No state income tax
How South Dakota taxes retirement income
South Dakota has no personal income tax, so the state takes nothing from your Social Security, your pension or your withdrawals from a 401(k), 403(b), 457(b) or IRA. That holds no matter where the pension comes from: a South Dakota plan, another state’s teacher system, a company pension or the federal government.
South Dakota collects revenue mainly through sales tax and property tax. The state offers property tax relief programs for lower-income homeowners who are 65 or older or disabled.
Federal income tax still applies everywhere. Your pension and traditional retirement account withdrawals are taxed by the IRS as ordinary income, and up to 85% of your Social Security can be taxable federally depending on your other income.
Questions
Does South Dakota tax pensions?
No. South Dakota has no personal income tax, so pensions of every kind are free of state tax.
Does South Dakota tax Social Security?
No. With no income tax, Social Security benefits are not taxed by the state.
If I move to South Dakota, can my old state still tax my pension?
No. Federal law (4 U.S.C. 114) bars states from taxing the pension income of people who no longer live there, including government pensions and most retirement plan payments.