Bottom Line
Middle-Class Families: Tax-Friendly (Go to the Kiplinger Tax Map for Middle-Class Families)
Retirees: Not Tax-Friendly (Go to the Kiplinger Tax Map for Retirees)
Sure, it's cold in the winter. But low taxes for middle-class families will offset some of the cost of staying warm in the Mount Rushmore state (retirees will have to freeze). South Dakota has no income tax – that's a good start. The combined state and local sales tax rate is below average for the U.S., although sales taxes have a broad reach in the state and include taxes on both groceries and clothing.
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For some bad news, take a look at the state's median property tax rate, which is on the high side.
South Dakota Income Taxes
South Dakota has no income tax.
South Dakota 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: Taxable
- Clothing: Taxable
- Motor Vehicles: Exempt from ordinary sales tax, but taxable under special 4% excise tax
- Prescription Drugs: Exempt
South Dakota Real Property Taxes
In South Dakota, the median property tax rate is $1,078 per $100,000 of assessed home value.
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, 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.
For 2022, single homeowners 66 and older who earned $13,653 or less in 2021 can get a property tax refund based on income. Multi-person households headed by someone 66 or older, where the combined 2021 income was $18,465 or less, are also eligible. Refunds are only available for single-household dwellings, and you must have been a South Dakota resident for all of the previous year. People who don't receive a property tax refund and who don't own a home may apply for a refund of sales tax.
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. Unmarried surviving spouses may also qualify for a freeze or reduction. For 2023 applications, income is limited to $37,065 for individuals and $47,655 for multimember households. In addition, the property generally can't be valued at more than $317,700.
South Dakota Motor Fuel Taxes
Gasoline: 30¢ per gallon.
Diesel: 30¢ per gallon.
South Dakota Sin Taxes
Cigarettes: $1.53 per pack
Other tobacco products: 35% of the wholesale price
Beer: $0.27 per gallon
Wine: $0.90 per gallon ($2.07 if sparkling)
Liquor: $3.93 per gallon
2% wholesale tax also due on wine and liquor.
Marijuana: A 15% excise tax was authorized by a November 2020 ballot initiative, but the South Dakota Supreme Court invalidated the ballot initiative in November 2021
South Dakota Estate and Inheritance Taxes
No estate or inheritance tax.
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