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Military Personnel Guideline

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If you had nonmilitary income taxed by another state while you were a North Dakota resident, you may qualify for

an income tax credit for taxes paid to another state. See Schedule ND-1CR (if ﬁ ling Form ND-1) or Schedule 4 (if

ﬁ ling Form ND-2).

Part-year residents and full-year nonresidents of North Dakota.

Even though your compensation for federal active duty is not taxable by North Dakota while you are nonresident of

North Dakota, you are subject to North Dakota income tax on other kinds of income that you or your spouse receive

from sources in North Dakota. This may include income from a civilian job, a business, or gambling winnings.

If you are a part-year resident or full-year nonresident of North Dakota, you are required to ﬁ le a North Dakota

individual income tax return if both of the following conditions apply to you:

●

You are required to file a federal income tax return, and

●

You received North Dakota gross income (see below).

“North Dakota gross income” means:

●

Income received from all sources (including sources outside North Dakota) while you were a resident of

North Dakota.

●

Income received from sources in North Dakota while you were a nonresident of North Dakota, which

includes the following:

○

Compensation for services performed in North Dakota (except military pay), such as wages, salaries,

tips, commissions and fees.

○

Income from tangible property located in North Dakota, such as rents, oil royalties, and the gain from

the sale of such property.

○

Income from a trade or business carried on in North Dakota as a sole proprietorship.

○

Income from a partnership, Subchapter S corporation, or limited liability company that carries on a

trade or business in North Dakota.

○

Income from an estate or trust, but only to the extent the income is derived from tangible property or a

trade or business in North Dakota.

○

Income from gambling activity carried on in North Dakota.

Gross income is used only to determine if there is a requirement to ﬁ le a North Dakota income tax return; only the

portion of the gross income that is included in federal taxable income is included in North Dakota taxable income. If

you (or your spouse, if ﬁ ling a joint return) is a nonresident of North Dakota for part or all of the tax year, you must

complete Schedule ND-1NR (if ﬁ ling Form ND-1) or Schedule 3 (if ﬁ ling Form ND-2).

Forms

North Dakota income tax law provides for two methods of calculating the individual income tax, which are

implemented on two different forms: Form ND-1 and Form ND-2. The calculation method and tax rates are different

under each method, so the form you choose will affect the amount of tax you will have to pay. The form you should

use will depend on your factual situation, but generally you should use Form ND-1 because over 97 percent of all

ﬁ lers will calculate a lower tax on this form.

It is important to note that just because you are eligible for one of the deductions or tax credits allowed only on

Form ND-2, you should not automatically assume it is the best form to use. While there are a number of special

deductions (including a number for military personnel) and tax credits that are only allowed if Form ND-2 is used, as

a general rule they are not enough to offset the higher tax rates on Form ND-2.

Treatment Of Military Personnel Guideline - Income Tax - North Dakota Offi Ce Of State Tax Commissioner Page 4

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