in gross income would save roughly $145 at most. Compare this to states like New York where the same worker could save $1,375 or more.

Does North Dakota use federal AGI as its starting point?

Yes. North Dakota taxable income starts from federal adjusted gross income with North Dakota modifications. This means that if ND conforms to the OBBBA tips deduction, the lower federal AGI would automatically flow through as the starting point for the ND return, reducing state taxable income. However, if ND does not conform, an addition modification would keep tips in the ND tax base.