Updated October 7, 2026. Quick answer: No. The South Dakota Department of Revenue says the state is “one of seven states that does not impose a state income tax”, so South Dakota does not tax the profit on selling your home. The deed carries a transfer fee instead: “fifty cents for each five hundred dollars of value”.
South Dakota tax on home sale profit at a glance
| Item | What the documents say |
|---|---|
| Profit on your main home | No individual income tax to conform: South Dakota taxes none of the gain |
| Rate on gain above the exclusion | No rate: no individual income tax |
| Collected at the sale | Real estate transfer fee: fifty cents per five hundred dollars of value, paid by the grantor (seller) |
| Source | South Dakota Department of Revenue; South Dakota Legislative Research Council |
What the South Dakota documents say
The Department’s page on taxes for individuals says South Dakota is “one of seven states that does not impose a state income tax”. It does not mention the sale of a home.
SDCL 43-4-21 imposes a real estate transfer fee of “fifty cents for each five hundred dollars of value”, “which fee shall be paid by the grantor”. SDCL 43-4-22 lists exemptions from the fee; the archived text of that section lists none for a principal residence.
What the federal exclusion requires
Most state answers start here. The statute says “Gross income shall not include gain from the sale or exchange” of property that, during the five years before the sale, you owned and used as your principal residence for periods adding up to two years or more. The limit is “shall not exceed $250,000”, or $500,000 for a husband and wife who make a joint return and meet the statute’s conditions. See CMG’s home sale taxes page and exclusion calculator.
A worked example at a $400,000 gain
An illustration, not a return: a married couple in South Dakota sells their main home with a gain of $400,000. On the documents read South Dakota levies no individual income tax, so the state’s income tax on that gain is $0 whether or not the federal exclusion applies. Federal tax is separate and outside this page: if the couple meets the statute’s ownership and use tests, a gain of $400,000 is below the $500,000 joint exclusion, so no federal income tax is owed on it either.
What is collected at the sale
The grantor, the seller, pays the transfer fee under SDCL 43-4-21. SDCL 43-4-22 lists exemptions and the archived text lists none for a principal residence.
What changes in 2026
The documents read for South Dakota announce no change for 2026 that is specific to the tax on a home sale. The forms and instructions read are for tax year 2025 or the newest page archived; check the state agency for 2026 forms when they are published.
What the documents do not say
- The Department’s page does not mention a home sale; the transfer fee statutes are read from the Legislative Research Council’s online code.
Common mistakes
- Assuming the absence of a South Dakota income tax removes the federal tax on a home sale; the federal exclusion limits and tests still decide the federal result.
- Treating the seller-paid transfer fee as a tax on gain; the statute sets it per five hundred dollars of value.
- Assuming the answer for one state applies to another, or that the state answer changes the federal tax on the sale.
Related: home sale taxes, state tax on home sale profit, how South Dakota taxes capital gains, South Dakota retirement taxes, and home sale exclusion calculator.
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Answer againSources
- Taxes (Individuals): https://dor.sd.gov/individuals/taxes/
- SDCL 43-4-21 Imposition and amount of real estate transfer fee: https://sdlegislature.gov/api/Statutes/43-4-21.html
- SDCL 43-4-22 Exemptions from real estate transfer fee: https://sdlegislature.gov/api/Statutes/43-4-22.html
- 26 U.S.C. 121, Exclusion of gain from sale of principal residence (U.S. Code, GovInfo): https://www.govinfo.gov/content/pkg/USCODE-2023-title26/html/USCODE-2023-title26-subtitleA-chap1-subchapB-partIII-sec121.htm
Sources: the primary documents linked above, read on October 7, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.