Overview of South Dakota Taxes
South Dakota is one of seven states that does not levy a state income tax. Additionally, no South Dakota cities have local income taxes. Taxpayers will, of course, still have to pay federal income tax.
This calculator reflects the 2018 federal withholding tax changes.
Click here to learn more about how the Trump Tax Plan will affect you.
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- Our Tax Expert
Jennifer Mansfield, CPA Tax
Jennifer Mansfield, CPA, JD/LLM-Tax, is a Certified Public Accountant with more than 30 years of experience providing tax advice. SmartAsset’s tax expert has a degree in Accounting and Business/Management from the University of Wyoming, as well as both a Masters in Tax Laws and a Juris Doctorate from Georgetown University Law Center. Jennifer has mostly worked in public accounting firms, including Ernst & Young and Deloitte. She is passionate about helping provide people and businesses with valuable accounting and tax advice to allow them to prosper financially. Jennifer lives in Arizona and was recently named to the Greater Tucson Leadership Program.
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South Dakota Paycheck Calculator
Photo credit: ©iStock.com/© Katherine Welles
South Dakota Paycheck Quick Facts
How Your South Dakota Paycheck Works
Since South Dakota is one of seven states with no personal income tax, FICA and federal income taxes are the only concern for workers here. This is good news for your paycheck. You won’t experience state (or local) income tax being withheld from your pay, which means more money in your pocket throughout the year.
When we talk about FICA taxes, the two factors at play are Social Security and Medicare taxes. Each pay period, 6.2% of your paycheck goes to your share of Social Security taxes and 1.45% goes to Medicare taxes. Your employer matches these contributions so the total amount is doubled.
While most of the time you only pay 50% of your total FICA taxes, this is not always the case. If you’re a self-employed individual in the Mount Rushmore State, you’ll need to pay all FICA taxes yourself since you won’t have an employer to match the remaining half.
Each time you receive a South Dakota paycheck, you will notice federal income tax withholding. The amount of federal income tax withheld from your paycheck has a lot to do with the information you provide on the W-4 form you submit at the beginning of a new job. You'll also want to submit a new W-4 form to reflect any updates to your filing status, dependents or allowances should that change during the year.
Make sure to double check your withholdings for 2018 because President Trump's new tax plan has caused a slight change in withholding calculations. The IRS released new withholding guidelines in January and you should have seen changes to their paychecks, to reflect the new tax plan, starting in February 2018. For the time being, you do not need to fill out a new W-4. Your employer will use the withholdings on your current form.
While it doesn't affect your taxes, your pay frequency is a factor that affects your cash flow during the year. If you get paid monthly, for example, your paychecks will be bigger than if you get paid bi-weekly. A bigger check may sound tempting, but remember you are getting paid less frequently, so you need to budget accordingly.
South Dakota Median Household Income
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Tax Day is a better day for South Dakota taxpayers than for workers in many other states. What makes it different from other states? Let's say you make $50,000 per year. That $50,000 per year stretches significantly further in South Dakota than it would in places like California or Hawaii where you would be heavily taxed at the state level on top of federal income taxation. The absence of local income taxes in South Dakota also helps stretch your pay farther than in other places across the country. Whether you live in Sioux Falls or Rapid City, you won't be paying any state or local income taxes.
South Dakota's sales taxes are very paycheck-friendly as well. South Dakota has some of the lowest sales taxes in the nation with a base sales tax of just 4.5%. Sales taxes vary by county with many counties applying an additional 1% to 2%. Even areas with a maximum of 6.5% are still well below the nation's average of a 7.25% sales tax. Lower sales tax rates mean more of your paycheck remains in your pocket during the year.
South Dakota is arguably one of the best states to be a taxpayer. If this has you wishing you could be a resident of the Mount Rushmore State, take a look at our South Dakota mortgage guide to understand your mortgage options for buying a home in the state. It includes information for those considering a refinance on your mortgage.
How You Can Affect Your South Dakota Paycheck
While you can’t control every single component of your South Dakota paycheck, there are certainly areas where you do have some control. In part, this boils down to the way you complete your W-4 form. The number of allowances you choose to claim partially determines how much will be withheld from your paycheck in taxes. Claiming fewer allowances means you’ll have less of your earnings available to you for spending or saving, while claiming more allowances means more money available during the year.
When we talk about adjusting your allowances, both options come with benefits and drawbacks worth considering. Claiming more allowances frees up more of your paycheck during the year for investing or paying off debt but comes at the cost of potentially owing money in April if you haven't paid enough taxes all year. On the other hand, claiming fewer allowances means you are less likely to owe the IRS in April but leaves more of your income tied up in withholding and unavailable until you receive your return.
If the thought of owing money to the IRS keeps you awake at night, you’re not alone in your concerns. Many people opt for fewer allowances to keep themselves in a safer position from this possibility. While opting for fewer allowances means having reduced access to your earnings through the year, you’re more likely to receive a check in April.
South Dakotans can also elect to maximize their paycheck is by maxing out a 401(k) retirement account. The money you put into a 401(k) or 403(b) is taken from your wages before taxes are applied, so increasing your contribution actually lowers your taxable income. Putting funds into a Health Savings Account (HSA) or Flexible Spending Account (FSA), if your employer offers them, works in a similar fashion. You can use the funds you put into these accounts for health-related expenses like medical copays or prescriptions. However, it's important to keep in mind that there is an expiration date on money you funnel into a HSA or FSA, and anything you don't use in time, you will lose. Again this won't have an effect on state taxes as you don't pay any, but it can certainly help to lower how much you owe in federal taxes.
Most Paycheck Friendly Places
SmartAsset's interactive map highlights the most paycheck friendly counties across the country. Zoom between states and the national map to see data points for each region, or look specifically at one of the four factors driving our analysis: Semi-Monthly Paycheck, Purchasing Power, Unemployment Rate, and Income Growth.
Methodology Our study aims to find the most paycheck friendly places in the country. These are places in the country with favorable economic conditions where you get to keep more of the money you make. To find these places we considered four different factors: semi-monthly paycheck, purchasing power, unemployment rate and income growth.
First, we calculated the semi-monthly paycheck for a single individual with two personal allowances. We applied relevant deductions and exemptions before calculating income tax withholding. To better compare withholding across counties we assumed a $50,000 annual income. We then indexed the paycheck amount for each county to reflect the counties with the lowest withholding burden.
We then created a purchasing power index for each county. This reflects the counties with the highest ratio of household income to cost of living. We also created an unemployment rate index that shows the counties with the lowest unemployment. For income growth, we calculated the annual growth in median income over five years for each county and indexed the results.
Finally, we calculated the weighted average of the indices to yield an overall paycheck friendliness score. We used a one half weighting for semi-monthly paycheck and a one-sixth weighting for purchasing power, unemployment rate and income growth. We indexed the final number so higher values reflect the most paycheck friendly places.
Sources: SmartAsset, government websites, US Census Bureau 2016 5-Year American Community Survey, MIT Living Wage Study, Bureau of Labor Statistics