Understanding South Carolina Capital Gains Tax: A Simple Guide for Homeowners

If you’re planning to sell a house or any other property in the Palmetto State, it's important to understand how the South Carolina capital gains tax may impact your earnings. This tax could significantly reduce the profit you make from your sale—unless you plan ahead and use the right strategies.

In this blog, we’ll break down everything you need to know about capital gains in South Carolina, how the tax rate is calculated, and what exemptions may be available to help you save money.

🔍 What Is Capital Gains Tax?

Capital gains tax is the tax you pay on the profit from selling a capital asset—like a house, land, or investment property. The gain is calculated by subtracting your basis (usually your original purchase price plus improvements) from the sale price.

There are two types of capital gains:

• Short-term capital gains: Assets held for less than one year. Taxed as ordinary income.

• Long-term capital gains: Assets held for more than a year. Taxed at a lower rate than short-term gains.

In the case of selling real estate, most gains are classified as long-term.

📌 How Does Capital Gains Tax Work in South Carolina?

South Carolina is one of the states that follows the federal government’s lead when it comes to taxing capital gains. However, it also applies its own state tax.

If you sell a property and make a profit, you’ll need to consider two parts:

1. Federal Capital Gains Tax

2. State Tax – South Carolina’s share

The federal long-term capital gains tax rate is usually 0%, 15%, or 20%, depending on your income.

Then comes the SC capital gains tax rate, which is where many homeowners get confused.

📊 What Is the South Carolina Capital Gains Tax Rate?

The South Carolina capital gains tax rate is a bit unique. South Carolina doesn't have a special capital gains tax—it taxes capital gains as regular income. However, the state gives a 44% deduction on long-term capital gains, which lowers your taxable income.

Let’s look at a simple example:

• You sell a home and make a profit of $100,000.

• South Carolina allows you to deduct 44%, so your taxable gain becomes $56,000.

• This amount is taxed based on your income bracket, which can range from 0% to 7%.

So effectively, the capital gains tax South Carolina residents pay is lower than the state's top income tax rate, thanks to this deduction.

🧾 Do You Have to Pay Capital Gains Tax on a House in South Carolina?

That depends on your individual situation.

Here are common scenarios where capital gains tax in South Carolina may or may not apply:

✅ You May Avoid Paying Capital Gains Tax If:

• You lived in the home for at least 2 of the past 5 years.

• You used the home as your primary residence.

• Your profit is less than $250,000 (single) or $500,000 (married filing jointly).

In this case, you qualify for the home sale exclusion and may not owe any federal or South Carolina capital gains tax at all.

❌ You Will Likely Pay Capital Gains Tax If:

• The home was an investment property or second home.

• You did not live in the house for 2 out of the last 5 years.

• Your gain exceeds the federal exclusion limits.

🛠️ How Can You Lower Capital Gains in South Carolina?

If you think you may owe capital gains tax in South Carolina, there are several strategies that may reduce what you owe:

1. Keep Records of Improvements

Upgrades and repairs add to your cost basis, lowering your taxable gain. Keep receipts for:

• New roof

• Kitchen remodel

• Plumbing upgrades

2. Use a 1031 Exchange

If you're selling an investment property and buying another, a 1031 exchange lets you defer taxes.

3. Offset with Losses

You can use capital losses from other investments to offset gains, reducing your taxable income.

4. Time Your Sale

Holding onto a property for over a year classifies it as a long-term asset, which qualifies for the 44% deduction under the SC capital gains tax rate.

💡 Common Mistakes Sellers Make with South Carolina Capital Gains Tax

Selling property without understanding the tax consequences can lead to surprise tax bills. Here are some mistakes to avoid:

• Not consulting a tax advisor before the sale.

• Forgetting to factor in selling expenses like agent fees or repairs.

• Assuming you automatically qualify for the home exclusion.

Remember: capital gains in South Carolina can be reduced—but only if you plan ahead.

🏠 How Does Redhead Home Properties Help?

At Redhead Home Properties, we work with South Carolina homeowners every day to help them navigate the selling process. Whether you’re:

• Selling your inherited property,

• Downsizing your home,

• Or trying to avoid unnecessary taxes,

We can guide you through each step and connect you with local professionals who understand capital gains tax South Carolina laws inside and out.

You don’t have to do this alone—we’re here to make sure you get the best return on your investment while following the legal requirements.

📋 Final Thoughts: Plan Ahead for Capital Gains Tax in South Carolina

Selling a property in South Carolina is a major decision, and knowing how the South Carolina capital gains tax applies can help you plan smarter. Take advantage of deductions, exemptions, and strategies to keep more money in your pocket.

Here’s a quick recap:

• Understand your profit and how long you held the property.

• Know the South Carolina capital gains tax rate and how the 44% deduction works.

• Talk to a professional about minimizing your tax liability.

Capital gains tax in South Carolina doesn’t have to be overwhelming—especially with the right information and team on your side.

📞 Ready to Sell Your Home in South Carolina?

Reach out to Redhead Home Properties to speak with a local expert who understands the ins and outs of capital gains in South Carolina. We make selling simple, stress-free, and financially smart.