A change in South Dakota law now allows garages and outbuildings on separate parcels to qualify for lower owner-occupied property tax rates—potentially saving owners thousands.
Most construction and trades owners in South Dakota don't realize that a garage or workshop on a separate parcel from their home may have been taxed as commercial property—even if they own and use it themselves. SB154, passed during the 2026 legislative session, changes that.
South Dakota Code § 10-13-39 previously limited the owner-occupied single-family dwelling tax classification to structures on the same parcel as the primary residence. SB154 explicitly expands that definition to include garages, workshops, storage buildings, and other ancillary structures—even when they sit on a separate parcel.
The practical result: if you own a garage, detached workshop, or storage building on adjacent or nearby land, that structure and its land can now be classified as owner-occupied rather than commercial or non-owner-occupied property.
Property tax assessment rates in South Dakota differ significantly between classifications. Owner-occupied residential property receives a lower assessment rate than commercial or non-owner-occupied property. When a garage or workshop was classified as commercial, owners paid taxes at the higher rate on both the structure and the land beneath it.
Under SB154, those same structures now qualify for the lower owner-occupied rate, directly reducing annual property tax liability. For trades owners with separate workshop buildings, equipment storage structures, or detached garages used for business or personal use, this can mean measurable savings.
This change is most relevant to:
The law applies to owner-occupied structures, meaning you must own and occupy the primary dwelling on the property. Purely rental or investment properties don't qualify.
If you own garages, workshops, or outbuildings on separate parcels, review your current property tax assessment. Contact your county assessor's office to discuss whether your structures can be reclassified under the new provision. Assessments are typically reviewed annually, and you may be able to request a reassessment for the current tax year or future years.
Keep documentation showing that structures are ancillary to your owner-occupied residence and that you own them. Your assessor will want to confirm the relationship between parcels and the use of each structure.
SB154 amends South Dakota Codified Law § 10-13-39 (Section 1, Page 1). The bill was passed during the 2026 legislative session. While no explicit effective date is stated in the bill text, the provision likely takes effect upon gubernatorial signature and filing, making it available for current and future tax assessments.
For a detailed, business-specific summary of how this applies to your situation, contact your county assessor or a South Dakota property tax professional.