South Dakota’s New Property Tax Relief Laws: What Homeowners Need to Know and When
Why It Matters
South Dakota homeowners are set to see real reductions in their property tax burden thanks to two new laws signed into law in March. The measures shift more of the state’s revenue burden onto sales taxes rather than property owners — a meaningful structural change in how South Dakota funds public schools and local government services.
For families already stretched thin by rising costs, the relief could amount to hundreds of dollars annually, with timing depending on whether relief comes through the state or through a county-level option.
What Happened
South Dakota’s legislature and governor approved two property tax reduction laws in March 2026, both designed to use higher sales tax revenue to reduce owner-occupied property taxes. The two laws operate through separate mechanisms and will deliver relief on different timelines.
The first law taps into revenue from the restoration of the statewide sales tax rate from 4.2% to 4.5%, set to take effect July 1, 2027, after several years at a temporarily reduced rate. The second law creates an optional county-level sales tax of up to 0.5%, with counties choosing to implement it either through their county commission or a public vote.
In both cases, the additional sales tax revenue is directed toward reducing the property tax burden on homeowners — either through direct credits on tax bills or by reducing how much local school districts need to collect from property taxpayers.
By the Numbers
$168.30 — estimated savings per $100,000 of a home’s assessed value under the statewide relief, according to the state Revenue Department.
$547 — projected savings for the owner of a $325,000 home in a school district that applies the maximum allowable property tax levy.
$660 — the Governor’s Office’s estimated average credit under the county-level sales tax option, though individual results will vary.
$56 million — the amount of state reserve funds lawmakers are deploying alongside early sales tax revenue to fund the property tax reduction immediately, allowing homeowners to see relief on bills arriving as early as January 2027.
$114 million — the annual revenue the statewide sales tax increase is expected to generate for the property tax reduction fund in future years.
Zoom Out
South Dakota’s approach mirrors a broader national conversation about shifting tax structures away from property taxes, which can hit homeowners — particularly retirees on fixed incomes — regardless of their current income. Several states have explored similar mechanisms in recent sessions. Proposals like eliminating income taxes entirely for seniors 65 and older reflect the same underlying concern about the tax burden facing older and lower-income homeowners.
The South Dakota model is notable for pairing a predictable statewide mechanism with a flexible local option, allowing counties to move at their own pace based on fiscal capacity. Larger counties like Pennington, Minnehaha, and Lincoln, which have more stable sales tax income, are better positioned to move quickly, while smaller counties with leaner budgets may need additional time to build up the revenue base before issuing credits.
What’s Next
The statewide relief is effectively on autopilot — homeowners in qualifying school districts will see reduced property tax bills arriving in January or February 2027 without needing to apply or take any action. That relief is front-loaded using $56 million in reserve funds alongside the first six months of sales tax increase revenue.
On the county side, the earliest any county can implement the optional local sales tax is January 2027, with property tax credits potentially appearing on bills that same year. However, South Dakota Bureau of Finance and Management Commissioner Jim Terwilliger noted that smaller counties may not issue credits until 2028 or later.
Lawrence County Commissioner Eric Jennings cautioned that some homeowners in smaller counties could face a temporary “double tax” situation — paying both a higher sales tax and a full property tax bill for up to a year before credits arrive.
Looking further ahead, the statewide property tax reduction fund will rely entirely on ongoing sales tax collections after its initial launch. Officials noted that if those revenues grow, property tax levies could be reduced even further in future years. Other fiscal transparency efforts at the state level, including scrutiny of large commercial water and energy users, may also shape how future tax relief is structured.