Tax guide and calculator · 2026 law
Capital gains tax when you sell
in South Carolina.
By Devin Day, Operations Officer & licensed MLO · Reviewed by Timmy Fredrick Nash, Broker-in-Charge · Published July 20, 2026
South Carolina taxes long-term gains at an effective 2.92 percent for 2026 after its 44 percent deduction, primary residences usually owe nothing, and out-of-state sellers meet a withholding at the closing table that most never saw coming. The math, the forms, and a calculator, under the 2026 law.
The direct answer
The three layers of tax on a South Carolina home sale
Federal: long-term gains are taxed at 0, 15, or 20 percent depending on income; for 2026, the 0 percent bracket runs to $49,450 of taxable income single and $98,900 married filing jointly, and the 15 percent bracket to $545,500 and $613,700. High earners add a 3.8 percent surtax. And if you rented the home out and wrote off wear and tear over the years (called depreciation), the IRS taxes that part back at up to 25 percent when you sell. A primary residence excludes up to $250,000 single or $500,000 married under Section 121 if you owned and lived in it two of the last five years.
South Carolina: the state deducts 44 percent of net long-term gains and taxes the rest at its new 2026 top rate of 5.21 percent, an effective rate of roughly 2.92 percent. Anything the federal exclusion wipes out, South Carolina never sees.
At the closing table, for out-of-state sellers only: South Carolina collects early. The withholding described below is the piece that surprises absentee owners, and it is manageable with one form.
The withholding
The SC nonresident withholding: Form I-290, Form I-295, and why the affidavit is everything
When a nonresident sells South Carolina real estate, state law requires the buyer's side, in practice the closing attorney, to withhold tax at closing and send it to the Department of Revenue on Form I-290 by the 15th of the following month. Since a 2024 law change, that rate simply matches South Carolina's top income tax rate: 5.21 percent for a 2026 sale, or 5 percent for a company. The old 7 percent figure still on many websites is wrong.
What the rate applies to is the part sellers can control. Sign the Form I-295 seller's affidavit stating your actual gain, and the withholding is 5.21 percent of the gain. Skip it, and the attorney has to withhold 5.21 percent of the whole sale price (minus your selling costs), capped only by the cash you would actually walk away with after paying off the mortgage. On a $400,000 sale with a $186,000 gain, that is the difference between roughly $9,700 withheld and roughly $19,600.
Either way it is a prepayment, not the tax. The withholding math ignores the 44 percent deduction, so it almost always takes too much. You file a South Carolina return, report the gain with the deduction, list the amount already withheld (it works like a big W-2), and the state sends back the difference. The I-295 also covers the full exemptions: no withholding for a Section 121 primary residence, a 1031 exchange with full deferral, or a certified zero gain, which is exactly the situation of most heirs selling at stepped-up basis. Forms: I-290 and I-295; statute: S.C. Code 12-8-580.
Interactive calculator
South Carolina capital gains and withholding calculator, 2026
Assumes a sale in 2026 of property held more than one year. Educational estimate, not tax advice; the 2026 South Carolina forms are not yet published, so state figures are computed from the statute and current forms. Bring your CPA the specifics.
Worked example
An illustrative example: the Ohio owner selling a $400,000 rental
This is a constructed example, not a client. An Ohio resident sells a Myrtle Beach rental for $400,000 that was bought for $250,000, with $60,000 of depreciation taken and 6 percent selling costs. Amount realized: $376,000. Adjusted basis: $190,000. Gain: $186,000, of which $60,000 is depreciation recapture taxed federally at 25 percent and $126,000 is long-term gain, typically at 15 percent, roughly $33,900 federal before any net investment income tax.
South Carolina taxes 56 percent of the $186,000, about $104,160, at 5.21 percent: roughly $5,400. At closing, with a signed I-295 gain affidavit, about $9,700 is withheld; without one, about $19,600. After filing the South Carolina nonresident return, the affidavit seller gets roughly $4,300 back. Ohio then generally credits the South Carolina tax against its own.
The pattern to remember: the withholding is always bigger than the final South Carolina tax on a long-term gain, the affidavit controls how much bigger, and the refund requires filing. Nobody at a closing table volunteers this; your closing attorney and CPA handle it well when someone puts it on their desk early. We put it there early.
Ways around and out
Section 121, 1031, and stepped-up basis: the exclusions that cut the tax
- ✓Primary residence: up to $250,000 single and $500,000 married of gain simply is not taxed, federally or by South Carolina, if you owned and lived there two of the last five years. The window keeps working for up to three years after you move away, which matters to people who relocated and then decided to sell.
- ✓Inherited property: basis steps up to date-of-death value, so selling soon after inheriting usually produces little or no gain. The trap is the withholding on nonresident heirs, solved by the I-295 affidavit; the rest of that process is in our inherited house guide.
- ✓1031 exchange: a fully deferred exchange pays no tax now and no withholding at closing, certified on the same affidavit. The deadlines make or break it; see the 1031 guide and the hands-off DST alternative.
- ✓Depreciation is the asterisk on everything: every dollar you claimed, or could have claimed, on a rental comes back at up to 25 percent federally and is never covered by the primary-residence exclusion, even if you moved back in. Converted properties need a CPA's eyes before you count your net.
Plan the South Carolina tax before you list.
We put the I-295 on your CPA's desk early, price the sale with the real net in view, and reach the out-of-state buyers who dominate this market. Absentee sales are half of what we do.
Sources
Data sources for this page
- SCDOR on H.4216: the 2026 rate restructure (1.99% / 5.21%), signed March 30, 2026; S.C. Code 12-6-1150: the 44% net capital gain deduction.
- S.C. Code 12-8-580 and SCDOR Forms I-290 / I-295: nonresident withholding mechanics and exemptions.
- IRS Rev. Proc. 2025-32: 2026 capital gains brackets; IRS Publication 523 and Topics 409/701: Section 121 exclusion and depreciation recapture.
This page and calculator are educational only, not tax or legal advice. South Carolina's 2026 return instructions were not yet published as of this writing; state figures are computed from the statute and current forms. Have a CPA prepare your numbers, including the I-295 gain figure, and a licensed attorney handles every South Carolina closing.
Common questions
SC capital gains and withholding FAQ
Does South Carolina tax capital gains on a home sale?
Yes, but gently: South Carolina deducts 44 percent of a net long-term capital gain, so only 56 percent is taxed. At the new 5.21 percent top rate for 2026 that works out to an effective rate of about 2.92 percent on long-term gains, on top of whatever federal tax applies.
What is South Carolina's income tax rate for 2026?
Two brackets under the law signed March 30, 2026: 1.99 percent on taxable income up to $30,000 and 5.21 percent above it. The 2025 top rate was 6.0 percent. Further automatic cuts can trigger from 2027 if state revenue targets are met.
How much does South Carolina withhold when an out-of-state owner sells?
The buyer's side withholds at South Carolina's top individual rate for the year of the sale, 5.21 percent for 2026 closings, or 5 percent for corporations. With a signed Form I-295 gain affidavit, the rate applies only to your actual gain. Without one, it applies to the entire amount realized, capped at your net proceeds.
Is the South Carolina withholding an extra tax?
No. It is a prepayment. The withholding ignores the 44 percent gain deduction, so it nearly always over-collects; you claim the withheld amount as a credit on a South Carolina nonresident return and receive the difference back. Most long-term sellers are owed a refund.
Do I pay the withholding when selling my primary residence?
No, if the gain is excluded under the federal Section 121 primary-residence exclusion, up to $250,000 single or $500,000 married. You certify the exclusion on Form I-295 and no withholding applies, even if you have already moved out of state, as long as you are within the exclusion's two-of-five-year window.
What if I inherit a house in South Carolina and sell it?
Your basis steps up to the date-of-death value, so the taxable gain is usually small or zero. But the withholding still applies by default for nonresident heirs: without a gain affidavit, 5.21 percent of the whole sale price gets withheld and you wait for a refund. The I-295 affidavit certifying the near-zero gain is what prevents that; our inherited house guide covers the rest.