Navigating the complexities of state taxes can be daunting, but understanding South Dakota's tax landscape is essential for residents and newcomers alike.
In this guide, we'll explore key components of The Mount Rushmore State's tax system, from income and sales taxes to property taxes and retirement benefits.
South Dakota state tax: Overview
Thinking about taxes in South Dakota? Here are some key points to know.
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The state doesn’t take a bite out of your paycheck as there’s no income tax here, which is a positive for many residents. Plus, the combined state and local sales tax rate in South Dakota is relatively low compared to much of the country.
But there’s a catch: sales tax is charged on both groceries and clothing, which can add up.
And while you might save on income and sales taxes, keep in mind that South Dakota’s property taxes are on the higher side compared to other states.
[Data for this state tax guide was gathered from a number of sources including the Census Bureau, the state’s government website, the Sales Tax Handbook, and the Tax Foundation. Property taxes are cited as a rate percentage rather than the assessed value.]
South Dakota income tax
South Dakota has no income tax.
South Dakota retirement taxes
You won’t pay any state income taxes in South Dakota. That’s because there is no personal income tax in South Dakota. There is no estate or inheritance tax in the state either.
- Tax on Taxable Income: N/A
- Social Security: Not taxable
- Pensions: Not taxable
- 401(k) and IRA Distributions: Not taxable
South Dakota sales tax
The sales tax in South Dakota is 4.20%. The average local sales tax is 1.91%, resulting in a combined sales tax rate of 6.11%, according to the Tax Foundation.
Source: Tax Foundation
- Groceries: Taxable
- Clothing: Taxable
- Motor Vehicles: Exempt from ordinary sales tax, but taxable under a special 4% excise tax
- Prescription Drugs: Taxable
How much is South Dakota property tax?
In South Dakota, the median property tax rate is 1.01% of assessed home value, according to the Tax Handbook.
South Dakota Property Tax Breaks for Retirees
South Dakota offers a property tax homestead exemption for homeowners 70 or older (or surviving spouses), which delays payment of property taxes until the property is sold. Taxes are a lien on the property.
A property tax "freeze" is also available for seniors 65 and older. To qualify for the assessment freeze, you must meet income requirements and have resided in a single-family dwelling for at least 200 days of the previous calendar year.
South Dakota gas tax
Product | Tax Amount |
|---|---|
Gasoline | $0.28 per gallon |
Diesel | $0.28 per gallon |
Source: Sales Tax Handbook
South Dakota taxes on tobacco and alcohol
Product | Tax Amount |
|---|---|
Cigarettes | $1.53 per pack |
Other Tobacco Products | 35% of the wholesale price |
Medical Marijuana | 0.00% |
Recreational Marijuana | 19.50% (4.50% cannabis sales tax + 15% state excise tax) |
Source: Sales Tax Handbook
Product | Tax Amount |
|---|---|
Beer | $0.27 per gallon |
Wine | $0.93 per gallon |
Liquor | $3.93 per gallon |
There is also a 2% wholesale tax on wine and liquor.
Source: Sales Tax Handbook
South Dakota estate and inheritance taxes
South Dakota has no estate or inheritance tax.
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