How North Dakota capital gains tax on rental property works
A rental sale in North Dakota is taxed federally like anywhere else: depreciation recapture at your ordinary rates up to 25%, the rest of a long-term gain at 0%, 15% or 20%, and the 3.8% net investment income tax at higher incomes. On top of that, North Dakota taxes the gain. 40% of a long-term gain is excluded; the rest is taxed at North Dakota's low rates.
- North Dakota excludes 40% of net long-term capital gain (Form ND-1, line 6).
In the calculator above, the North Dakota tax is the difference between the state tax on your income with the sale and without it, so deductions, brackets and any exclusion are applied as North Dakota applies them.
Worked example: selling a North Dakota rental
A single investor earning $90,000 bought a North Dakota rental in June 2016 for $300,000, paid $6,000 in closing costs and later spent $20,000 on improvements. They sell in November 2026 for $500,000 with 6% selling costs. Estimated depreciation of $92,727.27 leaves a gain of $236,727.27.
| Amount | |
|---|---|
| Federal income tax | $43,218.54 |
| Net investment income tax | $4,815.64 |
| North Dakota tax | $2,769.71 |
| Total tax | $50,803.89 |
| Cash kept after the $150,000 mortgage payoff | $269,196.11 |
North Dakota adds $2,769.71 to $48,034.18 of federal tax, for 21.5% of the gain in all. $94,690.91 of the gain is left out of North Dakota income. That ranks North Dakota 12 of 51 for state tax on this sale (1 is the lowest).
| Situation | Gain | North Dakota tax | Total tax |
|---|---|---|---|
| Single, $40,000 of other income | $236,727.27 | $2,290.50 | $44,774.68 |
| Single, $90,000 of other income (the example) | $236,727.27 | $2,769.71 | $50,803.89 |
| Married, $200,000 of other income | $236,727.27 | $2,834.39 | $52,912.57 |
| A flip sold after 9 months | $39,800.00 | $776.10 | $9,532.10 |
The first three rows sell the same property; the flip is a $360,000 sale of a house bought for $250,000 with $40,000 of work, held under a year, so its gain is short-term.
North Dakota vs. neighboring states
State tax on the same $500,000 sale in South Dakota, Montana and Minnesota, lowest first. Each state links to its own calculator.
| State | How the gain is taxed | State tax | Total tax |
|---|---|---|---|
| South Dakota | No state income tax, so no South Dakota tax on the gain. | $0.00 | $48,034.18 |
| North Dakota | 40% of a long-term gain is excluded; the rest is taxed at North Dakota's low rates. | $2,769.71 | $50,803.89 |
| Montana | Long-term gains are taxed at 3.0%, or 4.1% above $47,500 of taxable income ($95,000 joint). | $9,705.82 | $57,740.00 |
| Minnesota | Taxed as ordinary income, plus a 1% tax on net investment income above $1 million. | $20,383.97 | $68,418.15 |
Where the property is matters as much as where you live: states tax gains on real estate located in them, so selling a rental in another state usually means filing there too.
All 50 states and D.C. are compared on the same sale in the state tax on selling a rental table, which you can sort and download.
Self-employed in North Dakota? The North Dakota 1099 tax calculator works out federal, self-employment and North Dakota income tax on freelance income, with the quarterly estimated payments.
States with similar rules
North Dakota is one of 12 states that exclude part of the gain or tax it at a special rate. These are the closest to it on the same $500,000 sale:
- Hawaii: $17,162.73 of state tax. Long-term gains are taxed at Hawaii's rates but never above 7.25%.
- Oklahoma: $0.00 of state tax. The whole gain is deductible on Oklahoma real property owned at least five years; otherwise ordinary income.
- Arkansas: $4,379.45 of state tax. 50% of a long-term gain is exempt (and any gain above $10 million); the rest is taxed at Arkansas's rates.
- Arizona: $4,438.64 of state tax. 25% of a long-term gain is subtracted if the property was bought after 2011; the rest is taxed at 2.5%.
Before you sell a rental in North Dakota
The sale of a rental goes on IRS Form 4797, which carries the gain to Schedule D and the depreciation part to the unrecaptured section 1250 gain worksheet. Before you file, gather the closing statements from both the purchase and the sale, your depreciation schedules (Form 4562 or your tax software's asset list) and receipts for improvements. Each of them changes your adjusted basis, and with it the gain.
A large gain can also bring an underpayment penalty if no tax is paid on it during the year. Federally, you avoid the penalty by paying, through withholding or estimated payments, at least 90% of this year's tax or 100% of last year's (110% if last year's AGI was over $150,000). Sending the tax on the sale with the next quarterly estimate is the simplest way to stay inside those rules. North Dakota's own estimated tax rules are set by the North Dakota Office of State Tax Commissioner, so check them too.
If the rental produced losses you couldn't deduct under the passive activity rules, selling your entire interest to an unrelated buyer generally frees them in the year of the sale, which offsets part of the gain.
The bottom line
Rental property capital gains tax in North Dakota is federal tax plus North Dakota's: $2,769.71 of state tax and $50,803.89 in all on the example's $236,727.27 gain.
Enter your own numbers in the calculator to estimate your North Dakota capital gains tax on rental property, compare a sale with a 1031 exchange, and confirm the details with the North Dakota Office of State Tax Commissioner or a tax professional before you sell.
Frequently asked questions
Does North Dakota tax capital gains on rental property?
Yes. 40% of a long-term gain is excluded; the rest is taxed at North Dakota's low rates. The gain is the sale price minus selling costs and your adjusted basis (what you paid, plus improvements, minus depreciation). On a $500,000 sale of a rental bought for $300,000 in 2016, a single seller earning $90,000 owes about $2,769.71 to North Dakota, 1.2% of the gain. The calculator above adds up the taxes on selling rental property in North Dakota for your own numbers.
How is depreciation recapture taxed in North Dakota?
Federally, the part of the gain that comes from depreciation, called unrecaptured section 1250 gain or depreciation recapture, is taxed at your ordinary rates up to 25%. North Dakota counts it as part of the capital gain, so it shares the 40% exclusion when the conditions are met and is otherwise taxed at regular rates.
Can a 1031 exchange defer North Dakota tax on a rental sale?
A 1031 exchange defers the federal tax if you reinvest in like-kind property within the 45- and 180-day deadlines, and most state income taxes defer the gain too. Rules differ when the replacement property is in another state, where some states keep track of the deferred gain, so confirm the treatment with the North Dakota Office of State Tax Commissioner.
Does the 3.8% net investment income tax apply in North Dakota?
Yes. The net investment income tax is federal, so it applies the same way in every state: 3.8% of the gain or of your modified adjusted gross income above $200,000 ($250,000 joint), whichever is smaller. In the example it adds $4,815.64.
Do I owe North Dakota tax if I sell a rental there but live in another state?
Usually yes: states tax gains on real estate located within them, including for nonresidents, and some require tax to be withheld at closing. Your home state typically gives a credit for tax paid to North Dakota. This page assumes you live in North Dakota; rules for nonresidents can differ.
Sources and further reading
- N.D. Century Code § 57-38-30.3 (opens in a new tab), North Dakota Legislative Branch
- 2025 Form ND-1 (opens in a new tab), North Dakota Office of State Tax Commissioner
- 2026 State Income Tax Rates and Brackets (opens in a new tab), Tax Foundation
- North Dakota Office of State Tax Commissioner (opens in a new tab), State of North Dakota
- Publication 544, Sales and Other Dispositions of Assets (opens in a new tab), Internal Revenue Service
- Instructions for Schedule D (Form 1040) (opens in a new tab), Internal Revenue Service
Related calculators
- Rental Property Depreciation CalculatorDon't know how much depreciation you've taken? Build the schedule from the IRS tables, improvements included.
- 1031 Exchange CalculatorBuying another rental with the proceeds? See how much of the gain a 1031 exchange defers.
- Hard Money Loan CalculatorFlipping your next property? Model the rehab loan, cash to close and the flip's profit before tax.