Do I Have to Pay Taxes on an Inheritance in South Carolina?

Losing a loved one in South Carolina can be devastating and overwhelming, especially when that loved one left behind assets that you have to take care of. Whether your family member left behind an inheritance or there are valuable assets left in your name, many residents find themselves asking, “Do I have to pay taxes on an inheritance in South Carolina?”

This is a common question for many South Carolina residents who are in the process of estate planning or managing an estate after someone’s death. As of 2024, only five states enforce inheritance taxes, and South Carolina is not one of them. In 2023-2024, Chester County had around 5,535 estate caseloads, where taxes were determined based on assets and unique case elements.

Inheritance Tax Vs. Estate Tax in South Carolina

While South Carolina doesn’t impose a state inheritance tax, that doesn’t mean an inheritance is completely tax-free. Inheritance tax is paid by the person who receives the inheritance, while estate tax is paid by the estate before any assets are given out. Because South Carolina does not have a state inheritance tax, if you inherit property, money, or assets from a South Carolina resident, you will not owe the state any inheritance tax.

There is also no South Carolina estate tax. In 2005, when the state decoupled from the federal estate tax system, estate taxes ended permanently. However, in certain situations, federal estate taxes may still apply to larger estates. Working with a skilled South Carolina estate planning lawyer can help you better understand which taxes may apply to your inheritance.

When Are Federal Estate Taxes Applied to South Carolina Inheritances?

Exemptions for federal estate tax filing depend on the year of the individual’s death. For those who passed in 2025, the total amount exempted from filing is any amount under $13,990,000. This means that if the total value of the estate is less than this amount, a South Carolina resident will not owe federal estate tax.

However, deductions to reduce the estate tax may be available. If you’re married and your spouse passes, all property included in the estate that passes to you will be eligible for a marital deduction. While $13.9 million is an enormous amount, any estates with large assets or family businesses with significant value can easily hit this threshold, making it important that you understand when taxes are applied.

Do You Have to Pay Taxes If You Inherit a Retirement Account in South Carolina?

Typically, when a person with a retirement account passes away, that account is given to their surviving spouse. If you’ve inherited a retirement account, such as a 401(k) or traditional IRA account, different rules apply to the taxes on the account.

If you’re a surviving spouse, you can leave the funds in the 401(k), roll them into your own IRA or 401(k), transfer them to an inherited IRA, or take a lump-sum distribution. Each option has different tax and withdrawal rules.

If you inherit an account and are not the spouse, the SECURE Act limits your available options. Under this act, you must withdraw all the money from the account within 10 years of the account owner’s passing. Different choices lead to higher taxes, especially if taking a lump sum pushes you into a higher tax bracket. Because of these complexities, it’s critical to seek legal counsel to pursue the most favorable options for your unique situation.

Capital Gains on Inherited Property

Inheriting real estate doesn’t typically require a tax payment right away, but if you sell the property later, taxes could apply. This is called capital gains tax, which is a tax that takes a portion of the profit made from selling a property. When determining tax, the home’s value is adjusted to the fair market value at the time of the original owner’s death, which can significantly reduce taxes.

This means if you sell the property later and the price has gone up, the capital gains tax will only apply to the difference between the sale price and the home’s value when you inherited it, not when the original owner originally paid for it. If you don’t want the financial responsibility, you can disclaim the inheritance itself. Before making any big decisions, it’s important to discuss your options with a Chester estate planning attorney who can guide you.

FAQs

Q: How Much Can You Inherit in South Carolina Without Paying Taxes?

A: South Carolina does not enforce an inheritance tax. This means you can inherit any amount without owing state taxes on it. There is no inheritance tax at the federal level, but there is a federal estate tax that applies to estates exceeding $13,990,000. However, it’s smart to consult with an attorney to determine your specific situation and the taxes on your inherited assets.

Q: How Much Is the Inheritance Tax in South Carolina?

A: There is no inheritance tax in South Carolina, so there are no taxes owed just for receiving money or property from a person’s estate. However, federal estate taxes still apply depending on your case, or if the deceased person lived in a state with an inheritance tax. In 2025, the states that have an inheritance tax are Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. You may owe taxes to that state even if you live in South Carolina.

Q: Can You Avoid an Inheritance Tax in South Carolina?

A: Because South Carolina does not impose an inheritance tax, there is nothing at the state level you have to avoid. However, through smart estate planning, you can reduce or altogether avoid federal taxes on your assets after you pass. Consulting with an attorney at Mack & Mack Attorneys can help lessen the future burden on your surviving heirs.

Q: Do You Need an Attorney After Receiving an Inheritance in South Carolina?

A: While you do not legally need to hire a lawyer when you receive an inheritance in South Carolina, doing so can help you immensely with the legal proceedings that will follow. A skilled estate planning lawyer can assess your inheritance, determine whether you need to pay taxes, and help you receive the assets you’re owed as efficiently as possible.

Mack & Mack Attorneys: Your South Carolina Estate Planning Team

If you’ve recently inherited property or want to make sure your own estate is planned carefully, it’s essential to understand how federal and state tax laws could affect your assets. The team at Mack & Mack Attorneys has helped countless South Carolina residents plan their estates and manage their loved ones’ assets after they pass. If you need assistance with an estate or are looking to learn more about inheritance taxes, contact us today.