A new South Dakota law explicitly protects multiple garages and ancillary structures from being taxed at commercial rates—potentially saving owners thousands annually.
Most construction and trades business owners in South Dakota don't realize their second garage, workshop, or storage structure sitting on a separate parcel of land might be taxed as commercial property instead of owner-occupied residential property. That difference can cost thousands of dollars a year in property taxes.
South Dakota's SB154, introduced in the 2026 legislative session, clarifies and extends the owner-occupied property tax classification to explicitly include all garages and ancillary structures—even when they sit on separate parcels of land from the main dwelling.
Under current South Dakota law, owner-occupied single-family dwellings qualify for a lower property tax assessment rate than commercial or non-owner-occupied properties. The problem: ambiguity around whether a second garage, detached workshop, or storage building on a separate parcel still qualifies for that lower rate.
SB154 removes that ambiguity by explicitly stating that all garages and ancillary structures—including those on separate parcels—remain classified as owner-occupied when the primary dwelling is owner-occupied. This means those structures qualify for the lower owner-occupied assessment rate rather than the higher commercial rate.
For trades owners, this is significant. A contractor with a detached garage workshop on an adjacent lot, or a plumber with a storage building across the property line, can now clearly claim the lower tax rate on those structures. The annual savings depend on your property's assessed value and your county's tax rate, but the difference between owner-occupied and commercial classification can easily amount to hundreds or thousands of dollars annually.
This provision primarily benefits owner-occupied residential properties where the owner uses garages, workshops, storage buildings, or other ancillary structures for personal use or a home-based business. If you own a single-family home and operate a trades business from a detached structure on your property—or simply need extra storage on an adjacent parcel you own—this law clarifies your tax status.
It does not apply to commercial rental properties, multi-unit dwellings, or structures used primarily for non-residential commercial purposes.
SB154 was introduced in the 2026 South Dakota legislative session. The bill text does not specify an explicit effective date, meaning it would likely take effect upon gubernatorial approval and filing with the Secretary of State. Property owners should monitor the bill's status through the South Dakota Legislature's website and consult with their county assessor about how the new classification applies to their specific parcels once it becomes law.
The relevant statutory amendment is found in Section 1, which amends § 10-13-39 of South Dakota Codified Laws (Page 1 of the bill).
If you own multiple structures on separate parcels and want to understand how this applies to your property tax situation, contact your county assessor's office or a tax professional familiar with South Dakota property classifications.
Source: South Dakota SB154, 2026 legislative session; § 10-13-39.