Live in South Dakota, Work in Indiana: Which State Taxes Your Paycheck?
Answer
Indiana is the only state with a claim. Living in South Dakota spares you a resident return, but it does not shelter income earned inside Indiana — that income is Indiana-source and it is taxed there on a nonresident return.
Last verified
This is the mirror image of the more common commute. There is no home-state return to file, so the Indiana nonresident return carries the whole obligation — and because South Dakota charges nothing, there is no credit mechanism involved anywhere.
Indiana also has a layer below the state one, and it is the layer that survives every agreement: Every Indiana county levies its own income tax, and the reciprocal agreements do not cover it. A resident of a reciprocal state who works in Indiana still pays Indiana county tax on those wages.
What you file
- 1Nonresident return · IndianaForm IT-40PNR
File a Indiana nonresident return for the wages you earned in Indiana. South Dakota has no wage income tax, so there is no second return and no credit to claim.
The two states, side by side
| South Dakota | Indiana | |
|---|---|---|
| Taxes wages | No | Yes — flat |
| Reciprocity partners | None | 5 (Form WH-47) |
| Convenience rule | No | No |
| Nonresident return | Not applicable | Form IT-40PNR |
| Credit for other-state tax | No income tax | Schedule 6 (Form IT-40PNR) |
| Nonresident safe harbour | Not applicable | None published |
| Local income tax | No | Yes |
| Revenue department | South Dakota Department of Revenue | Indiana Department of Revenue |
| Last verified |
The other direction
Reversing the commute does not always reverse the answer. Living in Indiana 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.
- Remote worker: South Dakota → IndianaNo state income tax on your wages
- 1099 contractor: South Dakota → IndianaClient state only, if you work there
- Moved mid-year: South Dakota → IndianaOne part-year return — the state you moved to
Other South Dakota pairs
Questions people actually ask
I live in South Dakota and work in Indiana. Which state takes the tax out of my paycheck?
Indiana is the only state with a claim. Living in South Dakota spares you a resident return, but it does not shelter income earned inside Indiana — that income is Indiana-source and it is taxed there on a nonresident return.
Which state should my employer be withholding for?
Indiana. The wages are sourced to Indiana, so Indiana withholding is correct and there is no South Dakota withholding to set up, because South Dakota levies no income tax on wages.
How current is this?
The South Dakota and Indiana rules on this page were last checked against South Dakota Department of Revenue and Indiana 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
- Indiana Department of Revenue — individual income taxaccessed 2026-08-07