SOUTH DAKOTA
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The Mount Rushmore State
BOTTOM LINE: TAX-FRIENDLY
South Dakota, home to Mount Rushmore, 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. 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 2.75%, and they may change this tax rate on January 1 or July 1 of each year. Residents who are 65 or older and have a yearly income of less than $10,250 (single) or $13,250 (household) are eligible for a sales-tax refund.
INCOME-TAX RANGE
No state income tax.
SOCIAL SECURITY
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.
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.
For 2012, single homeowners 66 and older who earn $10,500 or less can get a refund of up to 35% of taxes paid. Multi-person households headed by someone 66 or older, where the combined income is $13,750 or less, are eligible for a refund of up to 55% of taxes paid. 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. Applicants must be 65 or older, disabled, a resident of South Dakota for the entire calendar year and meet strict income requirements.
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 multi-member household, the limit is $20,000.
INHERITANCE AND ESTATE TAXES
There is no inheritance tax and no estate tax.
Visit RetirementLiving.com for a complete rundown of taxes in South Dakota.
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