Retiring in South Dakota: what taxes actually cost you
The short answer
On $80,000 of retirement income, South Dakota costs about $5,905 a year across state income, property and sales tax. That ranks 18 of 51, or $730 below the median state. South Dakota levies no state income tax, so property and sales tax are the whole bill.
Run it on your own numbers
The figures above use a reference profile. Change them and every number on this page moves, including the ranking.
How South Dakota treats retirement income
South Dakota levies no state income tax, so nothing you withdraw is taxed at the state level.
Social Security
Not taxed
Pension income
Not taxed
401(k) and IRA withdrawals
Not taxed
Capital gains
Not taxed
Property tax
Averages 1.24% of assessed value, so $4,960 a year on a $400K home.
Sales tax
State rate of 4.5%, before any local addition.
Worth knowing: No state income tax.
Where South Dakota sits against the rest
The spread across all 51 runs from $3,280 in Wyoming to $14,004 in Connecticut, a difference of $10,724 a year on the same income.
Five cheapest on these numbers
| State | Total tax |
|---|---|
| Wyoming | $3,280 |
| Nevada | $3,639 |
| Colorado | $4,009 |
| Tennessee | $4,310 |
| Louisiana | $4,678 |
Five most expensive on these numbers
| State | Total tax |
|---|---|
| Connecticut | $14,004 |
| New Jersey | $12,953 |
| Vermont | $12,755 |
| Kansas | $11,108 |
| Minnesota | $10,888 |
Worth keeping in proportion. The gap between the best and worst state here is real money, but it is smaller than the gap between two housing markets, and it is far smaller than the effect of your withdrawal rate. Safe withdrawal rate covers that one.
Common questions
Does South Dakota tax Social Security?
No. South Dakota does not tax Social Security benefits at the state level. Federal tax on benefits still applies depending on your combined income.
How much tax would a retiree pay in South Dakota?
On $80,000 of retirement income with a $400,000 home and $70,000 of annual spending, South Dakota works out at roughly $5,905 a year across income, property and sales tax. That ranks 18 of 51, against a median of $6,635.
Does South Dakota tax 401(k) and IRA withdrawals?
No. Withdrawals from 401(k)s and IRAs are not taxed by South Dakota.
Is South Dakota a good state to retire in for taxes?
Around the middle of the pack. On the reference profile it costs $730 less than the median state, and $2,625 more than Wyoming, which is the cheapest. Tax is one input though. Cost of living, housing and proximity to family usually move a retirement budget further than the tax code does.
Retirement taxes in another state
Related: Taxes in retirement, Withdrawal order, Roth conversions, All 51 states.