Capital Gains Tax in South Dakota

South Dakota is one of the states that never got around to taxing income, which means capital gains on an investment property sale answer to the federal government alone. A seller here caps out at 23.8%, the federal long-term rate plus the NIIT surcharge, with nothing added on top.

South Dakota's capital gains rate, broken down

With no state income tax, the math is simpler than in most places. The 23.8% ceiling breaks down like this:

• Federal capital gains tax: 20%
• Net investment income tax (NIIT): 3.8%
• South Dakota state income tax: 0%

Where the 1031 exchange fits

Since there's no state layer to defer, a 1031 exchange in South Dakota is purely about pushing off the federal 23.8%. The exchange rules are federal anyway, so the mechanics don't change from state to state, just what you're deferring. Build the swap in the 1031 exchange calculator and set the 45- and 180-day clocks from the timeline calculator.

Things to know before you exchange

• A South Dakota sale still needs a signed exchange agreement in place before closing, not after.
• Depreciation recapture on a South Dakota property is deferred right along with the rest of the gain in a 1031.