Virtual Assistant Taxes in South Dakota - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Essentials for a Virtual Assistant in South Dakota

The wide-open spaces and growing entrepreneurial spirit of South Dakota make it an ideal location for virtual assistants seeking flexibility and independence. However, alongside the freedom comes the responsibility of managing self-employment taxes.

As a virtual assistant operating in South Dakota, all income earned through self-employment must be reported to the IRS on Schedule C (Profit or Loss from Business) with Form 1040. Crucially, earnings exceeding $400 are subject to self-employment tax, which covers both Social Security and Medicare contributions. Accurate record-keeping throughout the year is essential for a smooth tax filing process.

How South Dakota Handles Gig Worker Taxes

South Dakota stands out as one of the few states with no state income tax. This means virtual assistants won’t be filing a state income tax return. However, this does not exempt them from federal tax obligations. The federal government still requires reporting of all income and payment of applicable taxes, including self-employment tax. South Dakota does collect sales tax, but generally, services provided by virtual assistants are not subject to sales tax unless they involve the transfer of tangible personal property. It’s important to note that while South Dakota’s tax landscape is simpler than many states, diligent federal tax compliance is paramount. The state’s focus on agriculture and tourism doesn’t diminish the IRS’s expectations for independent contractors. Furthermore, while there's no state income tax, businesses operating in South Dakota are still responsible for other state taxes, such as unemployment insurance contributions if they have employees. Staying informed about federal tax law changes is crucial, as these directly impact virtual assistants in the state. For more information on South Dakota business resources, visit the South Dakota Small Business Development Center.

Key Tax Deductions for Home-Based Virtual Assistants

• Home Office Deduction: To qualify for the home office deduction, the space must be used exclusively and regularly for business. “Exclusive use” means that portion of your home is used solely for your virtual assistant work – it cannot double as a guest room or family space. “Regular use” implies consistent and ongoing use for business purposes. Two methods exist for calculating this deduction: the simplified option, which allows a standard deduction of $5 per square foot of the home used for business (capped at 300 square feet), and the actual expense method, which requires calculating a percentage of your home-related expenses (mortgage interest or rent, utilities, insurance, etc.) based on the business use percentage of your home.
• Hardware & Software: The cost of essential hardware, such as computers, webcams, and printers, is generally deductible. Software subscriptions vital to your business, including programs like Adobe Creative Cloud, project management tools, and website hosting fees, are also deductible expenses.
• Internet & Phone Bill: You can deduct the business-use percentage of your internet and phone bills. If you use these services for both personal and business purposes, you must accurately determine the percentage of time they are used for work. Detailed records are crucial to support this claim.

Note on Mileage: As a home-based worker, mileage deductions are typically less significant. However, any travel directly related to your virtual assistant business – such as occasional client meetings or trips to purchase supplies – can be claimed using the standard mileage rate or actual expenses.

The 15.3% Self-Employment Tax Explained

The 15.3% self-employment tax is comprised of two components: 12.4% for Social Security and 2.9% for Medicare. This tax effectively covers both the employer and employee portions of these taxes, as a self-employed individual is both the employer and the employee. It’s calculated on your net earnings – your business income minus allowable business deductions – exceeding $400.