How South Dakota taxes retirement income
South Dakota has no state income tax, so no retirement income is taxed at the state level: not Social Security, not pensions, and not 401(k) or IRA withdrawals. This makes South Dakota one of the more tax-friendly states for retirees. Federal income tax still applies.
Retirement income tax in South Dakota, at a glance
| Income type | Taxed by South Dakota? |
|---|---|
| Social Security | No |
| Pensions | No |
| 401(k) / IRA withdrawals | No |
| Estate / inheritance tax | None |
| Avg. property tax rate | 1.16% of home value |
Does South Dakota tax Social Security benefits?
No. South Dakota does not tax Social Security benefits. That follows automatically from having no state income tax.
Does South Dakota tax pensions and 401(k) or IRA withdrawals?
No. With no state income tax, South Dakota does not tax pension income or withdrawals from 401(k) plans and IRAs. You still owe federal tax on withdrawals from traditional (pre-tax) accounts.
For the mechanics of required withdrawals in retirement, see what is an RMD.
Sources
- South Dakota taxation of retirement income (Social Security, pensions, 401(k)/IRA): South Dakota Department of Revenue / Taxation.