Live in New Mexico, Work in South Dakota: Which State Taxes Your Paycheck?
Answer
Only New Mexico taxes you. South Dakota levies no personal income tax on wages, so nothing is withheld there and you file no South Dakota return. New Mexico taxes its residents on all income wherever earned, which means your South Dakota earnings go on a New Mexico resident return in full.
Last verified
The instinct that working in a no-tax state means paying no tax is the single most expensive misunderstanding in this niche. South Dakota takes nothing, but New Mexico still taxes residents on income earned anywhere, so the full amount lands on your New Mexico return.
What you file
- 1Resident return · New Mexico
File a New Mexico resident return reporting all of your income.
The two states, side by side
| New Mexico | South Dakota | |
|---|---|---|
| Taxes wages | Yes — graduated | No |
| Reciprocity partners | None | None |
| Convenience rule | No | No |
| Nonresident return | Form PIT-1 with Schedule PIT-B | Not applicable |
| Credit for other-state tax | Form PIT-1 (credit for taxes paid to another state) | No income tax |
| Nonresident safe harbour | None published | Not applicable |
| Local income tax | No | No |
| Revenue department | New Mexico Taxation and Revenue Department | South Dakota Department of Revenue |
| Last verified |
The other direction
Reversing the commute does not always reverse the answer. Living in South Dakota and working in New Mexico gives:Work 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.
- Remote worker: New Mexico → South DakotaHome state only
- 1099 contractor: New Mexico → South DakotaHome state only — estimated payments
- Moved mid-year: New Mexico → South DakotaOne part-year return — the state you left
Other New Mexico pairs
Questions people actually ask
I live in New Mexico and work in South Dakota. Which state takes the tax out of my paycheck?
Only New Mexico taxes you. South Dakota levies no personal income tax on wages, so nothing is withheld there and you file no South Dakota return. New Mexico taxes its residents on all income wherever earned, which means your South Dakota earnings go on a New Mexico resident return in full.
Which state should my employer be withholding for?
New Mexico. Your employer should withhold New Mexico tax rather than South Dakota tax on these wages. If a South Dakota line is showing on your pay stub, raise it with payroll now rather than at filing time.
How current is this?
The New Mexico and South Dakota rules on this page were last checked against New Mexico Taxation and Revenue Department and South Dakota 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.
- New Mexico Taxation and Revenue Department — individual income taxaccessed 2026-08-07
- South Dakota Department of Revenue — individual income taxaccessed 2026-08-07