Self-Employment Tax in South Dakota (2026)
Federal Self-Employment Tax (Applies to All States Including SD)
The federal self-employment tax is 15.3% on the first $168,600 of net SE income (2024), composed of 12.4% Social Security and 2.9% Medicare. Above $168,600, the 2.9% Medicare portion continues. An additional 0.9% Medicare surtax applies to SE income over $200,000 (single) or $250,000 (married joint).
Self-employed individuals can deduct half of their SE tax (7.65%) from gross income before calculating federal and state income tax.
South Dakota State Income Tax on Self-Employment Income
Self-employed South Dakotans owe no state income tax on self-employment earnings. Federal SE tax of 15.3% still applies. South Dakota's lack of income tax and simplified tax environment makes it highly attractive for self-employed individuals and entrepreneurs.
South Dakota has no state income tax, so self-employed residents only owe federal income tax and federal SE tax.
Quarterly Estimated Tax Payments for South Dakota Self-Employed
Self-employed South Dakota residents typically must make quarterly estimated tax payments to both the IRS (due Apr 15, Jun 15, Sep 15, Jan 15) and no state payments are required. Underpayment can trigger penalties.
Deductions Available to South Dakota Self-Employed
- Half of federal SE tax (7.65%) — deductible above-the-line on federal return
- Home office deduction (if qualifying dedicated workspace)
- Health insurance premiums (100% deductible for self-employed if not eligible for employer plan)
- SEP-IRA or Solo 401(k) contributions — up to 25% of net SE income
- Business expenses: equipment, software, vehicle mileage (67 cents/mile in 2024), professional fees
Frequently Asked Questions
What taxes do self-employed people pay in South Dakota?
Self-employed South Dakota residents pay: (1) federal self-employment tax of 15.3% on net SE income up to $168,600; (2) federal income tax on net earnings; and (3) no state income tax, since South Dakota has no state income tax. Self-employed South Dakotans owe no state income tax on self-employment earnings. Federal SE tax of 15.3% still applies. South Dakota's lack of income tax and simplified tax environment makes it highly attractive for self-employed individuals and entrepreneurs.
What is the self-employment tax rate in 2026?
The federal SE tax rate is 15.3% on the first $168,600 of net self-employment income (2024). Above that, only the 2.9% Medicare portion continues. An additional 0.9% Medicare surtax applies above $200,000 (single). This applies to all self-employed individuals regardless of state, including South Dakota.
Can I deduct the self-employment tax in South Dakota?
Yes. Half of your federal SE tax (7.65%) is deductible as an above-the-line deduction on your federal return, reducing your federal and state taxable income. Since South Dakota has no income tax, this deduction only benefits your federal return.
Do I need to make quarterly estimated tax payments in South Dakota?
Yes, if you expect to owe more than $1,000 in federal taxes for the year. South Dakota has no state income tax, so no state estimated payments are required.