South Dakota has no state income tax, so the only money leaving your paycheck for taxes is federal income tax and FICA. There is no South Dakota withholding line at all.
That makes South Dakota one of the best states in the country for take-home pay. Here is what still comes out of a South Dakota paycheck, and how the state funds itself instead. See your exact take-home with the free South Dakota paycheck calculator.
How South Dakota's income tax works
South Dakota is one of nine states with no tax on wage income. Your employer withholds only federal income tax and FICA at 7.65% (6.2% Social Security up to the wage base, plus 1.45% Medicare). There is no state or local income tax anywhere in South Dakota, including Sioux Falls and Rapid City.
Because there is no state layer, a South Dakota worker keeps far more of the same salary than a neighbor in Minnesota. The gap is simply the state income tax South Dakotans never pay.
Your take-home on a $65,000 salary in South Dakota
Here is how a $65,000 salary breaks down for a single filer, using 2025 federal and FICA figures alongside South Dakota's no state income tax.
| Item | Annual |
|---|---|
| Federal income tax | $5,246 |
| FICA (Social Security + Medicare) | $4,973 |
| South Dakota income tax | $0 |
| Take-home pay | $54,782 |
| Percent of gross kept | 84.3% |
On a $65,000 salary a single filer keeps about $54,782, or 84.3% of gross, with no state income tax form to file. That is roughly $2,900 more than a worker nets in neighboring Minnesota. With low living costs in Sioux Falls and Rapid City, that take-home stretches a long way. Compare with Minnesota.
How South Dakota pays for itself without an income tax
No income tax does not mean no taxes. South Dakota leans on sales tax (a state rate around 4.2% plus local add-ons) and on tourism and other levies. Property taxes are moderate. The absence of an income tax is a major draw for workers and businesses.
For retirees the math is excellent: South Dakota taxes neither wages nor retirement income such as 401(k), IRA, and pension withdrawals or Social Security, and there is no estate or inheritance tax.
How to keep more of your South Dakota paycheck
Even without a state tax to shelter, a traditional 401(k) or HSA still lowers your federal tax, and an HSA also avoids FICA. In a no-income-tax state like South Dakota, those accounts are the main remaining lever to raise your take-home rate.