South Dakota Military Retirement Taxes 2026
NO state income tax + property tax relief for veterans
🎯 Quick Summary: South Dakota (2026)
- ✓ Military retirement pay: NO state income tax
- ✓ VA disability: Tax-free (federal and state)
- ✓ Social Security: NO state income tax
- ✓ Property tax: $150,000 exemption for 100% disabled vets
- ✓ Sales tax: 4.5% (low compared to other states)
- ✓ Cost of living: 5-10% below national average
- ✓ Overall ranking: Top 10 most tax-friendly for retirees
Why South Dakota Is a Hidden Gem for Military Retirement
South Dakota is one of only 9 states with no state income tax, making it exceptionally tax-friendly for military retirees. Your entire military pension, VA disability, Social Security, and all other income is free from state income tax. Combined with low property taxes, property tax relief for disabled veterans, and a below-average cost of living, South Dakota offers outstanding value for retirees.
Beyond taxes, South Dakota provides safe communities (lowest crime rate in nation), friendly people, beautiful landscapes (Black Hills, Badlands), excellent outdoor recreation (hunting, fishing, hiking), low population density, and no state estate or inheritance tax. The state's fiscal responsibility and pro-business environment ensure long-term tax stability.
Twenty years in, the hard question was never the tax rate
It's what you have to earn on the outside so your family never feels the drop. South Dakota taking $0 of your pension is one line of that math. Your federal bracket and your VA rating decide the rest. Put your numbers in and you get one figure back: the civilian salary you need in South Dakota. Once you know it, you can go after work you actually want instead of the first offer that covers the bills. About a minute, free, no account, nothing saved.
See the salary I need →2026 South Dakota Tax Breakdown
State Income Tax
🎉 ZERO State Income Tax!
South Dakota does not have a state income tax. This applies to ALL income sources including military retirement pay, VA disability, Social Security, pensions, wages, investment income, and business income. You only pay federal taxes.
Property Tax Relief for Veterans (2026)
| Disability Rating | Property Tax Benefit | Requirements |
|---|---|---|
| 100% Disabled | $150,000 assessed value exemption | 100% service-connected disability |
| 70%+ Disabled | Partial reduction available | 70%+ service-connected |
| Paraplegic Veterans | 100% property tax exemption | Paraplegic from service |
Real Example: Tax Savings in South Dakota (2026)
Example: E-7 Retired After 20 Years
- • Military retirement pay: $2,800/month ($33,600/year)
- • VA disability (70%): $1,808/month ($21,696/year)
- • Part-time civilian job: $25,000/year
- • Total annual income: $80,296
South Dakota
No state tax on any income
State tax: $0
Minnesota (6.8% on wages)
Exempts military retirement, taxes the civilian job
State tax: about $1,700
Annual South Dakota Savings: about $1,700
Over 20 years: about $34,000 saved
That E-7 above isn't you
Your rank, your years, your rating, your house payment. Same math run on your numbers: what actually lands in the account each month after federal tax, and the civilian salary that closes whatever gap is left. If your spouse is working, it counts that too. You walk away with a target instead of a worry.
Run my numbers →Cost of Living in South Dakota (2026)
South Dakota's cost of living is 5-10% below the national average:
📍 Housing Costs
- • Median home price: $265,000
- • Rent (2BR): ~$950/month
- • Property tax rate: 1.2% (low)
- • Housing: Below national average
🛒 Living Expenses
- • Groceries: Below average
- • Healthcare: Near average
- • Utilities: Below average
- • Gas: Slightly below average
Military Presence in South Dakota
🎖️ Ellsworth Air Force Base (Rapid City)
- • Home of the B-1B Lancer - 28th Bomb Wing
- • Personnel: 4,000+ active duty and civilians
- • Economic Impact: $400+ million annually
- • Facilities: Full commissary, exchange, medical, fitness
- • Future: Selected for B-21 Raider bomber
🎖️ South Dakota National Guard
Active Army and Air National Guard presence with training facilities statewide. Strong military heritage and veteran community.
Best Cities for Military Retirees in South Dakota
🏔️ Rapid City
Why: Ellsworth AFB access, Black Hills beauty, tourism economy, outdoor recreation, growing tech sector
Population: 75,000
Housing: $280,000 median
Best for: Military retirees, outdoor enthusiasts
🏙️ Sioux Falls
Why: Largest city, strong economy, excellent healthcare, no income tax draws businesses, low unemployment
Population: 195,000
Housing: $275,000 median
Best for: Job opportunities, urban amenities with Midwest feel
✈️ Box Elder
Why: Adjacent to Ellsworth AFB, military community, affordable, family-friendly
Population: 10,000
Housing: $250,000 median
Best for: Air Force retirees wanting base proximity
🏛️ Pierre (Capital)
Why: State capital, stable government jobs, small-town feel, Missouri River recreation
Population: 14,000
Housing: $230,000 median
Best for: Quiet retirement, fishing/hunting
Pros & Cons of Retiring in South Dakota
✅ PROS
- ✓ NO state income tax on anything
- ✓ Property tax relief for disabled vets
- ✓ Low cost of living (5-10% below average)
- ✓ Lowest crime rate in the nation
- ✓ No estate/inheritance tax
- ✓ Low property taxes overall
- ✓ Ellsworth AFB - full facilities
- ✓ Beautiful landscapes - Black Hills, Badlands
- ✓ Excellent hunting/fishing
- ✓ Low population density - peace & quiet
- ✓ Friendly communities
- ✓ Fiscal responsibility - stable taxes
❌ CONS
- ✗ Harsh winters - very cold (-20°F common)
- ✗ Limited VA facilities - closest in Sioux Falls, Hot Springs
- ✗ Rural state - long distances
- ✗ Limited job market outside major cities
- ✗ Extreme weather - blizzards, tornadoes
- ✗ Limited cultural amenities vs. urban states
- ✗ Small population - isolation for some
VA Healthcare in South Dakota
🏥 VA Facilities
- • Hot Springs VA Medical Center - Full medical care, long-term care
- • Sioux Falls VA Health Care System - Primary care, specialty services
- • Multiple CBOCs - Rapid City, Pierre, Fort Meade, Eagle Butte
- • Telehealth: Available statewide for remote consultations
Frequently Asked Questions (FAQs)
Does South Dakota tax military retirement pay?
No. South Dakota has NO state income tax, which means your military retirement pay is NOT taxed at the state level. This includes all military pensions from active duty, reserves, or National Guard. You'll only pay federal income tax. South Dakota is one of only 9 states with no income tax.
What property tax relief do veterans get in South Dakota?
South Dakota exempts the first $150,000 of full and true value, which is not the same as assessed value, for a veteran rated permanently and totally disabled from a service-connected disability. There is no partial tier: a 70% rating does not qualify. Paraplegic veterans, veterans with loss or loss of use of both lower extremities, and their unremarried surviving spouses get a larger exemption of up to $200,000, though that one is also capped rather than unlimited. Unremarried surviving spouses qualify under either program, and the application deadline is November 1. South Dakota also has low overall property tax rates compared to neighboring states.
Is South Dakota a good state for military retirees?
Yes, South Dakota is excellent for military retirees seeking tax advantages and low cost of living. With no state income tax, low property taxes, property tax relief for disabled veterans, affordable housing, and no tax on Social Security or pensions, South Dakota offers exceptional value. The state has low crime, friendly communities, and outdoor recreation opportunities. Main considerations are cold winters and limited VA facilities.
Does South Dakota tax Social Security benefits?
No. South Dakota has no state income tax, so Social Security benefits are completely tax-free at the state level. This is a major advantage for retirees with multiple income sources.
What is the sales tax rate in South Dakota?
South Dakota has a 4.5% state sales tax, which is relatively low. Local jurisdictions can add up to 2% additional sales tax, so total rates typically range from 4.5% to 6.5%. This is offset by having no state income tax.
Can military retirees access Ellsworth AFB facilities?
Yes. Military retirees can access all facilities at Ellsworth Air Force Base including the commissary, exchange, medical/dental clinics, fitness center, MWR facilities, and more. Ellsworth provides substantial savings and quality of life benefits for retirees in the Rapid City area.
Calculate Your South Dakota Retirement Income
See how much you'll save with zero state income tax
Use Free Calculator →Comparing states? The $4.99 worksheet ranks your exact pension in all 50, South Dakota included, with 20-year state tax totals for each. Get the worksheet or see a sample first.
Weighing other states too? Compare North Dakota, Nebraska and Wyoming, or see the full 50-state ranking of military retirement taxes.