Go to Retiree Tax Map South Dakota Add to State Compare List | View List View State Compare List (0) selected | Compare up to 5 The Bottom Line Most Tax-Friendly One of Kiplinger’s top ten most tax-friendly states for retirees, the Mount Rushmore State offers a friendly tax environment for retirees. There is no state income tax, so Social Security benefits and other forms of retirement income get a free ride. Sales taxes are relatively low, although they cover a broad scope of services. The state has several property tax relief programs. State Sales Tax 4.5% state levy. Localities can add as much as 4.5%, and the average combined rate is 6.40%, according to the Tax Foundation. Many services are taxed, as are groceries. Income Tax Range There’s no state income tax. Social Security Benefits are not taxed. Exemptions for Other Retirement Income Retirement income is not taxed.IRAsRetirement income is not taxed.401(k)s and Other Defined-Contribution Employer Retirement PlansRetirement income is not taxed.Private PensionsRetirement income is not taxed.Public PensionsRetirement income is not taxed. Property Taxes The median property tax on South Dakota's median home value of $146,700 is $1,943.Tax breaks for seniors: A tax freeze and/or municipal property tax reduction is available for seniors 65 and older. To qualify for the assessment freeze, you must meet income requirements and have resided in a single-family dwelling for at least 200 days of the previous calendar year. Unmarried surviving spouses may also qualify for a freeze or reduction. Income is limited to $28,279 for individuals and $35,349 for multimember households, and the value of the home must be less than $194,115.South Dakota also has a property tax homestead exemption for homeowners 70 or older (or surviving spouses), which delays payment of property taxes until the property is sold. Taxes are a lien on the property, which includes up to one acre, and must be paid along with 4% interest before the property can be transferred. For a single person, annual income must be less than $16,000. For a multimember household, the limit is $20,000. Vehicle Taxes 4% excise tax is due when vehicle is titled. Inheritance and Estate Taxes None.