Updated October 5, 2026. Quick answer: No. South Dakota does not tax trust income at the state level, and the Department of Revenue says “does not impose a state income tax”. No South Dakota document read addresses trust income specifically.
How South Dakota treats trust income
| Item | What the documents say |
|---|---|
| Treatment | The Department of Revenue states that South Dakota is “one of seven states that does not impose a state income tax”. The page does not mention trusts or estates. |
| Legislative research confirmation | A South Dakota Legislative Research Council memo states that “South Dakota and Wyoming do not impose an individual income tax”. The memo covers individual income tax in general and does not mention trusts. |
| Rate on trust income | No South Dakota trust income tax rate appears in the documents read, so no trust rate schedule exists in them. |
| Distribution deduction | The documents read describe no state income tax return for trusts, so they state no distribution deduction. |
| Nonresident trusts | The documents read set no state income tax on any trust, resident or nonresident, and state no residency test for trusts. |
| What South Dakota taxes instead | The Legislative Research Council memo notes that although the state has no broad corporate income tax, “income tax on banks and financial institutions in SDCL chapter 10-43”. The memo does not extend that tax to trusts. |
| Return to file | The documents read describe no South Dakota income tax return for individuals or trusts. |
A $10,000 example
A trust with $10,000 of taxable income owes $0 of South Dakota income tax on it. Federal tax on the trust’s income still applies.
A trust with ties to another state also has to check that state’s own rules, because each state sets its own test for taxing a trust.
What changes in 2026
The latest documents read print no 2026 change to how trust income is taxed.
Federal rules
The state’s treatment sits on top of the federal one. The federal brackets a trust faces are laid out in trust tax brackets versus individual brackets, and capital gains that a trust keeps are covered in capital gains stay in the trust. The IRS explains the federal return in the About Form 1041 page.
Related: how South Dakota taxes retirement income, whether South Dakota taxes pensions, what a living trust costs in South Dakota, and federal trust tax brackets.
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Answer againSources
- Taxes, Individuals (South Dakota Department of Revenue): https://dor.sd.gov/individuals/taxes/
- Comparison of Neighboring State Tax Systems (South Dakota Legislative Research Council): https://mylrc.sdlegislature.gov/api/Documents/IssueMemo/252628.pdf?Year=2023
Sources: the primary documents linked above, read on October 5, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the plan administrator or the agency itself is the right place to confirm anything consequential.