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South Dakota Federal Estate Tax
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South Dakota Federal Estate Tax

South Dakota has no estate, inheritance or income tax. Only the federal estate tax can reach an estate, above $15 million in 2026.

By Settled Editorial

South Dakota collects no estate tax, no inheritance tax and no income tax. The only death tax that can reach a South Dakota estate is the federal estate tax, and for a death in 2026 it starts above $15,000,000 of gross estate plus lifetime taxable gifts. Nearly every South Dakota family owes none of it.

This page covers that federal tax and the South Dakota rules that sit beside it: the repeal of the state's own death taxes, the leftover references to them in the probate code, and SDCL 29A-3-916, which decides who inside the estate bears a federal bill. It does not cover the new tax basis heirs receive on inherited property. That is an income tax rule, and the basis your heirs receive has its own guide.

A note on sources. Every South Dakota statute below was read on September 27, 2026 through the South Dakota Legislature's own code service, and the tax statements come from the Department of Revenue's taxes page read the same day. Federal figures come from the IRS and the United States Code.

South Dakota Repealed Its Death Taxes

The Department of Revenue puts it plainly on its taxes page: "South Dakota does not have an inheritance tax," and "There is also no estate tax."

The code tells the same story. In 2014 the Legislature passed House Bill 1057, "An Act to repeal certain provisions imposing the inheritance tax and the estate tax," signed February 12, 2014 and printed as SL 2014, chapter 59. It repealed three whole chapters of Title 10:

ChapterWhat it heldStatus today
SDCL 10-40Imposition and amount of inheritance taxRepealed by SL 2014, ch 59
SDCL 10-40AEstate taxRepealed by SL 2014, ch 59
SDCL 10-41Administration and collection of inheritance taxRepealed by SL 2014, ch 59

The Department adds one date: "The voters of South Dakota repealed the state inheritance tax effective July 1, 2001." That is the Department's own statement. This page does not say which dates of death the old tax still reached, because we have not read the 2001 measure itself. If the person you are settling an estate for died many years ago, ask the Department of Revenue before assuming anything about an old inheritance tax.

Two practical points follow:

  • No South Dakota return means no South Dakota tax clock. The nine month deadline below is federal. South Dakota adds nothing to it.
  • Another state's tax can still reach South Dakota families. If the person who died owned real estate in a state that taxes estates or inheritances, that state can tax the property inside its borders. SDCL 29A-3-916(h) lets a personal representative from another state sue in South Dakota to recover a proportionate share of an estate tax or death duty owed to that state.

Old wording that is not live law

Two South Dakota statutes still mention the repealed taxes, and both confuse people closing an estate.

  • The closing statement. SDCL 29A-3-1003(a)(2) still has a personal representative who closes by sworn statement confirm they "determined that all inheritance taxes and state estate taxes due from the estate have been duly determined and are fully paid."
  • The clerk's fee list. SDCL 16-2-29(3)(c) still sets a $25 fee for "cases to determine amount of inheritance tax," and the court system's schedule of costs still prints a row for it.

Neither brings a tax back. With no South Dakota inheritance or estate tax in force, none is due, so there is nothing to determine and no petition to file.

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The Federal Number For A 2026 Death

Internal Revenue Code Section 2010(c)(3)(A) sets the exclusion at $15,000,000 for 2026. The IRS publishes the filing threshold by year of death:

Year of deathFiling threshold
2024$13,610,000
2025$13,990,000
2026$15,000,000

A return is required when the gross estate, increased by the decedent's adjusted taxable gifts and specific gift tax exemption, exceeds the threshold for the year of death. That test has nothing to do with the size of the South Dakota probate file.

For deaths after 2026, Section 2010(c)(3)(B) indexes the figure for inflation from a 2025 base, so check the IRS table for the year of death rather than trusting a number printed a few years back.

Above the threshold, the rate schedule in Section 2001(c) tops out at 40 percent. Only the part above the exclusion is taxed, so the effective rate on a whole estate stays well below that.

What Counts In The Gross Estate

The IRS describes the gross estate as everything the person owned or had certain interests in at death, at fair market value: cash, securities, real estate, insurance, trusts, annuities and business interests. Debts, funeral and administration costs, and gifts to a surviving spouse or a qualified charity come off to reach the taxable estate.

For a South Dakota family the gross estate is usually bigger than the probate estate:

  • Transfer on death property still counts. A South Dakota transfer on death deed under SDCL 29A-6-403 moves land without probate, and SDCL 32-3-80, added by SL 2025, chapter 116, lets an owner name a transfer on death beneficiary on a vehicle, snowmobile or boat title. Skipping probate does not take either out of the federal gross estate. The transfer on death deed guide and the avoid probate in South Dakota guide cover each route.
  • Beneficiary accounts and life insurance count. A policy the decedent owned counts even though the proceeds go straight to a named beneficiary.

The South Dakota small estate affidavit answers a different question. SDCL 29A-3-1201 lets a successor collect personal property by affidavit when the entire estate, less liens and encumbrances, does not exceed $100,000, and being under that figure or over it tells you nothing about a federal return. The South Dakota small estate affidavit guide explains that route.

Deductions that end the question for most families

The marital deduction. Property left outright to a surviving spouse who is a United States citizen passes free of federal estate tax with no dollar cap. Section 2056(d) takes the deduction away when the surviving spouse is not a citizen, unless the property passes into a qualified domestic trust.

The charitable deduction. Property left to a qualified charity comes off dollar for dollar.

Who Pays The Federal Tax: SDCL 29A-3-916

South Dakota's apportionment rule is a single section of the probate code, 29A-3-916, and it works in this order.

The will decides first

Under 29A-3-916(b), "If the decedent's will directs a method of apportionment of tax different from the method described in this code, the method described in the will controls." A clause saying all taxes come out of the residue settles the question.

Where the will is silent

The tax "shall be apportioned among all persons interested in the estate," in "the proportion that the value of the interest of each person interested in the estate bears to the total value of the interests of all persons interested in the estate." Three definitions in 29A-3-916(a) shape how far that reaches:

  • "Tax" means the federal estate tax plus interest and penalties.
  • "Estate" means the gross estate as determined for federal estate tax, so nonprobate property is in the pool.
  • "Person interested in the estate" means anyone who received property included in the estate by reason of the death, which takes in a life insurance beneficiary or a transfer on death grantee as well as the heirs.

Deductions follow the gift that earned them. Under 29A-3-916(e)(2), an exemption or deduction allowed because of a person's relationship to the decedent, or because of the purpose of the gift, "inures to the benefit of the person bearing such relationship or receiving the gift." In plain terms, a surviving spouse's marital share and a charity's share carry none of the tax. The children and others whose shares created the tax pay it in proportion to what they take.

One more rule catches families by surprise. Under 29A-3-916(f), a life estate and the remainder after it are not apportioned between each other. The tax on both comes out of the property itself.

What the personal representative can do

  • Withhold. Under 29A-3-916(d)(1), the personal representative can withhold from anyone's distribution the tax attributable to that person's interest, and recover any shortfall from that person.
  • Demand security. Under 29A-3-916(d)(2), a person who takes a distribution before the tax is finally apportioned must post a bond or other security in the form and amount the personal representative sets.
  • Wait three months to sue. Under 29A-3-916(g), the personal representative has no duty to sue a beneficiary for an unpaid share until three months after the tax is finally determined, and a share that proves uncollectible is spread equitably among the others.
  • Ask the court. Under 29A-3-916(c), the circuit court handling the estate can determine the apportionment on petition, and can charge the personal representative with interest and penalties caused by that fiduciary's negligent delay.

Federal law has the last word. Section 29A-3-916(i) says that where the federal estate tax law sets different liabilities, the federal rules control. The South Dakota executor duties guide covers the personal representative's tax filings alongside the rest of the job.

Portability: The Filing Nobody Thinks They Need

When the first spouse dies, the unused part of that spouse's exclusion can pass to the survivor. Section 2010(c)(4) calls it the deceased spousal unused exclusion amount, and the survivor can use only the amount from the last deceased spouse.

The catch is in Section 2010(c)(5)(A): the survivor gets it only if the executor of the first spouse's estate files a Form 706 computing it and makes the election on that return. So a South Dakota couple nowhere near $15,000,000 may still want a Form 706 at the first death.

The IRS Form 706 instructions describe relief under Revenue Procedure 2022-32 for an executor who had no filing requirement and missed the deadline: the return can be filed on or before the fifth anniversary of the death, stating at the top that it is "Filed Pursuant to Rev. Proc. 2022-32 to Elect Portability under section 2010(c)(5)(A)."

Three Clocks That Do Not Line Up

The federal return. Form 706 is due nine months after the date of death. Form 4768 requests an automatic six month extension of time to file.

The South Dakota probate window. SDCL 29A-3-108 says no informal or formal probate or appointment proceeding may start more than three years after the death, with narrow exceptions. The federal return and the portability election both close well before that. See the South Dakota probate timeline for the rest of the calendar.

Federal tax claims inside the estate. If the estate cannot pay every claim in full, SDCL 29A-3-805(a) puts "debts and taxes with preference under federal law" third in line, after administration costs and reasonable funeral expenses and ahead of every ordinary creditor. The South Dakota creditor claims guide covers how the other claims run.

One South Dakota filing helps with the federal return. SDCL 29A-3-706 has the personal representative prepare an inventory within six months after appointment or nine months after the death, whichever is later, listing each item's "fair market value as of the date of the decedent's death." Those are the same values the federal schedules use.

The Only Income Tax Returns Are Federal

The Department of Revenue says "South Dakota is one of seven states that does not impose a state income tax." So the person who died files no South Dakota final return, and the estate files no South Dakota fiduciary return.

The federal returns still apply. The decedent's final Form 1040 covers income up to the date of death, and the estate files Form 1041 when its own income calls for one. An estate that rents out a farm in Brookings County for a year has federal taxable income, and none of that has anything to do with the federal estate tax. A trust that held the decedent's property can have federal filings of its own, and the trust's federal filings are covered with the rest of trust administration.

What A South Dakota Family Should Do Next

  1. Add it up once, the federal way. Count the house, land passing by transfer on death deed, life insurance the decedent owned, retirement accounts and anything with a beneficiary form. If the total is far below $15,000,000 for a 2026 death, no federal estate tax applies and no Form 706 is required.
  2. If a spouse died, look at portability. The election is the usual reason a modest estate files a Form 706, and Revenue Procedure 2022-32 offers a five year path for a missed one.
  3. Read the will before you distribute. A clear tax clause controls under 29A-3-916(b). Without one, the statute spreads the tax by value and lets you withhold or take security first.
  4. File the federal income returns. The final Form 1040 and, when needed, Form 1041 are the returns most South Dakota estates actually file.
  5. Get help when the facts are hard. A farm or ranch, a business, a spouse who is not a citizen, property in a state that taxes estates, or a gross estate anywhere near the threshold are the cases where a CPA and a South Dakota estate attorney earn their fee.

The South Dakota probate guide covers the court side of the same estate, and the South Dakota estate tax page shows whether an estate comes near the federal exemption.

Frequently Asked Questions

Does South Dakota have an estate tax or an inheritance tax?

No. The South Dakota Department of Revenue states that South Dakota does not have an inheritance tax and that there is also no estate tax. The Legislature repealed what was left of both in the code with SL 2014, chapter 59 (House Bill 1057, signed February 12, 2014), which struck the inheritance tax chapter (SDCL 10-40), the estate tax chapter (10-40A) and the chapter that administered them (10-41). The Department says the voters repealed the inheritance tax effective July 1, 2001. For an older death, ask the Department which rules applied.

How large does a South Dakota estate have to be before federal estate tax applies?

For a death in 2026 the federal exclusion is $15,000,000 per person under Internal Revenue Code Section 2010(c)(3)(A). The IRS filing threshold table lists $13,610,000 for a 2024 death, $13,990,000 for 2025 and $15,000,000 for 2026. A return is required when the gross estate, increased by adjusted taxable gifts and the specific gift tax exemption, exceeds the figure for the year of death.

Who pays the federal estate tax out of a South Dakota estate?

The will decides first. SDCL 29A-3-916(b) says that if the will directs a method of apportionment, that method controls. Where the will is silent, the tax is apportioned among all persons interested in the estate in proportion to the value of each person's interest, and 29A-3-916(e)(2) gives the benefit of the marital and charitable deductions to the spouse or charity whose gift earned them. The personal representative can withhold a person's share of the tax from that person's distribution under 29A-3-916(d)(1).

Does South Dakota tax an estate's income?

No. The Department of Revenue states that South Dakota is one of seven states that does not impose a state income tax. So there is no South Dakota final income tax return for the person who died and no South Dakota fiduciary return for the estate. The federal returns still apply: a final Form 1040, and a Form 1041 when the estate has enough income to need one.

Why does a South Dakota closing statement still mention inheritance taxes?

Because the probate code was never updated after the repeal. SDCL 29A-3-1003(a)(2) still has a personal representative who closes an estate by sworn statement confirm that all inheritance taxes and state estate taxes due from the estate have been determined and paid, and the clerk's fee statute, 16-2-29(3)(c), still lists a fee for cases to determine the amount of inheritance tax. Neither revives a tax. With no South Dakota inheritance or estate tax in force, there is none to determine or pay.

Is the South Dakota probate deadline the same as the federal estate tax deadline?

No. Form 706 is due nine months after the date of death, and Form 4768 requests an automatic six month extension to file. SDCL 29A-3-108 lets a probate or appointment proceeding start up to three years after the death. A family that waits on the South Dakota window can miss the federal return and the portability election that rides on it.

Related South Dakota Guides

This guide is general information about South Dakota estates and federal transfer taxes. Tax figures change every January and apportionment turns on the words of the will, so confirm anything that affects your situation with a CPA or a licensed South Dakota attorney.

Sources:

It is not legal advice.

Information current as of September 27, 2026

Settled Estate is not a law firm, and this content is for informational purposes only and does not constitute legal advice. Probate laws and procedures in South Dakota can change. Consult with a qualified attorney for advice specific to your situation. Full disclaimer.

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