Property Tax Valuation In South Dakota: How Is It Calculated?

A client asked how property taxes in South Dakota are calculated. The South Dakota Department of Revenue actually does a really nice job going into detail of property tax valuation on their website. If you want to get deep into the weeds, you may want to give them a visit. But, below is a shorter form explanation of a topic that is likely important to most farmers and ranchers across the state.

South Dakota changed its assessment rules starting with the property tax assessments in 2010. At that time, South Dakota moved from its old system to its new system, which is based on land’s “productivity value.” South Dakota has an agreement with South Dakota State University’s economics department whereby SDSU uses US Department of Agriculture Statistics to quantify production of farm acres across the state based on production type and divided by county.

The primary variable in calculating SDSU’s “productivity value” is the gross revenue produced on all agricultural land throughout a given county. For cropland, gross revenue for a county is calculated by looking at how many acres were in production in a given year, what commodities were produced and at what volumes, and each commodity’s average price for the year. After calculating these figures, the gross revenues generated by all crops throughout a county are combined and then divided by total acres in production in that particular county to arrive at gross revenue produced per acre in that county. To allow for yearly variations, the calculation of gross revenues considers an 8 year average of per acre gross revenue, throwing out the high and low years during that period of time.

After plugging the gross revenues into its productivity formula to arrive at the average crop values per acre, these average values are then compared against the average soil values across the county and scaled so that the soils that are stronger within a county receive a proportionately stronger assessment. And, the law also allows for the Director of Equalization in each county to make adjustments to ensure fairness.

The above analysis is for crop land acres in South Dakota, though a similar analysis is performed for non-cropland agricultural land throughout the state, as well.

If you disagree with your property tax assessment the State has also outlined an appeal process to challenge your tax assessment. A general outline of the standard for an appeal is whether the property is assessed at market value and whether it is assessed fairly in relation to the other agricultural property within your county. This broad outline presents a good first step analysis if you believe your property taxes are inequitable.