Work in North Dakota, Live in Minnesota: Who Taxes Your Wages

Reciprocity

Do North Dakota and Minnesota have a tax reciprocity agreement?

Yes. North Dakota and Minnesota have an income tax reciprocity agreement, and it is still in force. North Dakota's nonresident page says that wages or salary earned by a Minnesota resident working in North Dakota are taxable only to the resident state. Minnesota lists North Dakota and Michigan as its only two reciprocity partners.

The agreement covers what Minnesota calls personal service income: wages, salaries, tips, commissions, fees and bonuses. For a Minnesota resident with a North Dakota paycheck, that means one state income tax on the job, paid to Minnesota at Minnesota rates. North Dakota does not tax those wages, and Minnesota does not need to give you a credit for them, because nothing is taxed twice.

Minnesota's own example describes this case directly: a resident who commutes daily to a job in North Dakota does not file a North Dakota return and reports the wages on the Minnesota return instead.

Eligibility

Who qualifies for the reciprocity exemption?

Minnesota's reciprocity fact sheet sets three conditions, and all of them must apply for the year:

• You live in Minnesota and work in North Dakota (or the reverse).
• You receive personal service income from North Dakota.
• You return to your home state at least once a month.

The monthly return test matters for people on rotation schedules in the oil field or on long construction jobs. Form NDW-R asks it as a yes or no question, and the form states that a Minnesota resident who answers no does not qualify for the exemption. In that case the agreement does not shield the wages, and North Dakota's nonresident rules apply to them.

Spending long stretches in North Dakota does not by itself make you a North Dakota resident. North Dakota normally treats someone who keeps a home there and stays more than seven months as a resident, but its resident page says that threshold does not apply to Minnesota or Montana residents covered under the reciprocity agreements.

Filing

Which tax returns do I file?

As a Minnesota resident you report all of your income on Form M1, including the North Dakota wages. Minnesota requires a return once you meet its minimum filing requirement, which was $14,950 for 2025. The North Dakota column only comes into play when tax was withheld by mistake or when you have North Dakota income that the agreement does not cover. North Dakota's booklet sends anyone who was a nonresident at any point in the year to Form ND-1 rather than the shorter Form ND-EZ.

Withholding

How do I stop North Dakota tax from being withheld?

Give your employer Form NDW-R, the Reciprocity Exemption from Withholding for Qualifying Minnesota and Montana Residents Working in North Dakota. The form asks for your Minnesota address, the date you moved there, whether you return at least once a month, and whether you lived in North Dakota during the past three years. It also asks you to fill in the wages you earned in North Dakota during the previous calendar year, so have last year's W-2 handy.

Timing rules printed on the form:

• Hand it to your employer by February 28 of the year it should apply to. New hires and people who change their permanent address follow the separate deadline printed on the form.
• It covers one year only. The employer instructions say an employee must give the form each year to continue the exemption.

Make a copy for your own records before you hand the original to your employer.

Refunds

What if my employer already withheld North Dakota tax?

You get it back by filing a North Dakota return. North Dakota's instructions say that when wages covered by reciprocity had North Dakota income tax of $5.00 or more withheld, you must file a North Dakota individual income tax return at the end of the year to obtain a refund. With no other North Dakota income, you use Form ND-1, fill in the MN/MT reciprocity circle for item F, and follow the booklet's line steps for entering the withholding.

Do not try to fix the problem on the Minnesota side. Minnesota's fact sheet tells residents who work in North Dakota not to file Schedule M1CR for these wages, since the credit is meant for income taxed by two states and reciprocity wages are taxed by one.

The larger risk is the opposite gap. Minnesota warns that you may owe Minnesota tax if it was not withheld during the year. If your North Dakota employer does not run Minnesota withholding, the estimated tax rules below apply to you.

Worked example: Minnesota resident with a Fargo paycheck

Single filer, tax year 2026, $60,000 of Minnesota taxable income, all from North Dakota wages. Rates from Minnesota's 2026 bracket table.

Estimated Tax

Do I need to make Minnesota estimated tax payments?

Often, yes. Once your employer has Form NDW-R, North Dakota tax stops coming out of your checks. Unless the employer also withholds Minnesota tax for you, no state income tax may be taken from your pay at all, and the whole Minnesota bill would land on your return.

Minnesota's rule is that you must pay estimated tax if you expect to owe $500 or more in Minnesota income tax after subtracting withholding and refundable credits. To avoid a penalty, withholding, refundable credits and estimated payments together must equal either 90% of the current year's original tax liability or 100% of the prior year's total tax liability. The prior-year figure rises to 110% if your federal adjusted gross income is more than $150,000.

For most people the four payments are due April 15, June 15, September 15 and January 15 of the following year. You can skip the January payment if you file your Minnesota return and pay the entire amount by January 31.

Other Income

What North Dakota income is not covered?

Only personal service income is protected. North Dakota lists the kinds of income a nonresident still reports to North Dakota:

• Property income such as rents, royalties and gains from sales or exchanges
• Gambling winnings
• S corporation income other than wages
• Sales of goods or services into the state

A nonresident must file a North Dakota return when both apply: a federal return is required, and there is income from a North Dakota source. Minnesota also taxes that income because it taxes residents on everything, so this is the one place the Minnesota credit applies. Minnesota's example uses a cabin sale: the gain is taxed by both states, you complete the North Dakota return first, then claim the credit on Form M1 with Schedule M1CR.

Business owners get no relief on business profits. A nonresident who owns a business operating in North Dakota must file there when a federal return is required and the business generates income reportable on it. Minnesota's fact sheet likewise limits reciprocity to compensation for services you personally provide.

Life Changes

What changes if I move or work from home?

Moving across the Red River during the year makes you a part-year resident of each state. North Dakota treats people who moved into or out of the state and set up a permanent home elsewhere as part-year residents. Minnesota part-year residents file Form M1 with Schedule M1NR. Once you live in North Dakota, the agreement runs the other way: Minnesota wages would be taxed by North Dakota, and the Minnesota employer would need Form MWR from you instead of NDW-R.

Remote days are simple in this corridor. Minnesota taxes a full-year resident on all taxable income wherever it was earned, and reciprocity already keeps North Dakota's hands off your wages, so working some days from home in Moorhead instead of an office in Fargo does not change which state gets the tax.

Rates

How much Minnesota tax applies to the North Dakota wages?

The wages go through Minnesota's normal graduated brackets, set by Minnesota Statute 290.06, recalculated each year for inflation and rounded to the nearest $10. For tax year 2026, a single filer pays 5.35% on taxable income up to $33,310, then 6.80% up to $109,430, 7.85% up to $203,150, and 9.85% above that. Married couples filing jointly reach the 6.80% bracket at $48,701, and head of household filers at $41,011. For 2025 returns, the single 5.35% bracket ended at $32,570.

Because reciprocity removes North Dakota from the picture, your total state income tax on a North Dakota paycheck is simply your Minnesota tax. Minnesota's only other reciprocity partner is Michigan, so this one-return setup is specific to those two neighbors.