If you’re selling a house, rental, or land in South Carolina, real estate capital gains tax works in two layers: federal tax on your profit, then a state tax cut nearly in half by a deduction most sellers never hear about until closing. Knowing both layers before you list can change how you time the sale.
Mack & Mack Attorneys has guided South Carolina sellers through closings for four generations and can walk you through the math first.
Your gain is the sale price minus your adjusted basis, which starts with what you paid plus qualifying improvements. Subtract selling costs like commissions, and what’s left is your net capital gain. Hold the property more than one year and it’s a long-term gain, taxed at lower federal rates.
Sell within a year and it’s short-term, taxed as ordinary income at both federal and state levels.
South Carolina taxes capital gains as ordinary income, but state law carves out relief. Individuals, estates, and trusts get a deduction equal to forty-four percent of net capital gain recognized in the state under South Carolina Code Section 12-6-1150.
South Carolina’s rate for income of $30,000 and above is 5.21% for tax year 2026, per the Department of Revenue’s individual income tax page. Only 56% of a long-term gain reaches that rate, pushing the effective hit down near 2.9%.
Yes, if the property was your primary residence. Eligible homeowners who’ve lived in the home two of the past five years can exclude up to $250,000 (single) or $500,000 (married filing jointly) of profit, per IRS guidance on home sale gains. South Carolina follows this same exclusion.
Gains above that threshold still qualify for the 44% state deduction on the long-term portion. Investment and rental properties don’t get this exclusion.
South Carolina requires the buyer’s closing attorney to withhold state tax on a nonresident’s recognized gain. A 2024 amendment to Section 12-8-580 replaced the old flat seven percent with “a percentage equal to the maximum individual tax rate.”
You can limit withholding by providing a signed affidavit stating your actual gain instead of the full sale price. An attorney can prepare that affidavit before closing defaults to withholding on the entire price.
Investors rolling proceeds into another investment property under IRC Section 1031 can defer both federal and state tax. South Carolina wants proof of exchange intent at closing, so give the closing attorney a signed affidavit naming the qualified intermediary before the deed records; withholding then applies only to cash you pocket.
Both apply. Long-term gains are taxed at 0%, 15%, or 20% federally, per IRS guidance on capital gains, and South Carolina taxes the same gain after its 44% deduction.
Usually the tax is smaller, since inherited property gets a stepped-up basis to fair market value at death. The taxable gain is often just appreciation since you inherited it.
You won’t owe capital gains tax, and personal-residence losses generally aren’t deductible. Investment property losses may offset other gains, subject to federal limits.
No, not on the deferred portion. South Carolina’s tax base starts from your federal net capital gain, so federal deferral defers state tax too.
Working out real estate capital gains tax in South Carolina means running two calculations before trusting any number. Our closing team checks cost basis, exclusion eligibility, and withholding exposure before the contract is signed, often the difference between a clean closing and a surprise check held back at the table.