South Dakota has no state income tax, meaning you pay $0 in state capital gains tax. You still owe federal capital gains tax.
SD State Rate
0%
No state income tax
Federal Rate
15%
Most common long-term bracket
Combined Effective
18.8%
On $150K taxable gain (example)
After the $250K/$500K exclusion, here's what a typical seller might owe.
If South Dakota is where your primary residence is located and you've lived there at least 2 of the last 5 years, you can exclude up to $250K (single) or $500K (married filing jointly) of your capital gain from both federal and state taxes.
Investment and rental properties in South Dakota don't qualify for the exclusion. You'll owe 0% state tax plus federal tax on the full gain, plus 25% depreciation recapture on any depreciation claimed.
In South Dakota, homes sold in October sell for 13% more than those sold in January (-17%). Timing your sale right can offset a significant portion of your tax bill.
Capital gains tax rates on home sales in South Dakota and nearby states.
| State | Rate | Tax on $150K Gain | Notes |
|---|---|---|---|
South Dakota0%You | 0% | $0 | No state income tax |
Wyoming0% | 0% | $0 | No state income tax |
| 1.95% | $2,925 | Top marginal rate | |
| 3.8% | $5,700 | Flat tax (2026) | |
| 5.84% | $8,760 | Top marginal rate | |
| 5.9% | $8,850 | Top marginal rate; 2% credit available | |
| 9.85% | $14,775 | Top marginal rate |
South Dakota has no state income tax, meaning $0 in state capital gains tax on home sales.
Sioux Falls and Rapid City are the primary markets. Both are affordable with moderate appreciation.
The zero-tax advantage has attracted interest from high-net-worth individuals, though the state's small population limits the real estate market.
South Dakota's trust-friendly laws have made it a haven for asset protection, which can benefit real estate investors planning estate transfers.
Offering buyer concessions?
Our sister tool helps you model different scenarios and maximize your position.