South Dakotans paid nearly $1.5 billion in property taxes last year. At a time when property values are increasing, we hear concerns about high property tax bills. It is important to differentiate between assessed value, taxable value, and the amount of taxes due.
By March 1, the county mails an assessment notice to owners of real property, indicating the full and true value of the property on the legal assessment date of November 1 of the previous year. Each county is given an equalization factor to make sure that all property in the State is equalized at eighty-five percent of value for property tax purposes. This factor determines the taxable value indicated on the annual tax bill.
The State of South Dakota does not collect or spend property tax dollars. Rather, property taxes are used at the local level. Over half of all property taxes are used to support local schools; the rest pays for cities, counties, and special purpose districts such as those for water development, rural fire protection, and ambulance service. While the legislature sets the levy for K-12 public schools, the levy for other units of local government is based on the budgeted need. County budgets are allowed to increase from one year to the next by the lesser of three percent or the rate of inflation, plus new construction. The total budget is divided by the taxable value to determine the mill levy. One “mill” is one dollar of taxes per thousand dollars of assessed value. The mill levy multiplied by the taxable value determines the total tax bill. If taxable values increase and the budget stays the same, the tax levies decrease. If taxable values stay the same and budgets increase, then levies increase.
Owner-occupied homes, agricultural land, and commercial property are all treated equally when setting the levy for local governments. For the school general fund levy, however, these three classes of property are treated differently, with agricultural land taxed at about forty-five percent of what owner-occupied homes are taxed, and owner-occupied homes taxed at slightly less than half of commercial property.
Taxes are due and payable by January 1 of the year following assessment. Tax payments do not become delinquent if half of the bill is paid before May 1 and the remaining half is paid before November 1.
Anyone with questions about the property tax process should contact the South Dakota Department of Revenue at https://dor.sd.gov/.