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: $3.53 trillion (2020)
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%.