Live in South Dakota, Work Remotely for a Iowa Employer: Who Taxes You?
Answer
Nothing is owed on either side. South Dakota has no wage income tax, and Iowa taxes nonresidents only on work actually performed inside Iowa. Never setting foot in Iowa keeps the income entirely outside its reach, so this pair produces no state return at all.
Last verified
Wages are sourced to the place where the work is physically performed. That default is what makes remote work simple, and it is only disturbed when the employer's state runs a convenience-of-the-employer rule. Iowa does not.
Iowa also has a layer below the state one, and it is the layer that survives every agreement: Many Iowa school districts levy a surtax calculated as a percentage of state income tax. It is reported on the state return rather than separately.
What you file
There is nothing to file in either South Dakota or Iowa on these wages. Your federal return is unaffected — the federal government taxes the income whatever the states do.
The two states, side by side
| South Dakota | Iowa | |
|---|---|---|
| Taxes wages | No | Yes — flat |
| Reciprocity partners | None | 1 (Form 44-016) |
| Convenience rule | No | No |
| Nonresident return | Not applicable | Form IA 1040 with Schedule IA 126 |
| Credit for other-state tax | No income tax | Form IA 130 |
| Nonresident safe harbour | Not applicable | None published |
| Local income tax | No | Yes |
| Revenue department | South Dakota Department of Revenue | Iowa Department of Revenue |
| Last verified |
The other direction
Reversing the commute does not always reverse the answer. Living in Iowa and working in South Dakota gives:Home state only.
Same two states, different situation
The withholding answer turns on how you are paid and where the work happens, not only on which two states are involved.
- W-2 commuter: South Dakota → IowaWork state only
- 1099 contractor: South Dakota → IowaClient state only, if you work there
- Moved mid-year: South Dakota → IowaOne part-year return — the state you moved to
Other South Dakota pairs
Questions people actually ask
I live in South Dakota and work remotely for a Iowa employer. Which state do I pay?
Nothing is owed on either side. South Dakota has no wage income tax, and Iowa taxes nonresidents only on work actually performed inside Iowa. Never setting foot in Iowa keeps the income entirely outside its reach, so this pair produces no state return at all.
Which state should my employer be withholding for?
Neither. There is no state income tax to withhold on either side of this pairing, so a state line on your pay stub for South Dakota or Iowa is an error worth querying.
Does my Iowa employer's location alone create a Iowa tax obligation?
No. Iowa sources wages to the place where the work is physically performed, and it does not apply a convenience-of-the-employer rule that would override that. Days you actually spend working inside Iowa are a different matter — those are Iowa-source income and can require a nonresident return.
How current is this?
The South Dakota and Iowa rules on this page were last checked against South Dakota Department of Revenue and Iowa Department of Revenue on 2026-08-07. We re-check the full grid every December after state legislative sessions close, and re-check the convenience-of-the-employer states quarterly because that is where the rules move fastest.
Sources
Every fact above comes from the revenue department that publishes the rule. We do not cite secondary summaries, and we do not restate a figure we could not find at source.
- South Dakota Department of Revenue — individual income taxaccessed 2026-08-07
- Iowa Department of Revenue — individual income taxaccessed 2026-08-07