Merab Bennett, a server at Peacock Alley in Bismarck, delivers food to customers on April 15, 2026. Bennett received a higher income tax refund this year due to a new federal policy that does not tax tips. (Photo by Michael Achterling/North Dakota Monitor)
BISMARCK, N.D. (North Dakota Monitor) – Many North Dakotans are seeing a larger state income tax refund this year, in part due to recent changes in federal tax policy, Tax Commissioner Brian Kroshus said.
The One Big Beautiful Bill Act reduced federal taxable income for many people, Kroshus said, which in turn reduced North Dakotans’ state tax liability. The federal changes include no taxes on tips and no tax on overtime earnings.
So far this tax season, North Dakota state tax refunds are averaging about $430 per filer, an average increase of just under $22, Kroshus said. That includes both single and joint filers.
As of Tuesday, the Tax Commissioner’s Office had processed 375,000 tax returns with a total state refund amount of $72.5 million, Kroshus said. That’s an increase in refunds of $3.1 million compared to last year.
Final figures won’t be available until later this year, as about 13%-14% of North Dakotans file for extensions each year, he said.
Merab Bennett, a server at Peacock Alley in Bismarck, said she filed her taxes in March and was excited to take advantage of the new provision that does not tax tips up to $25,000.
“I got back triple of what I got back in previous years,” Bennett said.
She said her total tax refund was more than $6,000, and she plans to put it toward remodeling her house.
Some provisions of the federal policy, including no tax on tips or overtime, expire at the end of 2028 unless Congress takes additional action.
“Take advantage of it while we can because we don’t know if this is going to stick around,” Bennett said. “And we don’t know what’s next.”
Nick McCann, an accountant with Padgett Bookkeeping in Bismarck, said he’s seen North Dakotans benefit from the recent changes in federal tax policy, especially seniors who have been able to take an additional $6,000 deduction.
He’s also noticed an impact for people who earn tips or work overtime.
“For North Dakota, we have a lot of health care workers, we have a lot of overtime workers, and we have a lot of seniors,” McCann said. “So I think it’s been beneficial.”
North Dakotans who work overtime are expected to save $13 million in state income tax this fiscal year, according to projections from the State Tax Commissioner’s Office. That does not include the taxes those workers saved on federal income tax.
“We tend to see a fair amount of overtime in North Dakota because of workforce constraints and availability,” Kroshus said. “So the workers that we do have typically are working more than just a 40-hour week.”
The additional $6,000 deduction for some seniors is expected to save North Dakotans $4 million this year in state income tax, according to the state’s projections. The exclusion for tips is projected to save North Dakotans $1 million this year in state income tax.
In all, the tax changes in the federal reconciliation package are expected to reduce state income tax revenue by $130 million for the 2025-27 budget cycle. Impacts to individuals account for $55 million and savings for businesses account for $74 million, according to the state’s projections.
North Dakota already has low income taxes. Lawmakers in 2023 eliminated state income taxes for lower earners and reduced tax rates for higher earners.
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