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Tool | September 2014

State-by-State Guide to Taxes on Retirees

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South Dakota

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The Bottom Line
Map of South Dakota

TAX-FRIENDLY

One of Kiplinger's top ten most tax-friendly states for retirees, the Mount Rushmore State offers a friendly tax environment for retirees. There is no state income tax, so Social Security benefits and other forms of retirement income get a free ride. Sales taxes are relatively low, although they cover a broad scope of services. Property is assessed at 85% of market value, but the state has several property tax relief programs.

State Sales Tax

4% (prescription drugs are exempt). Municipalities may add up to 2%, and they may change this tax rate on January 1 or July 1 of each year. Residents who are 65 or older and have an annual income of less than $10,250 (single) or $13,250 (household) are eligible for a sales-tax refund.

Income Tax Range

There's no state income tax.

Social Security

Benefits are not taxed.

Exemptions for Other Retirement Income

Retirement income is not taxed.

Property Taxes

Property is assessed at 85% of market value. Local government entities assess and collect property taxes.

Median property tax on the state's median home value of $126,200 is $1,620, according to the Tax Foundation.

Tax breaks for seniors: A tax freeze and/or municipal property-tax reduction is 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. Unmarried surviving spouses may also qualify for a freeze or reduction. Income is limited to $26,566 for individuals and $33,208 for multi-member households, and the value of the home must be less than $182,358.

Single homeowners 65 and older who earn $11,670 or less can get a property tax refund based on income. Multi-person households headed by someone 65 or older, where the combined income is $15,730 or less, are also eligible. Refunds are only available for single-household dwellings, and you must have been a South Dakota resident for the entire previous year. People who do not receive a property tax refund and who do not own a home may apply for a refund of sales tax.

South Dakota also has 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, which includes up to one acre, and must be paid along with 4% interest before the property can be transferred. For a single person, annual income must be less than $16,000. For a multimember household, the limit is $20,000.

Inheritance and
Estate Taxes

There is no inheritance tax or estate tax.

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