Short-Term Rental Taxes in North Dakota: Low Rates, Full Bonus Dep, Complete STR Guide
1.1–2.9% income tax — lowest in the Midwest | Conforms to federal bonus depreciation | 5% state sales tax + local lodging taxes | Main STR markets: Medora/Badlands, Bismarck, Fargo | Very low state income tax burden maximizes net returns
North Dakota is not a major STR destination state, but it offers the most investor-favorable income tax environment in the entire Midwest. With income tax rates topping at just 2.9%, North Dakota STR investors keep a greater share of their rental profits than investors in any other Midwestern state. The state also fully conforms to federal bonus depreciation, giving cost segregation its full double benefit.
North Dakota State Income Tax: The Lowest in the Midwest
North Dakota's top income tax rate is 2.9% — dramatically lower than Minnesota (9.85%), Wisconsin (7.65%), or even Iowa (declining to 3.9%). For STR investors, this means state income taxes on rental profits are minimal. The low rate makes cost segregation's state-level savings modest in absolute terms, but the federal savings remain fully intact and the low combined tax burden means investors build wealth substantially faster than in neighboring high-tax states.
North Dakota Sales Tax and Lodging Taxes
| County / Market | State Sales Tax | Local Lodging Tax | Approximate Total |
|---|---|---|---|
| Billings County (Medora/Theodore Roosevelt NP) | 5% | 3% | ~8% |
| Burleigh County (Bismarck) | 5% | 2% | ~7% |
| Cass County (Fargo) | 5% | 2% | ~7% |
| Grand Forks County | 5% | 2% | ~7% |
| Morton County (Mandan) | 5% | 2% | ~7% |
| McKenzie County (Williston area) | 5% | 1% | ~6% |
North Dakota STR Markets
North Dakota's primary STR draw is Theodore Roosevelt National Park and the nearby town of Medora — a historic cowboy town that serves as the park's western gateway. The park attracts 700,000+ visitors annually, with summer (June–August) and fall being peak seasons. Medora's historic charm, the Medora Musical outdoor show, and the dramatic Badlands scenery create a unique destination. Cabin rentals in and around Medora and Belfield are a small but growing market.
Bismarck and Fargo offer urban STR markets driven by conferences, sports events (NDSU Bison football is a regional draw), and oil industry corporate travel in the western part of the state. Properties in these cities can achieve reasonable occupancy, though ADRs are lower than resort markets.
Cost Segregation in North Dakota
North Dakota's full bonus depreciation conformity makes cost segregation calculations straightforward. While the state tax savings are modest given the low 2.9% rate, the federal savings are identical to those in any other state. For a $400,000 Medora or Bismarck STR property, cost segregation might identify $80,000 in bonus-eligible assets — generating $29,600 in federal tax savings at 37% plus $2,320 in North Dakota state savings. The study cost is recovered many times over from federal savings alone.
Estimate Your North Dakota STR Tax Savings
North Dakota's ultra-low income tax and full bonus depreciation conformity mean you keep more of your federal tax savings. Get your free estimate.
Get My Free Estimate