North Dakota Military Retirement Income Exemption

Subdivision (r) of section 57-38-30.3(2) reduces North Dakota taxable income by "the amount received by a taxpayer as retired military personnel benefits, including retired military personnel benefits paid to the surviving spouse of a deceased retired member of the armed forces of the United States, a reserve component of the armed forces of the United States, or the national guard", to the extent it was included in federal taxable income. That is the whole provision. There is no percentage, no dollar ceiling, no age threshold, no requirement to have earned income in the state, no limit on the number of years, no window tied to when the taxpayer became a resident, and no termination date. Set against the states in this catalog that cap the benefit, condition it on residency dates, or run it for a fixed number of years, North Dakota's is the simplest exemption of military retired pay in the file. The survivor annuity is inside the same subdivision rather than in a separate one. A Survivor Benefit Plan annuity paid to the surviving spouse of a deceased retired member is "retired military personnel benefits paid to the surviving spouse" and is subtracted on the same terms. A survivor can read this entry with no veteran on the household account. Two neighbouring provisions complete the picture for a retired household. Subdivision (s) subtracts the Social Security benefits included in federal adjusted gross income under section 86 of the Internal Revenue Code, so North Dakota does not tax Social Security either. And VA disability compensation never enters federal taxable income at all, so there is nothing for North Dakota to subtract and no separate provision to look for. The mechanics are a subtraction on the North Dakota return from federal taxable income, so the starting point is the federal figure. Retired pay that was already excluded federally, such as the portion waived to receive VA compensation, is not in the base and is not subtracted again. North Dakota's income tax is low to begin with, so the cash value of this is smaller than the equivalent in a high-tax state. The reason it matters for a retiree comparing states is that there is nothing to lose here: no five-year clock to run out, no wage condition to fail when work stops, and no sunset to plan around.