Planning for Madison Households and Businesses
Madison clients plan around very different events: a start-up raising money or being acquired, a professor nearing retirement, a family deciding what to do with a lake cabin, a farm passing to the next generation. Early planning gives more options. BOMCAS plans with Madison clients remotely.
General strategies are on the South Dakota tax planning page, and this page turns to founders, faculty, lake cabins and farm succession in Madison.
Founders and Equity
Founders of technology companies should consider a section 83(b) election within 30 days of receiving restricted stock, which can turn future growth into capital gain. Stock in a qualified small business C corporation may allow a large exclusion of gain on sale, with recent federal law adding partial exclusions after three and four years for stock issued after July 4, 2025. Planning the structure early protects these benefits.
Employees With Stock Options
Employees of technology companies with incentive stock options may face alternative minimum tax when exercising. Exercising in stages, timing sales and coordinating with other income can reduce the cost.
Faculty and Staff Retirement
DSU employees combine the South Dakota Retirement System with voluntary savings. Planning the timing of pension benefits, withdrawals and Social Security helps manage federal tax. South Dakota does not tax retirement income, which is one reason many retirees stay near the lakes.
Lake Property
Families with lake cabins can choose whether to rent them, how many days and whether to keep them in the family. Renting fewer than 15 days keeps the rent free of federal tax. Passing a cabin to children through gifts, a trust or an LLC each has different tax and practical effects. Inherited property receives a stepped-up basis.
Farm Succession
Lake County farm families planning a transition should look at gifts of land, sales on contract, leases to the next generation and estate planning together. Installment sales can spread gain, and keeping land until death may provide a stepped-up basis.
Remote Work
Residents working remotely for employers elsewhere should keep records showing where they work, especially if they travel to the office. Moving to Madison from a state with an income tax can be timed to reduce tax on bonuses or stock sales.
The 2027 Rate Change
With Lake County declining a county tax, the only scheduled change is the state increase on July 1, 2027. Businesses planning large taxable purchases can save by buying before then.
Planning Meetings
- A projection for the current year.
- Options with estimated savings.
- Deadlines and next steps.
Retirement Plans for Small Firms
Consultants and small technology firms can use a solo 401(k), SEP IRA or SIMPLE IRA. A solo 401(k) allows the largest contributions for owners without employees other than a spouse.
Charitable Giving
Gifts to DSU, local schools and charities can be increased in value by donating appreciated stock, bunching gifts into one year or using a donor-advised fund. Retirees over 70½ can give directly from an IRA.
When to Meet
Useful times are before a funding round or acquisition, before exercising options, before retirement, when deciding about a lake property and in the fall, while there is still time to act.
Estimated Payments
Founders, consultants and retirees with uneven income should set quarterly estimates based on last year's tax to avoid penalties, then adjust in the fall once the year's income is clearer. An acquisition, option exercise or large IRA withdrawal may call for a mid-year payment.
Health Savings and Benefits
Families and business owners with high-deductible health plans can use an HSA as a long-term savings tool, with a deduction now, tax-free growth and tax-free withdrawals for medical costs in retirement.
Each meeting ends with a short written summary of decisions and deadlines.
Madison Tax Planning Questions
Should I file an 83(b) election for my founder shares?
Often yes, within 30 days of grant, but it depends on the stock's value and vesting terms.
Can I exclude gain on selling my start-up stock?
Possibly, if it is qualified small business stock held long enough.
How can we pass the lake cabin to our children?
Through gifts, a trust or an LLC, each with different effects. Inherited property gets a stepped-up basis.
When does Madison's sales tax rate change?
On July 1, 2027, with the state increase.
Talk to BOMCAS About Tax Planning in Madison
Plans need current books and filed business and personal returns, and they are carried out through payroll and equity and purchases that affect sales and use tax. Resolve unfiled years first, and check international rules for foreign investors or moves. For other parts of the state, see our South Dakota pages on business taxes, personal returns, sales and use tax, bookkeeping, payroll, back taxes and cross-border tax through the South Dakota overview.
Tell BOMCAS about your Madison business or household and we will reply with next steps and what we need for a quote. Use the contact page or the form below, call 780-667-5250 or email info@bomcas.ca. Every Madison service is on the Madison overview. This page is general information, not advice for your situation.