Ocity Logo ocity
Official Tax Guide

South Dakota Taxes 2025: Income, Sales, and Property Tax Guide

Complete guide to South Dakota state taxes. Income tax (0%), sales tax, and what you need to know before moving.

Updated January 15, 2026
5 min read

South Dakota State Tax Guide 2025

Welcome to South Dakota! Known for the Black Hills, Mount Rushmore, and wide-open spaces, the Mount Rushmore State also boasts one of the most tax-friendly environments in the United States. For those relocating here, understanding the local tax structure is essential for financial planning.

This guide breaks down what you can expect regarding state taxes as a new resident in 2025.

1. Income Tax

South Dakota is one of the few states in the nation that does not levy a state income tax on wages.

  • Tax Rate: 0%.
  • Structure: N/A (There is no income tax).
  • Details:
    • Wages and Salaries: You will not pay state income tax on earnings from your job.
    • Investment Income: Interest, dividends, and capital gains are not taxed at the state level.
    • Federal Taxes: Remember that you are still responsible for paying federal income taxes to the IRS.

Note: While South Dakota does not tax income, the lack of a state income tax often results in slightly higher reliance on other revenue sources, such as sales and property taxes (detailed below).

2. Sales Tax

While you won't pay income tax, you will encounter sales tax on most goods and some services.

  • State Rate: 4.2%
  • Local Taxes: Cities and counties may levy additional sales taxes.
  • Estimated Total: When combining the state rate with local levies, the combined sales tax rate typically ranges between 4.2% and 6.5%, depending on the municipality.
    • Example: Sioux Falls and Rapid City have their own local tax rates that stack on top of the state rate.

Taxable Items:

  • Physical goods (clothing, electronics, furniture).
  • Prepared food (restaurant meals).
  • Lodging (hotels/motels).

Exemptions:

  • Groceries: South Dakota does not tax food for home consumption (groceries).
  • Prescription Drugs: Generally exempt from sales tax.

3. Property Tax

Property taxes are the primary source of revenue for local governments in South Dakota, funding schools, roads, and emergency services.

  • General Context: South Dakota’s property tax burden is generally around the national average. However, rates vary significantly by county and school district.
  • Assessment: Property is assessed annually based on its market value. Residential property is typically assessed at a lower rate than agricultural or commercial property.
  • Tax Rates: While exact millage rates vary by location, effective tax rates generally fall between 1.0% and 1.5% of the property's assessed value.
  • Homestead Exemption: Senior citizens (65+) and disabled individuals may qualify for a property tax freeze or deferral program, depending on income and residence status.

4. Other Taxes

Gas Tax

South Dakota relies on a gas tax to maintain its extensive highway system.

  • Rate: As of 2025, the state gas tax is approximately $0.28 to $0.30 per gallon (subject to legislative adjustment). This is lower than the national average but higher than some neighboring states.

"Sin Taxes"

  • Alcohol: South Dakota imposes specific excise taxes on alcohol, which are generally moderate compared to national standards.
  • Tobacco & Vaping: The state levies excise taxes on cigarettes, chewing tobacco, and vaping products. These rates are subject to change via legislative session.

Inheritance and Estate Tax

  • Status: South Dakota does not have a state-level inheritance or estate tax.
  • Federal Impact: While the state does not tax the transfer of assets upon death, federal estate tax laws still apply to larger estates.

5. Retiree Taxes

South Dakota is consistently ranked as one of the best states for retirees regarding taxation.

  • Retirement Income: 0% State Tax.
    • Social Security benefits are not taxed.
    • Distributions from 401(k)s, IRAs, and pensions are not taxed.
    • Investment income (interest, dividends) is not taxed.
  • Sales Tax Impact: Retirees should budget for sales tax on daily purchases and services, as this is the primary consumption tax they will encounter.

6. Comparison to Neighbors

How does South Dakota stack up against its immediate neighbors?

  • Vs. North Dakota: North Dakota has a low but progressive income tax (ranging from roughly 1% to 2.5%). South Dakota wins on income tax (0%).
  • Vs. Wyoming: Wyoming is very similar to South Dakota, with 0% income tax and slightly lower average property taxes. Both are highly tax-friendly.
  • Vs. Montana: Montana has no sales tax but does have a progressive income tax. South Dakota has no income tax but does have sales tax. The better option depends on whether you spend more than you earn.
  • Vs. Minnesota: Minnesota has a progressive income tax (ranging from 5% to 9%) and a higher sales tax. South Dakota is significantly more tax-friendly for high earners compared to Minnesota.

DISCLAIMER: Tax laws change frequently and are subject to legislative amendments and local jurisdiction changes. The information provided in this guide is for educational purposes only and does not constitute legal or financial advice. You should consult with a Certified Public Accountant (CPA) or tax professional to understand how these laws apply to your specific financial situation.