State tax rates and rules for income, sales, property, estate, and other taxes that impact retirees. Go to Retiree Tax Map South Dakota Add to State Compare List | View List View State Compare List (0) selected | Compare up to 5 The Bottom Line Mixed Tax Picture The Mount Rushmore State offers both good tax news and bad tax news for retirees. First some good news: South Dakota doesn't impose an income tax, so Social Security benefits and other forms of retirement income get a free ride.For some bad news, take a look at the state's property tax rates, which are on the high side. Property tax relief programs are also limited to low-income residents.The news is split between good and bad when it comes to sales taxes in South Dakota. On the one hand, rates are below average. However, the sales taxes have a broad reach here and include taxes on both groceries and clothing. Income Tax Range South Dakota has no state income tax. Taxation of Social Security Benefits Social Security benefits are not taxed by the state. Tax Breaks for Other Retirement Income South Dakota has no income tax. Sales Tax 4.5% state levy. Localities can add as much as 4.5%, and the average combined rate is 6.4%, according to the Tax Foundation.Groceries: TaxableClothing: TaxableMotor Vehicles: Exempt from ordinary sales tax, but taxable under special 4% excise taxPrescription Drugs: Exempt Real Property Taxes 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 $29,565.46 for individuals and $36,956.82 for multimember households.Single homeowners 66 and older who earn $12,880 or less can get a property tax refund based on income. Multi-person households headed by someone 66 or older, where the combined income is $17,420 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. Annual Car Taxes and Fees An annual vehicle license fee based on the car's weight and age is imposed. Estate and Inheritance Taxes No estate or inheritance tax.