South Dakota Capital Gains Tax Rate (2026)
South Dakota capital gains tax overview
South Dakota has no individual income tax. Capital gains are not taxed at the state level.
Federal + South Dakota combined rates
Your total capital gains tax bill includes both layers — federal and state. Here is what a South Dakota investor pays in 2026 for long-term gains:
| Federal Long-Term Rate | South Dakota State Rate | Combined Rate | Plus NIIT (if applicable) |
|---|---|---|---|
| 0% | 0% | 0% | 3.8% |
| 15% | 0% | 15% | 18.8% |
| 20% | 0% | 20% | 23.8% |
The NIIT (Net Investment Income Tax) adds an extra 3.8% for taxpayers whose MAGI exceeds $200,000 (single) or $250,000 (married filing jointly). It is a federal tax only — South Dakota does not have an equivalent.
How South Dakota compares to other states
South Dakota is one of 8 states with no individual income tax. This group includes: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Wyoming. Residents of these states pay only federal capital gains tax — a significant advantage for investors with large unrealized gains who have flexibility on where they live.
Tax-reduction strategies for South Dakota residents
With no state income tax, South Dakota residents already benefit from one of the most favorable environments for capital gains in the country. The primary levers are federal:
- Hold over 1 year for long-term federal rates (0/15/20%).
- Tax-loss harvesting: Offset your gains with losses realized in the same year. A $20,000 loss offsets $20,000 of gains dollar-for-dollar, saving $4,000 in federal tax at top rates.
- 0% bracket planning: In lower-income years (retirement, sabbatical, between jobs), realize gains at the federal 0% rate. With no state tax, this means zero total capital gains tax.
- Donate appreciated stock directly to charity or a donor-advised fund to avoid capital gains tax entirely while generating a charitable deduction for the full fair market value.
Detailed South Dakota capital gains tax rules
Tax history and legal basis
South Dakota has never imposed a personal income tax. The state constitution would need to be amended to impose one.
Exemptions and special treatment
All capital gains are fully exempt from state taxation. No filing required. South Dakota residents pay only federal capital gains tax.
Filing requirements
No state income tax return required. South Dakota residents report capital gains only on their federal return.
Recent changes and legislative updates
South Dakota's combination of no income tax, no inheritance tax, and strong trust/asset protection laws makes it a premier jurisdiction for wealth management. The state has become a top destination for trusts holding appreciated assets. South Dakota Trust Company assets have grown to over $600 billion.
Worked example: $50,000 capital gain in South Dakota
Here's exactly what a South Dakota resident would owe on a $50,000 long-term capital gain with $80,000 in other income (single filer, 2026):
| Component | Amount | Notes |
|---|---|---|
| Capital gain | $50,000 | Long-term (held over 1 year) |
| Federal tax (15%) | −$7,500 | Based on $80,000 ordinary income + gain |
| South Dakota state tax (0%) | −$0 | No state income tax |
| Total tax owed | −$7,500 | Federal + state combined |
| You keep | $42,500 | 85.0% of your gain |
Because South Dakota has no state income tax, you keep $42,500 after federal tax — significantly more than residents of high-tax states like California (where state tax alone would cost ~$4,650 on this gain).
Frequently asked questions — South Dakota
Does South Dakota tax short-term and long-term gains differently?
No — South Dakota has no income tax, so neither type of gain is taxed at the state level. The difference between short-term and long-term only matters for federal purposes.
Do I need to file a South Dakota tax return if I only have capital gains?
No. South Dakota has no income tax, so there is no state return to file for investment income.
What if I moved to South Dakota mid-year?
Moving to South Dakota eliminates future state capital gains taxes, but gains realized while you were a resident of your prior state are taxable by that state. Most states use a prorated approach for part-year residents.