All-items parity
88.6
US = 100.0
South Dakota (SD) | All-items parity 88.6
South Dakota Cost of Living 2026
South Dakota reads 88.6 on the BEA all-items price parity for 2024, sixth-cheapest in the nation, and is the only state in that cheapest tier with no income tax at all: no tax on wages, pensions, 401(k) withdrawals or capital gains, funded by a 4.2% sales tax and the banking industry Sioux Falls built on the state's financial laws. Housing rents price at 67.6 with a median home of $289,600, property tax runs 1.14%, and the one caveat of note is that groceries sit inside the sales-tax base.
No income tax, 6th-cheapest pricesSioux Falls banking hubMedian home $289,600
Median Home
$289,600
2BR rent $1,071/mo
Median Income
$76,881
Household, Census ACS
Category breakdown
The four BEA price parities vs the nation
| Category | SD index | National avg | Difference |
|---|---|---|---|
| All items | 88.6 | 100.0 | -11.4% |
| Services: housing rents | 67.6 | 100.6 | -32.8% |
| Goods | 95.5 | 99.6 | -4.1% |
| Services: utilities | 79.7 | 98.4 | -19.0% |
| Services: other | 91.9 | 100.1 | -8.2% |
U.S. Bureau of Economic Analysis publishes these four component parities and no others. There is no federal grocery, healthcare or transportation price parity, so this table shows none. Food at home sits inside Goods; medical and transport services sit inside Services: other.
Sources: BEA Regional Price Parities by State (table SARPP), 2024 reference year, U.S. Bureau of Economic Analysis. Census ACS 2024 1-year (median income, home value), SD Department of Revenue (sales tax), Tax Foundation (effective property tax), EIA (electricity rates), KFF (uninsured rate).
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Pros / offsets
What works in South Dakota.
The only no-income-tax state in the cheapest tier. Florida, Texas and Tennessee price higher; Wyoming comes close but costs more too. South Dakota alone pairs a 88.6 parity with zero tax on wages, retirement withdrawals and capital gains, the purest cheap-and-untaxed combination in the country.
Sioux Falls is a bigger economy than the map suggests. The state's trust and bank-friendly statutes drew Citibank in 1981 and an industry after it; today financial services, two major health systems (Sanford, Avera) and steady construction give the metro real salaries against $300,000s family housing.
Retirement income is simply outside the system. With no income tax there is nothing to exempt: Social Security, pensions and IRA withdrawals arrive whole, and South Dakota's trust laws make it a national estate-planning venue on top.
Costs stay plains-cheap across the board. Median two-bedroom rent of $1,071, electricity at 13.15 cents per kWh, groceries at $397 a month and 3.8 hospitals per capita, among the nation's densest coverage.
Cons / drivers
Where South Dakota costs more.
Groceries are taxed. South Dakota applies its sales tax to food, one of the few states still doing so at the general rate (4.2% state, plus municipal add-ons of up to 2%); a 2024 ballot measure to repeal it failed, so the policy stands.
Wages trail the tax pitch. Median household income of $76,881 sits below the national median; outside Sioux Falls and Rapid City the job market thins quickly, and the no-tax advantage accrues fastest to those whose income arrives from elsewhere.
Property tax is the local workhorse. At 1.14% effective, bills run higher than the plains-state image suggests, roughly $3,250 a year on the median home, with owner-occupied assessment discounts and elderly freezes as the relief valves.
Winter and distance are the standing costs. Average lows of 28 degrees, gas bills of $82 a month in season, and a state where the two real cities sit five hours apart; western ranch country prices in isolation honestly.
Tax + benefit signals
South Dakota tax and access overview
State income tax
0%
No state income tax
Property tax effective
1.14%
Of assessed value, annual
Sales tax (state)
4.20%
Local can add 1-4% more
Uninsured rate
8.2%
Medicaid: not expanded
Your take-home pay in South Dakota
No state income tax: see exactly what federal tax and FICA leave you per paycheck.
The mortgage on a $289,600 home
Monthly payment at today’s rates with South Dakota property tax (1.14%) and average home insurance.
Metro variation
State averages mask city variation.
South Dakota averages 88.6 on the BEA all-items parity, with the spread running east to west:
Sioux Falls: The growth engine: banking, health systems and in-migration (South Dakota's no-tax pitch lands here first) support the state's strongest housing demand, new suburbs in the $300,000s-$400,000s and the tightest labor market on the northern plains.
Rapid City and the Black Hills: The scenic premium: Ellsworth AFB, tourism and retiree demand price Rapid City and the Hills towns (Spearfish, Custer) above their wage base, the state's version of a mountain-amenity market.
Aberdeen, Watertown, Brookings: The agricultural-and-university middle: steady small-metro economies with housing in the $200,000s, Brookings firmed by SDSU.
The reservations and the west river ranchlands: Some of the nation's lowest-cost housing alongside its most underserved economies; statewide averages describe neither.
Most movers are really choosing Sioux Falls or the Black Hills: the first for the economy, the second for the scenery, both under the same absent income tax.
Frequently Asked
South Dakota cost of living, answered
How does South Dakota fund itself with no income tax?
Sales tax on a broad base (including groceries and many services) at 4.2% state plus municipal add-ons, property taxes for schools and local government, and the bank franchise tax on the financial industry that state law deliberately attracted, the 1980s usury-law reform that brought Citibank's card operations built a sector that now carries real budget weight. Tourism (the Black Hills, Sturgis) adds seasonal revenue. The result is a structurally lean budget rather than an oil subsidy, which is why the sales-tax base stays broad.
Why did Citibank move to Sioux Falls, and why does it matter?
In 1981 South Dakota repealed its usury cap, letting banks charge market credit-card rates, and Citibank moved its card operations there within months; much of the industry followed. Four decades on, financial services anchor Sioux Falls employment alongside Sanford and Avera's hospital systems, giving the metro professional salaries, steady growth and the state's deepest job market, the reason South Dakota's no-tax pitch comes with an actual economy attached, unlike most cheap plains states.
Does South Dakota tax groceries?
Yes, at the general sales-tax rate, one of the last states to do so, with municipalities adding up to 2% on top. A 2024 initiated measure to exempt groceries failed at the ballot, and the overall state rate's temporary cut to 4.2% runs through mid-2027 under current law. On spending, households average $397 a month on food at home, so the tax costs a typical family roughly $200-250 a year, real, but small against the absent income tax for most budgets.
Is South Dakota the best state for retirees on taxes?
It is on the shortest list: no tax on Social Security, pensions, retirement withdrawals or capital gains (nothing to exempt, there is no income tax), property tax at 1.14% with elderly assessment freezes, and the sixth-cheapest price level in the country, cheaper than every other no-income-tax state. The honest comparisons are Wyoming (similar structure, higher prices) and Florida (no income tax, far higher housing and insurance). The offsets: taxed groceries, hard winters and distance to major-market specialists outside Sioux Falls.
What does the Black Hills premium look like?
Rapid City and the Hills towns price above their local wage base on scenery, Ellsworth AFB's expansion (the B-21 program) and retiree in-migration: desirable Spearfish or Hill City properties clear $400,000 while the region's service wages stay plains-ordinary. It is South Dakota's small-scale version of a mountain-amenity market. Buyers get Badlands-to-Black-Hills access and a drier, milder winter than the east river; the trade is a thinner job market and tourist-season pricing.
Who nets the most from moving to South Dakota?
Remote workers and the self-employed, whose full income escapes state tax at a sixth-cheapest price level; retirees drawing taxable-elsewhere pensions and withdrawals; and sellers of appreciated assets, with no state capital-gains tax. Sioux Falls adds a genuine local career market in finance and healthcare. The fit weakens for local-wage families (income below the national median, groceries taxed) and anyone allergic to winter. The /calculator will show the income-tax line going to zero against your current state.