Updated October 5, 2026. Quick answer: No. The Department of Revenue says South Dakota is “one of seven states that does not impose a state income tax”, so dividends and interest add no South Dakota income tax.
How South Dakota treats dividends and interest
| Item | What the documents say |
|---|---|
| Treatment | Not taxed by the state |
| Where it is written | South Dakota Department of Revenue, Taxes page for individuals |
| Inheritance and estate tax | “South Dakota does not have an inheritance tax.” The page adds that there is also no estate tax |
| Municipal bond interest | No rule needed: no income tax applies to it |
A $20,000 example
Dividends and interest of $20,000 add $0 of South Dakota income tax. Federal tax on the income still applies.
What changes in 2026
The latest documents read print no 2026 change to the way dividends and interest are taxed.
Federal rules
The state’s treatment sits on top of the federal one. Qualified dividends and ordinary dividends are sorted out on the Form 1099-DIV, as the site explains in Box 1a and 1b: ordinary versus qualified dividends, and interest is reported as covered in 1099-INT Box 1. The IRS explains the federal side in Topic no. 403, Interest Received and Topic no. 404, Dividends.
Related: whether South Dakota taxes capital gains, whether South Dakota taxes pensions, how South Dakota taxes retirement income, dividends and interest tax by state, and how tax-exempt interest is reported.
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Answer againSources
- South Dakota Department of Revenue, Taxes (individuals): https://dor.sd.gov/individuals/taxes/
Sources: the primary documents linked above, read on October 5, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the plan administrator or the agency itself is the right place to confirm anything consequential.