Military pay now exempt from North Dakota state income tax

FARGO, N.D. (Valley News Live) - Governor Doug Burgum signed a bill that exempts military pay from state income tax for active duty, National Guard and Reserve members, building on legislation signed in 2019 that exempts military retirement pay.

The adjutant general of the North Dakota National Guard, Maj. Gen. Al Dohrmann, and the prime sponsor of Senate Bill 2293, state Sen. Scott Meyer of Grand Forks, were among those who joined Burgum for a bill signing ceremony on Monday, March 27.

Statewide, the new law is estimated to reduce North Dakota service members’ income taxes by $4 million in the 2023-25 biennium. Military pay encompasses all federal pay for training, education, mobilization and bonuses as well as state pay when called to support an emergency on state active duty.

“By joining the roughly 20 states that don’t tax military income, North Dakota is recognizing the sacrifice of military service and building on the momentum of our ongoing efforts to make ours the most military-friendly state in the nation,” Burgum said. “We’re grateful to the legislators, National Guard officials, military supporters and everyone else who advocated for this important tax relief.”

Currently, 12 states fully exempt military income from state income tax, including Minnesota, and 14 states partially exempt it, according to testimony on the bill. Nine states have no income tax, including South Dakota. As a result, military service members often choose a state with exemptions for military pay or no income tax as their official state of residence.

“This policy will assist our active duty members and their families when they decide where to set their state residency, it will assist our National Guard with recruiting efforts, and it will assist workforce development by veterans filling job openings once they separate from the military,” Meyer said.

North Dakota currently has about 5,500 Guard and Reserve members and nearly 7,300 active duty service members primarily at the Grand Forks Air Force Base and Minot Air Force Base, according to the Department of Defense.

The bill passed the House 89-3 and the Senate 40-4.