If you serve in the military or have served, South Dakota is one of the friendlier states for your money, with no state income tax and a solid property tax break for disabled veterans. South Dakota is home to Ellsworth Air Force Base near Rapid City and Joe Foss Field, the South Dakota Air National Guard base in Sioux Falls, so it draws many military families after a PCS, which is short for Permanent Change of Station, the official military move from one duty station to another. This guide explains the main rules in plain language and points you to the state's own sources. Tax law changes, so treat these figures as a starting point and confirm the current rules before you file.

How South Dakota Helps Disabled Veterans With Property Taxes

South Dakota gives its most severely disabled veterans a large property tax break by removing a big slice of the home's value from taxation. The U.S. Department of Veterans Affairs, known as the VA, is the federal agency that rates service-connected disabilities, and the top rating opens the door to this benefit.

As the South Dakota Department of Revenue explains, the Disabled Veteran Property Tax Exemption exempts up to $200,000 of the full and true value of a veteran's dwelling from property tax. The state's Department of Veterans Affairs describes the dwelling as the home, the garage, and the lot. It is a generous exemption on a fixed amount of value, not a full waiver, so a veteran whose home is worth more than the exempt amount still owes tax on the value above it.

Who Qualifies

To qualify, you must be a veteran rated as permanently and totally disabled from a service-connected disability, and you must own and occupy the dwelling. The exemption is built for the most severely disabled, so a permanent and total rating is the key requirement.

Surviving Spouses

The benefit can carry to a surviving spouse. An unremarried surviving spouse of a veteran who was rated permanently and totally disabled may receive an exemption of up to $150,000 of the dwelling's full and true value, and the spouse keeps it until the property is sold, is no longer occupied as the home, the spouse remarries, or the property changes use. Confirm the current amount and conditions with your county.

Paraplegic Veterans

South Dakota runs a separate program for paraplegic veterans. A paraplegic veteran, a veteran with the loss or loss of use of both lower extremities, or the unremarried widow or widower of such a veteran, whose home is specifically designed for wheelchair use, may qualify for an exemption on the dwelling. Your county Director of Equalization can confirm which program fits your situation.

How It Works With Your Local Tax Bill

Property tax in South Dakota is assessed and collected at the county level. You claim the Disabled Veteran Property Tax Exemption through your county Director of Equalization, with proof of your permanent and total service-connected rating, and the application is due by November 1. After your first approval, you do not need to apply again each year. Near Ellsworth Air Force Base that office is in Pennington and Meade counties, and near Joe Foss Field it is in Minnehaha County.

If you are weighing where to settle, our guide to the military bases in South Dakota can help you picture the local cost of owning a home in each market.

Military Pay and South Dakota Taxes

Here is the simplest part of this guide: South Dakota has no state income tax. That means the state does not tax your active-duty pay, your military retirement pay, your National Guard or Reserve pay, or your VA disability compensation. There is no state return to file on that income and no military-pay exemption to claim, because there is no state income tax to begin with.

That makes South Dakota one of a small group of states that collect no personal income tax at all, which can stretch a military paycheck or a fixed retirement income further. You will still pay federal income tax where it applies, and you will pay local property and sales taxes, so weigh the whole picture when you compare duty stations. Because tax rules can change, confirm the current details with the South Dakota Department of Revenue before you make decisions.

A Note for Military Spouses: MSRRA

If you are a military spouse, the Military Spouse Residency Relief Act, known as MSRRA, may matter to you. MSRRA is a federal law that lets a military spouse keep a home state for tax and voting purposes even after moving on military orders. Because South Dakota has no state income tax, residency here is often simple, but your prior home state's rules may still affect you.

Under the related federal rules, a service member, the spouse, or both may choose the service member's home state, the spouse's home state, or the service member's permanent duty station for residency. Because that choice can affect another state's taxes, confirm yours before you file. For the property tax exemption in this guide, what usually matters most is that the qualifying veteran owns and occupies the dwelling.