Known for its vast natural resources, rich Native American culture, scenic landscape, and historic towns, North Dakota is an attractive destination for tourists.
Thanks to its affordable living costs, high quality of life, and robust housing market, the Peace Garden State also offers many opportunities for homeowners and real estate investors.
However, buying a property in North Dakota comes with financial responsibilities, including tax payments.
Are property tax rates high in North Dakota? When do you have to pay them? Is there a legitimate way to lower these amounts? Let's answer all these questions and more!
Understanding Different Types of Property Tax Bills in North Dakota
In most states, property taxes are a source of revenue for city and county governments, as they're used to pay for essential projects, infrastructure, and services, such as schools, parks, and law enforcement.
North Dakota has two different types of property tax. Let's start by going over each one to understand how they work.
Locally Assessed Property
This category encompasses real property owned by individuals or businesses, including land and other assets structured on that land.
All homes, buildings, portions of land, and items within this category are subject to property taxes. This group also includes mobile homes with the following characteristics:
- Are used for residential or business purposes
- Are attached to utility services
- Are 27 or more feet long
Centrally Assessed Property
This category encompasses railroads, pipelines, airlines, investor-owned public utilities, and other specific types of property. Their value is determined by the State Board of Equalization.
After this value is certified to the counties, these local government units define the tax due for each property.
Taxes Paid in Lieu of Property Taxes
In addition, some industries in North Dakota pay property taxes through other taxes, which are known as "taxes in lieu of property tax." These are:
- Telecommunications companies
- Rural electric cooperatives
- State-owned property leased from the State Historical Society of North Dakota or the director of the North Dakota Parks and Recreation Department if used for concession or tourism
- Land owned by the Board of University and School Lands
- Farmland or ranchland owned by nonprofit organizations for conservation purposes
- Land owned or leased by the North Dakota Game and Fish Department
- Building and associated real property owned by Workforce Safety and Insurance
- Land owned by the North Dakota National Guard
How Many Times Do You Pay Property Taxes a Year in North Dakota?
Deadlines are different for each type of tax. However, we'll focus on locally assessed property.
North Dakota residents should pay real property taxes by January 1 after the year of the assessment. If they pay before March 1, there will be no penalty. Also, those who pay these taxes in full by February 15 can get a 5% discount.
To sump up, real property taxes should be paid as follows:
- First installment: At least half of the consolidated real estate tax and total special assessments must be paid by March 1.
- Second installment: The second half of the real estate tax must be paid by October 15.
Taxes for these types of properties are due in January or up to 10 days after taxpayers buy the unit or move into the state.
If you pay in full before February 15 or within 30 days before purchasing the mobile home or moving into North Dakota, you can get a 5% discount.
Consequences of Late Payments
As mentioned, there are discounts for taxes paid in full and on time, but what happens when you miss a deadline?
According to North Dakota law, these are the potential consequences if you don't pay property taxes or file returns on time:
- Penalties: Local governments are legally authorized to apply a penalty to late-filed returns. Also, if taxpayers don't pay the installments as required, they may be subject to 3% penalties every month from the due date until October. Authorities often impose penalties on March 2, May 1, July 1, and October 15.
- Interest: Interest may be applied to taxes that remain unpaid each month until paid in full. At a rate of 12%, these additional charges start from the original due date of the return until you file yours or the extended due date, whichever comes first.
- Lien: The Office of the State Tax Commissioner can place a lien on your property, which is a legal claim that prevents you from selling or buying other properties without a clear title. It works as collateral for your debt, allowing local governments to recover what they're owed.
- Tax deed: If you don't pay your property taxes for two years or more, you may receive a notice from the county that the tax lien will be foreclosed. After the date of the notice, you have until October 1 to pay the taxes and special assessments. Otherwise, the county gets a tax deed, becoming the new property owner.
How to Pay a Property Tax Bill in North Dakota
North Dakota offers multiple options to pay property taxes or set up payment plans, including the following:
- Credit or debit card (fees may apply)
- Free Electronic Payment with your checking or savings account information
- Payment Voucher, which you must print and send with a check or money order
- Payment plan, which you must request to spread payments over time if you cannot pay the full amount due
How Much is Property Tax in North Dakota?
There's a single property tax rate in North Dakota. It's the total of all rates levied by tax entities in your county.
However, many people calculate tax rates as "effective rates," which are a percentage of the property value paid annually in taxes.
The average effective tax rates are different in each North Dakota county, but you can see some examples below:
- Sioux County: Average effective rate of 0.31% (lowest) with a median home value of $83,300 and a median annual property tax payment of $359
- Cass County: Average effective rate of 1.33% (highest) with a median home value of $234,100, and a median annual property tax payment of $3,117
- Ward County: Average effective rate of 1.13% with a median home value of $217,700 and a median annual property tax payment of $2,455
How is Property Tax Calculated in North Dakota?
In North Dakota, property taxes are "ad valorem," which means the amount is based on the property value.
Each year, local assessors should appraise properties at their true and fair value. It's the amount that the unit or item would sell for in the open market. After that, they must apply the assessment ratio to get the assessed value.
North Dakota laws say that local governments must assess properties at 50% of their market value.
The following three elements also determine property taxes:
- Mills or tax rate, which is 1/1000th of your taxable value (9% of the assessed value or 4.5% of the market value)
- Taxable values, which are calculated by multiplying the "True and Full" value of your property times 4.5% if it's a residential property or 5% if it's an agricultural and commercial property
- Taxing entities, which includes taxing authorities that are legally permitted to levy property taxes and send tax statements, such as counties, cities, school board, township, and park board
Putting it all together, your property tax bill is calculated as follows:
- Number of mills x Value of each mill = Total tax
How Can I Lower My Property Taxes in North Dakota?
Do you want to lower your property taxes in North Dakota? There are legitimate ways to reduce these amounts. These are:
Appeal Your Property Assessment
If you think the assessment on your property is excessive, you can appeal the valuation by contacting your local assessor.
Exemptions and Credits
North Dakota also offers the following property tax credits and exemptions for individuals and businesses expecting lower property taxes:
Exemptions and credits for businesses:
- New or Expanding Business - Property Tax
- Wind Turbine Electric Generation - Property Tax Reduction
- Personal Property Tax Exemption
Exemptions and credits for individuals:
- Disabled Veteran's Property Tax Credit
- Homestead Property Tax Credit and Renter's Refund
- Farm Residence Exemption
- Additional Property Tax Exemptions
Property taxes fund local services and essential projects. That's why they're so important! However, you don't have to spend thousands of dollars on these payments.
With the proper property tax information, you can create an efficient strategy to maximize your investment and alleviate your financial burden. Additionally, there are several legitimate ways to reduce these payments.
This guide has been designed to help you learn everything you need to know about property taxes in North Dakota, but remember that you can contact a tax professional if you still have questions.