South Dakota has no state income tax — and never has. Sioux Falls is a financial powerhouse. Your paycheck loses only federal taxes and FICA, nothing more.
South Dakota funds state government through a 4.5% statewide sales tax (plus local additions). Major employers include Citibank, Wells Fargo, and Capital One credit card operations in Sioux Falls, Sanford Health, and agriculture/ranching across the state. There is no city income tax anywhere in South Dakota. Workers pay only federal income tax + Social Security (6.2%) + Medicare (1.45%).
South Dakota is not typically thought of as a financial powerhouse, but Sioux Falls is home to some of the largest credit card operations in the world. In 1980, South Dakota eliminated its usury ceiling — the cap on interest rates that lenders could charge. Citibank immediately moved its credit card operations from New York (which had strict usury limits) to Sioux Falls, bringing thousands of jobs and billions in economic activity. Wells Fargo, Capital One, and others followed. Today, Sioux Falls processes more credit card transactions than almost any city its size, and the financial sector employs a significant portion of the local workforce at wages well above the state average.
South Dakota is also a trust and dynasty trust haven with no rule against perpetuities — meaning trusts can last forever. Combined with no state income tax on trust income, South Dakota has attracted an enormous amount of wealth management, family office, and trust administration business. Wealthy individuals from around the world establish South Dakota trusts to shelter investment income from state taxation indefinitely. This trust industry is largely invisible to the average worker but represents billions in managed assets.
For everyday workers, the practical benefit is simple: no state income tax means your paycheck goes further than in Iowa (3.8% flat), Minnesota (up to 9.85%), or Nebraska (~4.55%). On a $70,000 salary, a South Dakota worker keeps approximately $2,700–$3,200 more per year than the same worker across the border in Minnesota. Rapid City (gateway to Mount Rushmore and the Black Hills), Sioux Falls (financial/healthcare hub), and Aberdeen (agricultural) are the main population centers.
No South Dakota state income tax. Only federal income tax, SS (6.2%), and Medicare (1.45%) are deducted. Estimates only — consult a tax professional.
| Gross Pay (this check) | $0.00 |
| Federal Income Tax | −$0.00 |
| South Dakota State Tax | $0.00 ✓ |
| Social Security (6.2%) | −$0.00 |
| Medicare (1.45%) | −$0.00 |
| Net Take-Home Pay | $0.00 |
No. South Dakota has no personal income tax of any kind. It never has. The state funds its government primarily through a 4.5% state sales tax, local sales taxes, property taxes, and federal funds. South Dakota workers pay only federal income tax and FICA (Social Security and Medicare) — zero state income tax on wages, investment income, retirement distributions, or any other income.
In 1980, South Dakota eliminated its usury ceiling — the maximum interest rate lenders could charge. At the time, federal law allowed states to export their interest rate limits to other states via the National Bank Act. Citibank (now Citigroup) moved its credit card operations from New York to Sioux Falls almost immediately, gaining the ability to charge interest rates that New York law prohibited. Wells Fargo, Capital One, and other major financial firms followed. Today, Sioux Falls has one of the highest concentrations of financial services employment relative to its population of any US city.
Iowa has a flat 3.8% income tax. On $75,000 in wages, Iowa costs approximately $2,200–$2,800 per year in state income tax; South Dakota costs $0. On $100,000, the difference is approximately $3,500–$3,800 per year. For workers along the I-29 corridor between Sioux City (IA/SD border) and Sioux Falls, the South Dakota side offers a meaningful annual take-home advantage.
No. Sioux Falls, Rapid City, Aberdeen, Watertown, and all other South Dakota cities do not levy local income taxes. There is zero state or local income tax of any kind in South Dakota.
South Dakota has no income tax at all, so Social Security benefits, pension income, 401(k) and IRA withdrawals, and investment income are completely free of South Dakota state tax. SD is consistently ranked among the most retiree-friendly states in the US.