North Dakota fully conforms to federal §168(k) via rolling IRC conformity. STR investors take the 100% Year-1 bonus depreciation deduction — restored by the One Big Beautiful Bill Act (OBBBA, P.L. 119-21) for property acquired and placed in service after January 19, 2025 — on both federal and North Dakota returns. No add-back, no separate schedule, no state Form 4562 adjustment. See the full 50-state conformity map to compare North Dakota's treatment to every other US jurisdiction.
Modeled on a $150,000 federal §168(k) deduction. Compare in the state conformity tool →
How North Dakota Adopts §168(k) — Rolling vs Static Conformity
North Dakota's income tax base is defined under N.D. Cent. Code §57-38-01 by reference to the Internal Revenue Code on a rolling basis. That means every time Congress amends the IRC, North Dakota's tax code updates on the same effective date — no follow-on state legislation required.
Rolling conformity is the design that makes North Dakota a full §168(k) conformer without any transitional friction. When OBBBA restored 100% bonus depreciation permanently for property acquired and placed in service after January 19, 2025, North Dakota picked it up automatically. Static-conformity states (California, Virginia, Wisconsin, Georgia, and others) had to wait for legislation — and several of them explicitly excluded §168(k) even after passing conformity updates.
For an STR investor in Medora, Bismarck, or Fargo, this means one depreciation schedule instead of two, and no basis divergence to track across the property's holding period.
Worked Example — $150K Federal Deduction + Extra State Savings
Assume a $1.1M short-term rental with a cost segregation analysis identifying $150,000 in 5-year and 15-year property eligible for §168(k) bonus depreciation:
- Federal Year-1 deduction: $150,000 × 37% marginal bracket = $55,500 federal tax savings.
- North Dakota Year-1 deduction: Same $150,000 flows to the state return unchanged. At the 2.5% top marginal rate = $3,750 in additional state tax savings.
- Total Year-1 tax benefit: $59,250.
North Dakota's top marginal rate is the lowest among states that have any individual income tax at all — so while conformity is clean, the incremental state dollar value is modest. The federal deduction remains the dominant driver of Year-1 cash. Compare this to a decoupled state at a higher rate: a California investor at 13.3% loses ~$19,950 in Year-1 state timing, meaning the North Dakota investor is ~$23,700 ahead on state cash alone.
The Statute Explained
The controlling authority is N.D. Cent. Code §57-38-01, which adopts the Internal Revenue Code by reference for North Dakota income tax purposes on a rolling basis. Because the reference is not fixed to a specified date, federal amendments to §168(k) apply for North Dakota purposes automatically.
OBBBA restored 100% §168(k) bonus depreciation permanently — meaning full first-year expensing for qualified 5-year, 7-year, 15-year, and 20-year property acquired and placed in service after January 19, 2025. Under North Dakota's rolling conformity, that treatment applies for the state return on the same effective date.
How North Dakota Compares to Decoupled States
North Dakota's low rate makes the state dollar impact of §168(k) modest — but "modest positive" is a very different posture than "large negative." Consider three prominent decouplers for contrast:
- California — 100% add-back at 13.3%: ~$19,950 Year-1 miss on a $150K deduction.
- New York — 100% add-back at 10.9%: ~$16,350 Year-1 miss (before NYC surtax).
- Pennsylvania — 100% PIT add-back at 3.07%: ~$4,605 Year-1 miss.
Decoupled-state investors ultimately recover the deduction over MACRS life, but they trade Year-1 cash for years of deferred timing and a permanent basis-tracking obligation. In North Dakota, that timing drag simply doesn't exist.
What This Means for Your STR Purchase Decision
Because North Dakota conforms cleanly, the deduction size is what drives the outcome — and that is a function of the property itself. Land ratio, age, price-per-square-foot, and amenity signals determine how much of your basis qualifies for §168(k) treatment. A modern build in a resort-adjacent market with high 5-year and 15-year content will generate a materially larger bonus deduction than an older property with a lot of embedded structural work.
To model the deduction for a specific address (and see both federal and North Dakota state Year-1 tax math), run the address on your property before you make an offer.
Analyze a specific North Dakota property
Run any North Dakota STR listing through DepreciMax's $99 property report — line-item finish classification with both federal and North Dakota state Year-1 tax math.
For a side-by-side view of North Dakota against any other state at any federal deduction amount, use the state conformity tool.
Frequently Asked Questions
Does North Dakota conform to federal §168(k) bonus depreciation in 2026?
Yes. North Dakota is a rolling IRC conformity state under N.D. Cent. Code §57-38-01 and fully adopts federal §168(k) as restored by OBBBA (P.L. 119-21) for property acquired and placed in service after January 19, 2025. There is no state add-back and no separate depreciation schedule.
How much extra state tax savings does a North Dakota STR investor get from bonus depreciation?
On a $150,000 federal §168(k) deduction, a North Dakota investor at the 2.5% top marginal rate captures an additional $3,750 in Year-1 state tax savings on top of ~$55,500 in federal savings at the 37% bracket. Total Year-1 tax benefit: about $59,250.
What is the North Dakota statute that governs IRC conformity?
N.D. Cent. Code §57-38-01 adopts the Internal Revenue Code by reference on a rolling basis for state income tax purposes. Federal IRC amendments — including OBBBA's restoration of 100% §168(k) bonus depreciation — apply automatically for North Dakota purposes without separate state legislation.
Does North Dakota require a Form 4562 add-back like decoupled states?
No. North Dakota's state return begins with federal taxable income and applies no §168(k) modification. Taxpayers do not file a state 4562 variant or an addition modification for bonus depreciation.
How does North Dakota compare to decoupled states like California or New York?
California requires a 100% add-back at 13.3% (~$19,950 miss on a $150K deduction), and New York requires a 100% add-back at 10.9% (~$16,350 miss). North Dakota adds no such penalty and instead delivers ~$3,750 in additional state savings — a swing of roughly $20K–$24K in Year-1 cash between these jurisdictions.
Is North Dakota's low 2.5% rate a concern for §168(k) planning?
The low rate reduces the incremental state dollar value of §168(k) — but it also means the state layer is never a drag. A full conformer at 2.5% is unambiguously better for STR investors than a decoupled state at any rate. The federal $55,500 at 37% remains the dominant Year-1 benefit either way.
- North Dakota Office of State Tax Commissioner — Individual Income Tax: tax.nd.gov/individual
- N.D. Cent. Code §57-38-01 (Income Tax, IRC conformity)
- IRS §168(k) — Modified Accelerated Cost Recovery System, additional first-year depreciation
- One Big Beautiful Bill Act of 2025 (P.L. 119-21) — restored 100% §168(k) for property acquired and placed in service after January 19, 2025
Every state's §168(k) position, in one place
Interactive map, sortable table, and deep-dive guide for each of the 51 jurisdictions — post-OBBBA verified.
See the 50-state map →