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South Dakota Residency for Tax Purposes

South Dakota residency for tax purposes might make sense for you. Those who are domiciled in the state enjoy no state income tax, no inheritance tax, no personal property tax and more. When combined with low sales tax and low vehicle insurance rates, it’s easy to see why a South Dakota address can come with serious savings.

By

Joseph Anthony
June 1, 2020
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Some say that home is where the heart is. Others might say home is home is where you pay taxes. If you’re among the latter set, you might have questions about South Dakota residency for tax purposes. There are many reasons why you might claim residency in The Mount Rushmore state, including for tax savings and more.

Explore what South Dakota residency means for tax purposes. Learn more about tax benefits, residency requirements, mail forwarding and more. 

What Are the Tax Benefits of South Dakota Residency?

South Dakota residency for tax purposes might pay off each year on April 15. There are a host of tax benefits that come with a permanent address in the state. In fact, you’ll find that residents of South Dakota pay the lowest sales tax in the nation, which can be quite beneficial when making a big purchase. Additionally, South Dakota is among 7 United States states that don’t impose income tax.

Residents of South Dakota can also avoid paying

  • Tax on pensions 
  • Tax on Social Security
  • Personal property taxes
  • Inheritance tax
  • Intangible tax on investments

While it’s best to go to a tax professional for tax advice, you might find a few tax benefits to being domiciled or establishing residency in the state of South Dakota. It might make sense for you if you’re a full-time RVer, an expat living abroad, a military member shipping overseas or anyone else in need of a permanent address.

According to information from the IRS, as long as you meet a state’s residency requirements you can file taxes from that state. You don’t have to spend a certain percentage of the tax year in that state.

What Does it Mean to be Domiciled in South Dakota?

If you’re seeking South Dakota residency for tax purposes, you’ll need to be domiciled in the state. To be domiciled in South Dakota means that your permanent home address is in South Dakota. You can reside anywhere else or even travel full-time and maintain a South Dakota domicile by maintaining permanent address in The Mount Rushmore State.

A domicile in South Dakota can come in handy in many situations. For example, let’s say you are a full-time RVer who is domiciled in Missouri. You own a rental property on the beach in Alabama, are a limited partner in an investment in Kentucky and have picked up a temporary job along the way in Oregon. This means that your income from all of the above sources would be taxed in Missouri because your official domicile is in The Show Me State -- even if you haven’t visited home all year long. You could avoid paying some of the imposed income taxes in this situation by having a South Dakota domicile. 

It’s easy to have an official domicile in South Dakota thanks to the state’s lax residency requirements. You can easily obtain a South Dakota address by enlisting the assistance of a mail forwarding service. From there, the rest of the requirements are simple. You’ll have to spend one night in the state and obtain a South Dakota driver’s license to be an official resident.

The state in which you are domiciled is very important because it impacts many factors of your life. For example, if you are seeking South Dakota residency for tax purposes you might save money on April 15 by avoiding state income taxes. Additionally, matters of family law like divorce or guardianship over children can vary by the state in which you are domiciled.  Creditor protection and state asset protection rules also depend on where you are domiciled as each state can have different laws.

Do I Have to Live in South Dakota to Be Resident for Tax Purposes?

In a word, no. You can take advantage of South Dakota’s tax savings without living there full time. To be a resident, you are required to have a permanent address in the state. You can get a permanent mailing address in South Dakota by taking advantage of mail forwarding service, like those offered by Americas Mailbox.

You can prove your residency by maintaining a South Dakota driver’s license. You can obtain SD residency and get a South Dakota drivers license by spending just one night in the state. You’ll have to spend at least one night in the state every 5 years to maintain your resident status and keep your driver’s license current.

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