Personal income tax is a government tax on individuals that varies based on their taxable income. Generally, taxable income is determined by taking a person’s total income and applying deductions. Depending on the circumstances, credits may also be available to individuals.
Many states levy a personal income tax in addition to the federal personal income taxes collected by the Internal Revenue Service. Several states, however, including South Dakota, do not collect personal income tax. This article addresses other relevant taxes in South Dakota.
South Dakota and Corporate Taxes
South Dakota does not collect a corporate income tax, nor a personal income tax. In fact, South Dakota is arguably the most income tax-friendly state in the country.
Bank Franchise Tax
The one important exception to the general absence of major business taxes in South Dakota is the state’s bank franchise tax, which applies to various financial institutions. The tax is based on the institution’s net income, and is assessed at a series of progressively lower marginal rates ranging from 6 percent on income of $400 million or less down to 0.25 percent on income over $1.2 billion.
Federal Taxes
As noted above, just because South Dakota does not charge personal income taxes does not mean state citizens get out of paying taxes altogether. You may also be subject to state consumer tax laws and federal tax laws .
Under basic tax law, states and the federal government are permitted to tax both earned and unearned personal income. Earned income is comprised of your salary from work, including wages, tips, commissions, and bonuses. On the other hand, unearned income comes from non-employment sources like interest, dividends, and profits from asset sales, royalties, and gambling winnings.
Tax Forms
The Internal Revenue Service (IRS) implements federal income taxes nationwide. You can find most IRS forms and publications online. And along with South Dakota's consumer taxes, there may be other tax obligations you must meet in-state. You can find many state tax forms online along with resources regarding taxpayer assistance programs if you would like assistance with state or federal taxes.
The highlights of South Dakota personal tax laws are listed in the following chart. See FindLaw's Tax Law section for more articles and resources.
| Code Section | No personal income tax |
| Who is Required to File | N/A |
| Rate | N/A |
| Federal Income Tax Deductible | N/A |
| Federal Income Tax Used as Basis | N/A |
Note: State laws are constantly changing -- contact a South Dakota tax attorney or conduct your own legal research to verify the state law(s) you are researching.
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South Dakota Tax Laws: Related Resources
