South Dakota is a pure no income/capital gains tax state for trusts.

However, if income is distributed from the trust to a beneficiary, the distributed income is generally taxed at the beneficiary’s personal rates in his/her tax residence jurisdiction.

Income not distributed is generally taxed to the trust at the trust rate based on the trust’s situs (none in South Dakota); there are certain exceptions with certain partnership interests, business interests and other source income assets.

South Dakota – The Land of No Taxation: 

  • No state income or capital gains tax
  • One of the lowest state insurance premium taxes
  • No intangibles tax
  • No dividends & interest tax
  • No state LLC tax
  • No state LLP tax
  • No state ad valorem tax
  • No city or local tax
  • No state inheritance tax
  • No state gift tax
  • No state Generation-Skipping Transfer (GST) tax
  • No state coupon tax
  • No state personal property tax

South Dakota’s main sources of tax revenue include:

  • Sales and use tax
  • Real property tax
  • Bank & financial corporation franchise tax

– A leading bank asset jurisdiction: $3.54 trillion

South Dakota’s main industries are banking and health care, unlike its competitor states. Additionally, South Dakota is the only state with: a fully-funded pension; a balanced budget since 1889; a state debt (adjusted for pension and other post-employment benefits) of 3.1% of GDP; and the lowest unemployment rate in the country as of December 2016 at 2.8%.