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Self-employment in North Dakota offers independence, flexible income opportunities, and access to a growing economy that supports agriculture, energy, technology, and remote work. Whether you are a freelancer, consultant, independent contractor, or small business owner, self-employment also brings full responsibility for managing your own taxes.
For the 2025 – 2026 tax years, understanding how self-employed taxes work in North Dakota is essential. Unlike traditional employees, no taxes are withheld from your earnings automatically. You must calculate, pay, and file federal and state taxes on your own, often through quarterly estimated payments.
This ultimate guide explains everything you need to know about North Dakota self-employed taxes, including federal obligations, state income tax rules, deductions, estimated payments, filing requirements, and tax planning strategies. It is designed to help you stay compliant, avoid penalties, and keep more of what you earn.
Who Is Considered Self-Employed in North Dakota?
Before addressing tax obligations, it is important to understand who qualifies as self-employed under federal and North Dakota tax law.
Common Types of Self-Employed Workers
You are generally considered self-employed if you earn income without being classified as an employee. Common examples include:
- Freelancers and independent contractors
- Consultants and advisors
- Gig workers such as rideshare drivers and delivery partners
- Online sellers and digital creators
- Sole proprietors and single-member LLC owners
- Commission-based professionals
If clients pay you using Form 1099-NEC or Form 1099-K instead of a W-2, you are typically treated as self-employed for tax purposes.
How North Dakota Defines Self-Employment
North Dakota follows federal IRS guidelines for determining self-employment status for income tax purposes. If the IRS considers you self-employed, North Dakota generally does as well.
Worker classification rules for labor or unemployment insurance may differ, but income tax treatment closely mirrors federal standards.
Overview of Taxes Self-Employed Individuals Pay in North Dakota
Self-employed taxpayers in North Dakota usually pay several types of taxes:
- Federal self-employment tax
- Federal income tax
- North Dakota state income tax
- Potential sales tax or industry-specific taxes
Each of these taxes plays a role in your total tax liability.
Federal Self-Employment Tax Explained
Self-employment tax funds Social Security and Medicare. When you are employed by a company, your employer pays half of these taxes. When you are self-employed, you pay the entire amount yourself.
Self-Employment Tax Rate for 2025 – 2026
The standard self-employment tax rate remains:
- 15.3 percent of net earnings
This includes:
- 12.4 percent for Social Security
- 2.9 percent for Medicare
An additional 0.9 percent Medicare surtax may apply if your income exceeds federal thresholds.
Social Security Income Limit
The Social Security portion of self-employment tax only applies up to an annual income cap set by the IRS. Income above this cap is not subject to the 12.4 percent Social Security tax, but Medicare tax continues to apply.
This limit is adjusted annually, so it is important to confirm the updated cap when estimating taxes for 2025 and 2026.
How Self-Employment Tax Is Calculated
Self-employment tax is based on net business income, not gross revenue.
Net income equals:
“Total business income minus allowable business expenses”
You calculate and report self-employment tax using Schedule C and Schedule SE with your federal tax return.
Federal Income Taxes for North Dakota Self-Employed Workers
In addition to self-employment tax, you must pay federal income tax on your taxable profits.
Progressive Federal Tax System
Federal income tax rates are progressive. As income increases, higher portions are taxed at higher rates. Your filing status affects your tax brackets.
Common filing statuses include:
- Single
- Married filing jointly
- Head of household
Self-employed income is taxed the same as wage income for federal purposes, but the lack of withholding often catches new self-employed workers off guard.
Deduction for Half of Self-Employment Tax
One important benefit for self-employed individuals is the deduction for half of self-employment tax.
You may deduct 50 percent of your self-employment tax when calculating adjusted gross income. This reduces federal income tax but does not reduce the self-employment tax itself.
North Dakota State Income Tax for Self-Employed Individuals
North Dakota imposes a state income tax on residents and certain nonresidents.
North Dakota Income Tax Structure
North Dakota uses a progressive income tax system with relatively low tax rates compared to many other states. The state has simplified and reduced income tax rates in recent years, which benefits self-employed individuals.
Tax rates apply to taxable income after deductions and exemptions. Rates and brackets may be adjusted for the 2025 – 2026 tax years, so reviewing current figures each year is important.
Who Must File a North Dakota Income Tax Return?
You must file a North Dakota income tax return if you are:
- A resident with income above the filing threshold
- A part-year resident who earned income while living in North Dakota
- A nonresident who earned income sourced to North Dakota
Self-employment income earned from work performed in North Dakota is generally considered North Dakota-sourced income.
Residency Rules and Taxation
Residency status determines how income is taxed:
- Residents pay tax on all income, regardless of where it is earned
- Nonresidents pay tax only on North Dakota-sourced income
- Part-year residents pay tax on income earned while living in the state
Remote work and multi-state clients can complicate residency and sourcing rules.
Local Taxes and Municipal Considerations in North Dakota
North Dakota does not impose local income taxes at the city or county level. This simplifies tax compliance for self-employed individuals compared to states with layered local taxes.
However, some cities impose local sales taxes, and certain industries may face local licensing or regulatory fees.
Quarterly Estimated Taxes in North Dakota
Quarterly estimated taxes are one of the most important obligations for self-employed taxpayers.
Why Estimated Taxes Are Required
Because no employer withholds taxes from your income, the IRS and the State of North Dakota require you to pay taxes throughout the year as income is earned.
Failing to make estimated payments can result in penalties and interest, even if you pay the full balance when filing your return.
Federal Estimated Tax Deadlines
Federal estimated tax payments are typically due:
- April
- June
- September
- January of the following year
These payments cover federal income tax and self-employment tax.
North Dakota Estimated Tax Requirements
North Dakota requires estimated payments if you expect to owe more than a minimum amount in state income tax after withholding and credits.
Payments are usually made quarterly through the state’s online tax system.
How to Calculate Estimated Payments
To calculate estimated taxes accurately:
- Estimate your annual net business income
- Calculate federal self-employment tax
- Calculate federal income tax
- Calculate North Dakota state income tax
- Divide the total by four quarterly payments
Many self-employed individuals update estimates throughout the year as income changes.
Business Deductions for North Dakota Self-Employed Taxpayers
Deductions are one of the most effective ways to reduce your tax liability.
Common Deductible Business Expenses
You may deduct ordinary and necessary expenses related to operating your business, including:
- Office supplies and equipment
- Software subscriptions and digital tools
- Marketing and advertising costs
- Professional services such as legal and accounting fees
- Internet and phone expenses
- Business insurance premiums
Expenses must be directly related to earning business income.
Home Office Deduction
If you use part of your home exclusively and regularly for business, you may qualify for the home office deduction.
Two methods are available:
- Simplified method based on square footage
- Actual expense method based on a percentage of household costs
This deduction reduces both federal and North Dakota taxable income.
Vehicle and Mileage Deductions
If you use a vehicle for business purposes, you may deduct:
- The standard mileage rate, or
- Actual vehicle expenses such as fuel, repairs, and depreciation
Accurate mileage logs and records are required to support this deduction.
Health Insurance Deduction
Self-employed individuals may deduct health insurance premiums paid for themselves, their spouse, and dependents, subject to income rules.
This deduction reduces adjusted gross income and can provide significant tax savings.
Retirement Contributions
Self-employed taxpayers can reduce taxable income while saving for retirement by contributing to plans such as:
- SEP IRAs
- Solo 401(k)s
- SIMPLE IRAs
Contribution limits depend on income and plan type.
Sales Tax and Self-Employment in North Dakota
Sales tax responsibilities depend on the products or services you provide.
When You Must Collect Sales Tax
You may be required to collect North Dakota sales tax if you sell:
- Tangible personal property
- Certain digital products
- Taxable services
Many service-based freelancers do not collect sales tax, but exceptions exist depending on the service type.
Registering for Sales Tax
If required, you must register with the North Dakota Office of State Tax Commissioner to obtain a sales tax permit.
Filing Sales Tax Returns
Sales tax returns may be due monthly, quarterly, or annually, depending on sales volume.
Failure to comply can result in penalties, interest, and audits.
Recordkeeping Requirements for Self-Employed Taxes
Strong recordkeeping is essential for compliance and audit protection.
Records You Should Maintain
You should keep detailed records of:
- Income received and payment dates
- Business expenses and receipts
- Mileage logs
- Invoices and contracts
- Bank and credit card statements
Using accounting software can simplify recordkeeping and reporting.
How Long to Keep Records
A common guideline is to keep tax records for three to seven years, depending on the type of document and filing circumstances.
Filing Your Taxes as a Self-Employed North Dakota Resident
Filing requires both federal and state returns.
Federal Tax Forms Commonly Used
Most self-employed individuals file:
- Form 1040
- Schedule C
- Schedule SE
Additional forms may apply for credits, deductions, or retirement contributions.
North Dakota State Tax Forms
North Dakota self-employed taxpayers typically file:
- Resident, nonresident, or part-year resident income tax return
- Any required schedules for business income
Electronic filing is encouraged and often results in faster processing.
Filing Deadlines for 2025 – 2026
Tax returns are generally due in April. Filing an extension gives you more time to submit paperwork but does not extend the time to pay taxes owed.
Estimated tax payments must still be made on time.
Penalties and Interest for Late Filing or Payment
Missing deadlines can be expensive.
Federal Penalties
Federal penalties may apply for:
- Failure to file
- Failure to pay
- Underpayment of estimated taxes
Interest accrues until the balance is paid.
North Dakota Penalties
North Dakota also imposes penalties and interest for late filing or underpayment of state taxes. Even small unpaid balances can grow over time.
Read: Federal Tax Credit for Insulation
Multi-State Income Issues for North Dakota Self-Employed Workers
Many self-employed individuals work with clients in multiple states.
Income Sourcing Rules
Income is generally sourced to the state where the work is physically performed. Remote work can complicate sourcing rules.
Credits for Taxes Paid to Other States
North Dakota may allow a credit for income taxes paid to other states, reducing the risk of double taxation.
This is especially important for consultants and remote professionals.
How Business Structure Affects North Dakota Self-Employed Taxes
The way your business is set up plays a major role in how your income is taxed, reported, and managed in North Dakota. While federal tax rules apply across all states, your business structure still influences how much you owe, how you file, and how complex your compliance responsibilities become.
Sole Proprietorship
A sole proprietorship is the most straightforward structure and is often the default for freelancers, contractors, and independent professionals. There is no legal separation between you and the business, which means all profits and losses flow directly to your personal tax return.
You report business income and expenses on Schedule C and pay federal self-employment tax on your net profit. That same income is also subject to North Dakota state income tax. While this structure is easy to set up and maintain, it offers limited flexibility for tax planning and no separation of personal and business liability.
Single-Member LLC
A single-member LLC is typically taxed the same way as a sole proprietorship unless you choose a different tax classification. From a tax perspective, income still passes through to your personal return, and self-employment taxes apply to net earnings.
The primary benefit of a single-member LLC is legal protection rather than tax savings. It can help separate personal assets from business liabilities while keeping tax reporting relatively simple. For many North Dakota self-employed individuals, this structure offers a balance between ease of management and added protection as income grows.
S Corporation Election
Some self-employed individuals elect S corporation status to potentially reduce self-employment taxes. With this structure, you pay yourself a reasonable salary that is subject to payroll taxes, while remaining profits are generally not subject to self-employment tax.
This approach can lead to tax savings at higher income levels, but it comes with additional responsibilities. You must run payroll, follow reasonable compensation rules, file separate business tax returns, and meet ongoing compliance requirements. For North Dakota business owners with consistent profits and long-term growth plans, the benefits can outweigh the added complexity.
Choosing the Right Structure
The right business structure depends on several factors, including income level, growth plans, and how much administrative work you’re willing to handle. What works well at the start may need to change as your business expands. Reviewing your structure regularly and adjusting when appropriate can help you stay compliant while managing your overall tax burden more effectively.
Tax Planning Strategies for 2025 – 2026
Strategic planning can significantly reduce tax stress and liability.
Separate Business and Personal Finances
Maintaining separate bank accounts simplifies bookkeeping and supports deductions.
Set Aside Money for Taxes
Many self-employed individuals set aside 25 to 35 percent of income for taxes, depending on earnings.
Review Finances Quarterly
Quarterly reviews help you adjust estimated payments and avoid penalties.
Work With a Tax Professional
A professional familiar with North Dakota tax laws can help you:
- Maximize deductions
- Navigate state-specific rules
- Plan for business growth
This is especially helpful if your income fluctuates or spans multiple states.
Common Mistakes Self-Employed Taxpayers Make in North Dakota
Avoiding common errors can save time and money.
Underestimating Taxes
New self-employed individuals often underestimate tax liability and fall behind.
Skipping Estimated Payments
Missing quarterly payments frequently leads to penalties.
Inadequate Recordkeeping
Poor documentation can result in denied deductions during audits.
Preparing for Tax Season as a North Dakota Self-Employed Worker
Preparation leads to smoother filing and fewer surprises.
Tax Preparation Checklist
- Gather income documents
- Organize expense records
- Review estimated tax payments
- Confirm filing deadlines
- Decide whether to file independently or hire a professional
Starting early gives you more flexibility and control.
Final Thoughts on North Dakota Self-Employed Taxes for 2025 – 2026
Self-employed taxes in North Dakota require planning, discipline, and consistent recordkeeping. You are responsible for federal self-employment tax, federal income tax, and North Dakota state income tax, often without employer guidance.
The advantage is control. Self-employed taxpayers have access to powerful deductions, flexible retirement options, and planning strategies that can significantly reduce overall tax liability.
By understanding your obligations, making timely estimated payments, and planning ahead for the 2025 – 2026 tax years, you can stay compliant, protect your income, and focus on building a sustainable and successful business in North Dakota.
File your federal and state taxes online with Beem. You can claim all the tax credits and deductions you are eligible for and file all forms, combinations, and filing statuses, including multi-state filing. You can also try Beem’s free Tax Calculator for an accurate federal and state tax estimate.
