Real estate taxes aren’t easy to understand, but if you’re buying, selling, or already own property, they’re something you need to know. Understanding South Carolina’s tax scheme will help you understand your potential tax liability and exemptions.
Anyone who’s buying, selling, or owns property needs to know their state’s tax scheme. The better you understand the specifics of your state’s tax policy, the more you can ensure you’re maximizing your property investment.
Property taxes vary widely based on what state, county, and city you live in. As soon as you start thinking about buying or selling real estate, you should also start thinking about your local property taxes.
Learning about the ins and outs of South Carolina real estate taxes will help you be sure that you’re paying the right amount.
Will You Have to Pay Taxes When You Sell Your Home in South Carolina?
Whether you have to pay taxes when selling property in South Carolina depends on a few things. If you’re selling investment property or haven’t owned your property for at least two years, you can expect to pay taxes on your gains. But if you’re selling your home, you may be exempt from federal capital gains taxes — if you meet the right criteria. Luckily, most home sellers do.
If you’re selling your primary residence, you’ll probably be exempt from paying taxes on the profits from selling your home. The amount that is considered a profit or gain is the amount you paid for the house plus the amount of any improvements and renovations, minus the amount you’re selling the property for.
If you meet these qualifications, you will not have to pay federal taxes on your gains:
- You owned the house for at least two years;
- You resided in the house as your main residence for at least two years;
- In the two-year period after you bought your home, you didn’t exclude the profits from the sale of another home; and
- You’re profiting less than $250,000 (if single) or $500,000 (if married and filing jointly) from the sale.
If you don’t meet any of these qualifications, you’ll have to pay capital gains taxes on your property sale. There are two types of capital gains tax, short-term and long-term. Which tax applies to you and what your rate is will depend on how long you’ve owned the property.
If you sell property within a year of buying, you’ll be charged for a short-term capital gain. This tax rate is the same as your income tax rate at the time of the sale.
If you sell property more than two years after buying, you’ll be charged for a long-term capital gain. The tax rate for long-term capital gains is significantly lower than the rate for short-term gains and will depend on the specifics of your sale.
South Carolina has a capital gains tax on profits from real estate sales. The South Carolina capital gains rate is 7% of the gain on the money collected at closing. However, South Carolina also has a 44% exclusion from the capital gains flowing from the 1040 federal return, effectively reducing the state tax to 3.92%.
If you’re a South Carolina resident, you’ll pay the gains tax with your annual South Carolina income tax return. If you’re not a South Carolina resident, the tax will be withheld by your closing attorney when you close your transaction.
Real estate taxes can be complicated when you’re selling property. Be sure to talk to your real estate agent about your potential tax liability.
How Much Are Real Estate Transfer Taxes in South Carolina (and Who Pays Them)?
When real estate changes hands, oftentimes state and local governments charge a transfer tax. The transfer tax is a set percentage of either the sale price or the appraised value of the real estate. Real estate transfer taxes can be charged at the state, city, and/or county levels, depending on where you live.
South Carolina Transfer Tax
South Carolina has a 0.37% combined state and county transfer tax. For a median South Carolina home of $165,800, the transfer tax would be $613. Most of the time in South Carolina, the seller pays the transfer tax. However, occasionally transfer tax is part of the negotiation between the buyer and seller.
How to Calculate Property Taxes in South Carolina
Property tax is a major source of revenue for state and local governments. State and local governments use property taxes to pay for things like public schools, parks, infrastructure, and services. The rate at which property taxes are levied can vary greatly based on what state you live in and where you are located within the state.
No matter where you are in South Carolina, your property taxes will be calculated as a percentage of the assessed value of your property. The exact number you pay will depend on where in South Carolina you live.
South Carolina has incredibly low property taxes. With an effective real estate tax rate of just 0.57% of the property’s value, South Carolina has the fifth lowest property taxes in the country. South Carolina counties and some South Carolina cities also charge property taxes, with an average county tax of 0.5% of the property’s value.
Tax Breaks for South Carolina Home Buyers & Sellers
There are state and federal programs that offer tax breaks to real estate owners, buyers, and sellers. The program(s) you qualify for will depend on your personal situation.
Tax Breaks and Credits for Buyers
First-time buyers and buyers who haven’t owned a home in the last three years qualify for the Mortgage Credit Certificate (MCC). With this credit, the South Carolina State Housing Financing Development Authority will give you an MCC that allows you to deduct up to 50% of your annual mortgage interest (up to $2,000).
Tax Breaks and Write-Offs for Sellers
Don’t worry, there are tax breaks for sellers, too. One of the most common deductions for home sellers is for repairs and improvements related to selling their homes. This deduction allows sellers to deduct the costs of most repairs and improvements made within 90 days of their sale date.
Sellers can also deduct their mortgage interest for the time they owned the home, discount points from their mortgage, property taxes up to $10,000, and costs related to selling their home.
Work with a Professional
Your tax liability can vary greatly from place to place, even within a state. Real estate buyers, sellers, and owners alike should be sure to seek guidance from a certified tax professional (accountant and/or attorney) in order to minimize exposure and maximize savings. You can turn to your expert real estate agent for help on finding a tax professional or for questions about your taxes.