South Dakota has no state income tax. The state constitution does not ban an income tax, but under Article XI, Section 14 no new tax can be imposed without a two-thirds vote of each chamber of the Legislature or a voter initiative, which makes a change unlikely. This makes SD one of the most tax-friendly states for individuals and businesses.
Why no income tax? South Dakota relies on other revenue sources including sales tax (4.2% state + up to 2% local), property tax (1.00% average), tourism revenue, and bank franchise taxes. This "South Dakota Model" attracts businesses, retirees, and remote workers fleeing high-tax states.
How it compares:
Recent changes: In November 2024, South Dakota voters rejected Initiated Measure 28, which would have eliminated the state sales tax on groceries, so the 4.2% state sales tax still applies to food (the reduced 4.2% rate is scheduled to end June 30, 2027). The state constitution also requires a balanced budget.
The tradeoff - Sales tax + property tax replace income tax: South Dakota funds government mainly through sales and property taxes. At $100K income + $40K annual spending: SD pays $0 income + $1,680 sales (4.2% × $40K) + $3,000 property (1.00% × $300K median home) = $4,680 total (4.7% burden). California (progressive income tax + 7.25% sales + 0.70% property): $4,911 income + $2,900 sales + $2,100 property = $9,911 total (9.9% burden on $100K). Result: SD saves $5,231/year vs CA, about 53% less total tax burden.
The California/Minnesota question - Sioux Falls as 'insurance/banking capital': South Dakota's 0% income tax attracts businesses and high earners from high-tax states. Sioux Falls (population 213K, largest SD city) has a large financial-services and healthcare sector. At $120K salary: MN tax $6,637 (5.53% effective) vs SD $0 = save $6,637/year. Add: Sioux Falls housing $315K vs Minneapolis $425K (save $110K), SD no corporate income tax (vs MN 9.8%), lower cost of living (groceries 10% cheaper). Trade-offs: Sioux Falls is much smaller than Minneapolis, winters are harsh (cold, snowy, with blizzards), limited urban amenities, brain drain (young people leave for larger cities).
Source: South Dakota Department of Revenue - Tax Information
Here's what South Dakota residents actually pay at different income levels (2026, single filer, standard deduction):
| Annual Income | Federal Tax | State Tax | Total Tax | Take-Home Pay | Effective Rate |
|---|---|---|---|---|---|
| $50,000 | $3,820 | $0 | $3,820 | $46,180 | 7.6% |
| $75,000 | $7,670 | $0 | $7,670 | $67,330 | 10.2% |
| $100,000 | $13,170 | $0 | $13,170 | $86,830 | 13.2% |
| $150,000 | $24,734 | $0 | $24,734 | $125,266 | 16.5% |
| $250,000 | $51,304 | $0 | $51,304 | $198,696 | 20.5% |
Note: Includes federal and state income tax only. Does not include FICA (Social Security/Medicare), which adds 7.65% for employees.
Key takeaway: At $100K, South Dakota takes $0 in state tax alone.
CountryTaxCalc.com is reader-supported. When you use our partner links, we may earn a commission at no cost to you. This helps us provide free tax calculators and comparison tools.Learn more about our affiliate partnerships
★ 4.8verified reviews · 3,758 reviews
Planning a move to or from South Dakota? Multi-state filing is complex. Get matched with a CPA who handles South Dakota taxes and multi-state returns. Virtual meetings, fixed pricing.
âš Not for simple single-state returns. Free filing is fine for straightforward W-2 situations.
Get Matched With a CPA →Interested in reaching this audience? Advertise on CountryTaxCalc →
Migration Trends: According to U.S. Census Bureau data (2021-2022), South Dakota experienced net immigration of 2,840 residents (+0.3% population, steady growth). Top origin states were:
Why people move to South Dakota:
Why people leave South Dakota:
Tax considerations if moving here:
| State | Tax Rate | Tax on $100K Income | Difference from South Dakota |
|---|---|---|---|
| South Dakota | 0% | $0 | Baseline |
| North Dakota | 0-2.5% | $653 | +$653 (more tax) |
| Minnesota | 5.35-9.85% | $5,277 | +$5,277 (more tax) |
| Iowa | 3.8% flat | $3,148 | +$3,148 (more tax) |
| Wyoming | 0% | $0 | $0 (same) |
Key insight: South Dakota's 0% income tax saves residents $653-$5,277/year at $100K income compared to neighboring states with income tax. Compared to Minnesota, savings are $5,277/year at $100K, $8,942/year at $150K, and about $17,439/year at $250K. Wyoming also has 0% income tax (ties SD).
But consider total tax burden (income + sales + property):
Result: South Dakota's 4.8% total burden is lower than Minnesota (11.2%) and North Dakota (5.6%), but higher than Wyoming (3.3%) due to WY's ultra-low 0.53% property tax. SD is middle-tier among 0% income tax states - wins for high earners prioritizing income tax savings, loses slightly to WY for homeowners prioritizing property tax.
No, South Dakota has no state income tax. The state constitution does not ban one, but any new tax requires a two-thirds vote of each chamber of the Legislature or a voter initiative (Article XI, Section 14), so a change is unlikely. Residents pay only federal income tax (10-37% based on income). South Dakota is one of only 9 US states with no income tax (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming).
South Dakota funds state services mainly through sales tax (4.2% state rate plus up to 2% local; the reduced 4.2% state rate is scheduled to end June 30, 2027), property tax (about 1.00% average effective rate), tourism-related taxes, bank franchise taxes, and federal funds. The state constitution requires the Governor to propose a balanced budget.
At $100K income: save $5,277/year vs Minnesota (MN 5.28% effective rate vs SD 0%). At $150K: save $8,942/year vs MN. At $250K: save $17,439/year vs MN. Compared to California: at $100K save $4,911/year (CA 4.91% effective), at $150K save $9,561/year, at $250K save $18,861/year. Over a 30-year career earning $150K a year, that is about $268,000 vs MN and $287,000 vs CA in state income tax (before sales and property tax differences). Trade-offs include harsh winters and fewer urban amenities.
South Dakota has no individual income tax, and its banking and trust laws have attracted trust companies and credit card banks to the state. Banks are taxed through a bank franchise tax rather than an individual income tax. Specific asset, employment and revenue figures previously quoted here could not be verified and have been removed.
Yes. South Dakota's state sales tax (4.2%, plus up to 2% local) applies to groceries. Voters rejected Initiated Measure 28, which would have eliminated the state sales tax on groceries, on the November 5, 2024 ballot. The reduced 4.2% state rate is scheduled to end June 30, 2027 unless the Legislature acts.
Yes, if you prioritize low taxes over urban amenities and warm weather. At a $120K single remote salary: SD $0 state income tax vs CA $6,771 and MN $6,637. Illustrative total including sales tax on $29K of spending (Sioux Falls 6.2% = $1,798 vs CA 7.25% state rate = $2,103) and property tax on a $315K home (SD 1.00% = $3,150 vs CA 0.70% = $2,205): SD about $4,948 (4.1% of income) vs CA about $11,079 (9.2%), so SD saves roughly $6,131/year in these taxes. Trade-offs: Sioux Falls is much smaller than a major metro, winters are harsh, and job and cultural options are more limited.
Effective rates, what the headline hides, 111+ countries. Every two weeks, free.
Bi-weekly. No spam. Unsubscribe in one click.
How we calculate: Since South Dakota has no state income tax, our calculator shows only federal income tax using official 2026 IRS tax brackets. We apply marginal tax rates correctly, subtract the standard deduction ($16,100 for single filers in 2026), and calculate effective tax rates. For comparison purposes, we show sales tax (4.2% state + local) and property tax averages (1.00%).
Data sources:
Verification: The lack of a constitutional ban on income taxes, and the two-thirds vote requirement for new taxes, were checked against SD Constitution Article XI, Sections 2 and 14. The 4.2% state sales tax was checked against SD DOR. The 1.00% property tax figure is the Tax Foundation 2026 (Census ACS) effective rate. Federal tax calculator accuracy: 99%+ for standard W-2 filers.
Limitations: Assumes single filer, standard deduction, W-2 income only. Does not include: itemized deductions, federal tax credits (EITC, child tax credit), self-employment tax, business income. Sales tax data uses the 4.2% state rate plus up to 2% local; rates vary by city (4.2-6.2% range). Property tax 1.00% is statewide average; actual rates vary by county (0.9-1.5% range). The bank franchise tax applies only to financial institutions, not individuals.
For complex situations: Consult a licensed CPA familiar with South Dakota tax law, or use official IRS tax software for federal calculations. SD has no state income tax filing requirements for residents.
Last Updated: March 2026
Verified By: Daniel · CountryTaxCalc
Contact: For corrections or questions, visit our contact page.
Last Updated: March 2026