South Dakota, with its pleasant cities, rural areas and abundant opportunities for outdoor recreation, can be an attractive place to retire. South Dakota also has a low cost of living and one of the lowest tax burdens of any state in the country. According to the Tax Foundation, South Dakota’s overall state and local tax burden is estimated at 7.9% of income, compared to the national average of 9.7%. South Dakota has no personal income tax. And if you are interested in starting a business when you retire, the state also has no corporate income tax and South Dakota is ranked first in the Tax Foundation’s State Business Tax Climate Index.
Property taxes
Property taxes in South Dakota are moderate compared to other states. According to the Tax Foundation, South Dakota ranked 16th in 2009 in terms of property taxes as a percentage of home value, at 1.28% overall. The state ranked 27th in median property taxes paid on a home at $1,620 per year.
South Dakota homeowners who are age 65 or older or disabled may qualify for a property tax assessment freeze, if their income is below a certain limit. There is also a reduction of municipal property taxes available for homeowners 65 or older or disabled who qualify based on their income. Veterans who are permanently and totally disabled as a result of a service-related disability and surviving spouses who have not remarried are exempt from property tax in South Dakota on up to $100,000 of the assessed value.
Through the homestead exemption, South Dakota homeowners age 70 or older and surviving spouses can delay the payment of property taxes on their home until the property is sold. A lien is placed on the home and interest accrues at 4 percent a year. There are income limits for the homestead exemption and you must have owned the house for at least three years or have been a resident of South Dakota for at least five years.
Sales tax
South Dakota has a 4 percent state sales tax and local municipalities can add up to an additional 2.75 percent. Prescription drugs are exempt from sales tax. South Dakota residents who are age 65 or older or disabled may qualify for a partial refund of sales tax depending on their income. Single residents qualify if their annual income is less than $9,750, and members of a household qualify if total income is less than $12,750. For these purposes, income includes adjusted gross income as reported on your tax return plus Social Security benefits, retirement and other types of income.
Sources:
Property and Sales Tax Relief Programs – South Dakota Department of Revenue and Regulation
Property Taxes on Owner-Occupied Housing by State, 2004 – 2009 – Tax Foundation
South Dakota – Tax Foundation
South Dakota Retirement Guide – Top Retirements
Tax Refund Program – South Dakota Department of Revenue and Regulation
Taxes by State – South Dakota – Retirement Living Information Center
