Updated October 7, 2026. Quick answer: No. The South Dakota Department of Revenue says the state “does not impose a state income tax”, so a TSP withdrawal by a South Dakota resident is not taxed by the state.
South Dakota TSP withdrawal tax treatment at a glance
| Item | What the documents say |
|---|---|
| TSP withdrawals | Not taxed by South Dakota: the documents read describe no individual income tax that applies to a withdrawal |
| FERS annuity | The documents read do not treat a FERS annuity differently from a TSP withdrawal; with no individual income tax, neither is taxed by South Dakota |
| Rate or limit printed | No rate: no individual income tax |
| Where it is reported | Nothing to report on a South Dakota return |
| Source | South Dakota Department of Revenue |
What the South Dakota documents say
The Department’s page on taxes for individuals says the state “does not impose a state income tax”. Its July 2026 sales and use tax guide repeats the point, saying the state “does not have a corporate, unitary, or personal income tax”.
Neither document names the Thrift Savings Plan or a retirement withdrawal. The conclusion for a TSP withdrawal follows from the absence of any personal income tax.
A worked example at $30,000 of withdrawals
An illustration, not a return: a South Dakota resident who takes $30,000 from the TSP in 2026 owes $0 of South Dakota individual income tax on it, on the documents read. Federal income tax still applies and is outside this page.
If you moved to South Dakota or left it
The rules above are South Dakota’s own, for a resident. Federal law limits what a state you have left may do: “No State may impose an income tax on any retirement income” of someone who is not a resident or domiciliary of that state, as 4 U.S.C. 114(a) puts it. The statute defines retirement income by reference to plans described in the Internal Revenue Code; this page does not decide whether a particular TSP payment meets that definition. If you moved during the year, check each state’s page and return. See CMG’s TSP withdrawal options and FERS, TSP and Social Security sequencing pages for the federal side.
What changes in 2026
The documents read for South Dakota announce no change for 2026 that is specific to TSP withdrawals. The instructions read are for tax year 2025, the newest archived; check the state agency for the 2026 forms when they are published.
What the documents do not say
- Neither South Dakota document names retirement income or the TSP.
Common mistakes
- Assuming the absence of a South Dakota income tax removes the federal tax on a TSP withdrawal; it does not.
- Assuming the answer for one state applies to another, or that the state answer changes the federal tax on the withdrawal.
Related: TSP withdrawal options, state tax on TSP withdrawals, South Dakota retirement taxes, how South Dakota taxes pensions, and how South Dakota taxes 401(k) and IRA withdrawals.
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Answer againSources
- Taxes (Individuals): https://dor.sd.gov/individuals/taxes/
- July 2026 Sales and Use Tax Guide: https://dor.sd.gov/media/avyep2sr/2026-7_sales-use-tax-guide.pdf
- 4 U.S.C. 114, Limitation on State income taxation of certain pension income (U.S. Code, GovInfo): https://www.govinfo.gov/content/pkg/USCODE-2023-title4/html/USCODE-2023-title4-chap4-sec114.htm
Sources: the primary documents linked above, read on October 7, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.