South Dakota state income tax in 2025: A guide

South Dakota is one of a handful of states without an individual state income tax. Additionally, the Mount Rushmore State is also known as a corporate income tax haven due to its lack of corporate income tax. Even though residents can reap these benefits, they’re still subject to federal income tax, sales tax, and property tax. 

*Note that even though South Dakota has no state income tax, you are still responsible for federal taxes if you meet the IRS income filing threshold. This article addresses state-specific taxes only.    

Specific income tax considerations in South Dakota

South Dakota’s lack of individual income tax means all income, including retirement and pension funds, investment earnings, Social Security benefits, and military pay, is exempt from taxation at the state level. That’s a big advantage for retirees, investors, and military service members, allowing them to keep more of their earnings.  

However, income is still subject to federal income taxes. Staying informed about federal obligations is critical to avoid penalties.  If you lived in a state with income tax but earned money in South Dakota, you’ll need to report that information on your home state’s tax return. That’s because you likely have a tax burden in your home state. In addition, if you live in South Dakota and earned money outside the state, you may need to file a nonresident tax return for the state in which you have income.

Other types of common taxes in South Dakota

Without an income tax, South Dakota generates most of its revenue through property and sales tax. 

• Property tax: South Dakota relies on property taxes as a significant source of revenue for funding local services, including schools, roads, and public safety. While tax rates in the state vary by county, they’re competitive compared to national averages, with an average 1.01% effective tax rate on owner-occupied housing values. 
• Sales tax: Sales tax is more varied. The state assesses a statewide sales tax of 4.2%. Local governments can add their own sales taxes, which increases the total rate in some places. This tax applies to most goods and some services, impacting household budgets and business operations.

How to file income tax in South Dakota

Filing your income taxes in South Dakota is fairly simple, thanks to the lack of state income tax. You’ll still need to file your federal tax return—including any deductions and credits—and factor in other taxes like property taxes throughout the year.

TurboTax helps South Dakota residents understand their tax responsibilities when filing, especially if they receive income from other states requiring complex returns. Whether you want to file your taxes on your own or get help from a professional, TurboTax makes completing your tax return easy.