Do expats from North Dakota still need to pay state taxes?

If you’ve moved out of North Dakota and are living in another state or country, you might be wondering if you still have to pay North Dakota state taxes. Understanding your tax responsibilities is important to avoid any surprises and ensure you’re following the law correctly.

Knowing whether or not you owe state taxes can help you plan better and avoid penalties. This article will explain what you need to know about paying state taxes as an expat from North Dakota.

TLDR:

Understanding North Dakota's tax residency rules

For tax purposes is determined by your domicile and physical presence in the state. Your domicile is your legal residence, the place you consider your permanent home and intend to return to whenever you are away.

You can only have one domicile at a time, and it remains unchanged until you establish a new one and make it your permanent home. 

Physical presence refers to the number of days you spend in North Dakota during the tax year.

Full-Year Resident

A full-year resident is someone who either:

• Has North Dakota as their domicile for the entire tax year.
• Maintains a permanent place of abode in North Dakota and spends more than 210 days in the state during the tax year.

As a full-year resident, you are required to report all income to North Dakota, regardless of where it was earned. This includes wages, business income, capital gains, interest, dividends, and rental income.

Part-Year Resident

If you lived in North Dakota for part of the year and then moved out, you are a part-year resident. You need to report all income earned while you were a resident of North Dakota. For income earned after moving, it should be reported to the new state of residence, if applicable. Filing as a part-year resident involves prorating your income based on the time spent in North Dakota and the time spent outside the state.

Non-Resident with North Dakota Domicile

If you live outside North Dakota but North Dakota remains your domicile, you are considered a non-resident with a North Dakota domicile. In this case, you only need to report income sourced from North Dakota, such as wages from a North Dakota employer, rental income from property in North Dakota, or business income from activities in the state.

Non-Resident without North Dakota Domicile

If you do not live in North Dakota and do not maintain North Dakota as your domicile, you are considered a non-resident without a North Dakota domicile. Generally, you only need to pay North Dakota taxes on income sourced from the state, such as income from a business operating in North Dakota or rental income from property in the state. You do not owe North Dakota tax if you have no North Dakota-sourced income.

What constitutes North Dakota-sourced income?

Understanding what constitutes North Dakota-sourced income is essential for nonresidents and part-year residents to accurately determine your tax obligations.

North Dakota-sourced income refers to any income derived from activities or assets located within the state. 

Here are some key categories to consider:

• Wages and Salaries: Money earned for services performed in North Dakota.
• Business Income: Income from business activities conducted in North Dakota.
• Real Estate: Rental income from property located in North Dakota.
• Capital Gains: Profits from the sale of real estate or tangible property in North Dakota.
• Dividends and Interest: Dividends from North Dakota-based companies and interest earned from North Dakota financial institutions.
• Pensions and Retirement Plans: Retirement income from North Dakota institutions or for services performed in the state.

Tax benefits and exemptions for expats from North Dakota

Living abroad as an expat comes with various tax benefits and exemptions that can help reduce your overall tax burden.

Here are some of the key tax advantages available:

Foreign Earned Income Exclusion (FEIE)

The FEIE allows U.S. taxpayers living abroad to exclude a portion of their foreign-earned income from U.S. federal income tax.

For the tax year 2024, this exclusion amount is up to $126,500.

To qualify, you must pass either:

• Bona Fide Residency Test: You qualify if you are a resident of a foreign country for an uninterrupted period that includes an entire tax year.
• Physical Presence Test: You qualify if you are physically present in a foreign country for at least 330 full days during a 12-month period.

FEIE Guide

Foreign Tax Credit (FTC)

The FTC is designed to prevent double taxation by allowing you to claim a credit for foreign taxes paid on income that is also subject to U.S. federal tax. 

This credit can significantly reduce your U.S. tax liability, particularly if you live in a country with high tax rates. 

The FTC helps ensure that you are not taxed twice on the same income, providing relief and making international work more manageable.

FTC Guide

Foreign Housing Exclusion (FHE)

The FHE allows you to exclude certain housing expenses from your federal and state taxable income. These expenses can include rent, utilities (excluding telephone), and other reasonable costs related to maintaining a household abroad.

The amount you can exclude is limited to a base amount plus housing expenses exceeding 16% of the FEIE limit.

FHE Guide