North Dakota introduced several income tax updates for the 2025 tax year that may affect individual taxpayers and employers. Review the changes below to determine whether any of these provisions apply to your tax situation.
New Employer Child Care Contribution Income Tax Credit
Beginning with tax year 2025, North Dakota offers a new Employer Child Care Contribution Income Tax Credit, created by Senate Bill 2282.
Eligible employers may claim a credit equal to 50% of the first $1,000 of qualified child care contributions made per employee.
Qualified contributions include:
- Payments made directly to licensed child care facilities on behalf of employees.
- Reimbursements paid to employees for qualified child care expenses.
- Payments made to child care facilities licensed in North Dakota.
- Payments made to licensed child care facilities located within 10 miles of North Dakota's borders.
Employers claiming the credit should refer to Schedule ECC and its instructions for additional requirements and calculations.
Military-Related Updates
Military Pay Withholding Changes
Senate Bill 2047 exempts qualifying military pay from North Dakota income tax withholding requirements beginning with tax year 2026. While this change does not affect 2025 withholding, taxpayers should be aware of the upcoming change for future tax years.
Military members may still request withholding if they prefer to have North Dakota income tax withheld from otherwise exempt military pay.
Military Retirement Benefit Deduction Reminder
Retired military service members, and surviving spouses of deceased retired military service members, may continue to deduct taxable military retirement benefits reported on their federal return. Eligible benefits include retirement pay received as a retired member of:
- The U.S. Armed Forces
- Reserve components of the Armed Forces
- Army National Guard
- Air Force National Guard
The deduction also applies to certain retirement benefits received for federal civil service employment as a dual-status military technician under Title 32 or Title 10.
Federal Tax Law Changes Affecting North Dakota Returns
In July 2025, Congress enacted H.R. 1, commonly known as the One Big Beautiful Bill Act (OBBBA). Because North Dakota uses federal taxable income as the starting point for calculating North Dakota taxable income, many federal changes automatically flow through to North Dakota returns unless specifically adjusted by state law.
Notable federal changes highlighted by North Dakota include:
- An increased federal standard deduction for all filing statuses.
- An additional $6,000 standard deduction amount for certain seniors.
- An increase in the federal state and local tax (SALT) deduction limitation to $40,000.
- New federal exclusions for certain tip income and overtime pay.
North Dakota notes that federal changes to federal income tax credits generally do not directly affect North Dakota income tax credits.
Reminder: Documentation Required for Contribution Credits
Taxpayers claiming certain contribution-related tax credits should attach supporting documentation, including the acknowledgment letter received from the qualifying school or charitable organization. Providing required documentation can help prevent processing delays.
Commonly claimed contribution credit schedules include:
- Schedule ND-1PSC: Nonprofit Private School Tax Credit
- Schedule ND-1QEC: Qualified Endowment Fund Tax Credit
- Schedule MCP: Contributions to a maternity home, child placing agency, or pregnancy help center
Electronic Form 1099-G Option
Taxpayers who have consented to receive Form 1099-G electronically will not receive a paper copy by mail. Instead, the form can be accessed through North Dakota's online 1099-G Lookup Tool.