Capital gains tax in South Carolina (2026): selling a business, real estate or farm
South Carolina taxes only 56% of a long-term gain
South Carolina is one of the few states with a straight percentage deduction for long-term gains. Individuals, estates and trusts deduct 44% of net capital gain recognized in South Carolina during the year, with net capital gain defined as in IRC 1222 (S.C. Code 12-6-1150, unchanged by the 2026 rate law). Gains passed through from partnerships and S corporations count.
The rate under that deduction just fell. Act 110 of 2026 (H.4216, signed March 30, 2026) sets two brackets for tax year 2026: 1.99% on income under $30,000 and 5.21% from $30,000 up, and it lowers the top rate further in any year the Board of Economic Advisors projects revenue growth of 5% or more (SCDOR). The same law makes federal adjusted gross income the starting point and replaces the federal standard deduction with a South Carolina Income Adjusted Deduction of $30,000 for joint filers, which shrinks as income rises. Taxing 56% of a gain at 5.21% works out to about 2.92% (2026).
Federal tax is separate: 0%, 15% or 20% on long-term gain, 20% above $613,700 of joint taxable income for 2026 (Rev. Proc. 2025-32), covered in the federal capital gains guide.
Worked example: the same $1,500,000 gain, three mixes
A joint-filing couple with $150,000 of other income sells a South Carolina rental for a $1,500,000 gain, $300,000 of it unrecaptured Section 1250 gain. Because unrecaptured 1250 gain is part of federal net capital gain, all of it gets the 44% deduction: South Carolina tax is $43,764 and total tax caused by the sale $425,117, an effective 28.3%.
Now a $1,500,000 gain on a company with $500,000 of equipment recapture. Recapture under Section 1245 is ordinary income, not net capital gain, so it is taxed at the full 5.21% (2026). South Carolina tax rises to $55,226 even though the owners are active and owe no NIIT.
If an independent appraisal supports a lower equipment value and $300,000 more goodwill, South Carolina tax drops to $48,349 and total tax to $371,324, $45,672 less than the second case. The allocation has to match fair market value and both parties report it on Form 8594; the purchase price allocation analysis and depreciation recapture analysis walk through it.
What the 44% deduction does not touch
- Short-term gain. Property held one year or less produces no net capital gain, so none of it is deducted.
- Recapture and ordinary pieces. Section 1245 recapture, inventory, non-compete and consulting payments are fully taxed at up to 5.21% (2026).
- Trust income passed to non-individuals. For estates and trusts, the deduction applies only to income taxed to the trust or to individual beneficiaries, not to income passed to non-individual beneficiaries (S.C. Code 12-6-1150(A)).
- Nonresidents' other gains. The statute speaks of net capital gain recognized in South Carolina, so a nonresident deducts 44% only of the South Carolina-source piece, such as gain on South Carolina real estate.
Nonresident sellers: withholding on every installment
When a nonresident sells South Carolina real property, the buyer withholds a percentage equal to the maximum individual tax rate on the amount realized, or on the gain if the seller provides an affidavit stating it, and 5% for a nonresident corporation or other entity, capped at the net proceeds (S.C. Code 12-8-580). The statute ties the individual rate to the top rate, which Act 110 set at 5.21% for 2026; older SCDOR guidance states 7%, so confirm the current figure with the closing attorney.
Seller financing changes the mechanics. Under SC Revenue Ruling 09-13, the buyer generally withholds on each payment and files Form I-290 each time; an amortization schedule limits withholding to the principal portion, and a Seller's Affidavit electing out of Section 453 for South Carolina purposes lets the buyer remit all withholding in one payment. See seller financing and the installment sale analysis for the federal side.
Closing costs, moving and the bigger picture
South Carolina charges a deed recording fee of $1.85 per $500 of the property's value (S.C. Code 12-24-10), and the contract decides who pays it. Because the state already taxes a long-term gain lightly, moving away before a sale saves less here than in high-tax states, and South Carolina real estate stays South Carolina-source either way. Sellers coming the other direction, retiring from New York or New Jersey, should make the move complete before closing on stock or other intangibles; see the residency change analysis. Compare neighbors such as North Carolina and Georgia on the capital gains tax by state page. To see every option on your own sale, get the Big Sale Tax Analysis.
What to know
The 44% deduction rewards capital gain, so an equipment-heavy or inventory-heavy business sale gets less from it than real estate does. An allocation that shifts value to goodwill has to stand up to the buyer's appraisal and the IRS. Nonresident withholding follows every installment payment unless the seller elects out.
Worked example
Married filing jointly, $150,000 of other income, 2026 cash sale: $1,200,000 of long-term gain plus $300,000 of unrecaptured Section 1250 gain. Passive investors, so NIIT applies. Same couple, active owners selling a company in 2026: $1,000,000 of long-term gain plus $500,000 of Section 1245 recapture on fully depreciated equipment. Same price, but an appraisal supports $300,000 less for equipment and $300,000 more for goodwill: $1,300,000 of long-term gain plus $200,000 of recapture.
| Engine run | South Carolina rental property, $1.5M gain | Equipment-heavy business, $1.5M gain | Same business, $300,000 more allocated to goodwill |
|---|---|---|---|
| Filing status | Married, joint | Married, joint | Married, joint |
| State | South Carolina | South Carolina | South Carolina |
| Other income (wages, pension, interest) | $150,000 | $150,000 | $150,000 |
| Long-term capital gain | $1,200,000 | $1,000,000 | $1,300,000 |
| Unrecaptured Section 1250 gain (25% max) | $300,000 | $0 | $0 |
| Section 1245 recapture (ordinary income) | $0 | $500,000 | $200,000 |
| Federal income tax on the sale | $328,153 | $361,770 | $322,975 |
| Net investment income tax (3.8%) | $53,200 | $0 | $0 |
| State income tax on the sale | $43,764 | $55,226 | $48,349 |
| Total tax caused by the sale | $425,117 | $416,996 | $371,324 |
| Effective rate on the gain | 28.3% | 27.8% | 24.8% |
| Gain kept after these taxes | $1,074,884 | $1,083,004 | $1,128,676 |
Computed October 7, 2026 by the Big Sale Tax engine (engine.js yearTax): federal brackets, 0/15/20% thresholds and AMT from Rev. Proc. 2025-32 (OBBBA-adjusted) and the One Big Beautiful Bill Act (P.L. 119-21); NIIT under IRC 1411 (thresholds not indexed); state tax from the engine's state table. "Tax caused by the sale" = tax with the sale minus tax without it. Excludes selling costs, local taxes and estimated-tax timing. Education only.
Run your own numbers
2026 law from the engine: federal 0/15/20% brackets (Rev. Proc. 2025-32), 25% cap on unrecaptured 1250 gain, ordinary rates on 1245 recapture, 3.8% NIIT over $200,000 single / $250,000 joint (IRC 1411), AMT, and your state's rules. Tax shown is the tax caused by the sale. Excludes selling costs, local taxes and NIIT exceptions for active business owners. Education only.
Long-Term vs Short-Term Capital Gains (2026)
The one-year holding rule, the 2026 0/15/20% thresholds for every filing status, NIIT, recapture, the state layer and a worked $200,000 example: 11 months vs 13 months, and what spreading the gain can save.
Frequently asked questions
What is the capital gains tax rate in South Carolina for 2026?
Does South Carolina tax capital gains on a primary residence?
What is South Carolina capital gains tax for nonresidents?
How much is capital gains tax on real estate in South Carolina?
How do I avoid capital gains tax in South Carolina?
Sources
- S.C. Code Title 12, Chapter 6 (12-6-1150)
- SCDOR: information about H.4216
- H.4216 (Act 110 of 2026)
- S.C. Code Title 12, Chapter 8 (12-8-580 withholding)
- SC Revenue Ruling 09-13: nonresident real property withholding
- S.C. Code Title 12, Chapter 24 (deed recording fee)
- Rev. Proc. 2025-32 (IRS, 2026 inflation adjustments)
Figures as of October 7, 2026; each rate and limit above names its source and year. Education only, not legal or tax advice.
Keep reading
North Carolina
One flat rate on every dollar of gain, falling on a revenue-triggered schedule, with a buyer report instead of withholding for nonresident sellers.
ReadGeorgia
Georgia's flat 4.99% applies to gains, but sellers 62 and older can shelter part of the gain with the retirement exclusion, and nonresidents face 3% withho
ReadPurchase price allocation
How the Section 1060 split between goodwill, equipment and non-competes sets the tax on a business sale.
ReadDepreciation recapture
The part of your gain that came from depreciation is taxed differently; here is which rate applies, how much, and what defers it.
ReadRental property
How a rental sale is really taxed: the 25% depreciation layer, the losses the sale finally frees, the 3.8% tax, and why moving in first rarely helps.
ReadSeller financing
Carry the buyer's note, collect interest, and pay the tax as the principal comes in, with the right collateral and terms behind it.
ReadKnow your number before you sign.
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