Whenever someone passes away, they leave behind some form of property or assets. The family members or beneficiaries of these assets often have numerous questions. For homeowners in South Carolina, it’s important to know the difference between the inheritance tax in SC and the South Carolina estate tax. Even though South Carolina doesn’t collect its own inheritance tax, there is a federal estate tax liability that can be a factor for large estates.
With that in mind, we’ve created this guide to explain the details of how inheritance tax in SC works. We’ll go over what rules apply and how you can maximize your potential tax savings with a little bit of planning. From dealing with an inherited property to planning your own estate, being informed will help you make better decisions.
An inheritance tax is a levy a beneficiary pays when receiving assets passed to them from someone who has passed away. Instead of the estate paying the tax, each person who inherits assets is responsible for covering their tax liability.
The amount of tax due often depends on the value of the inheritance and the recipient’s relationship to the deceased. Real estate will typically get an appraisal, so the tax can be calculated. In most states that impose this tax, closer relatives such as spouses or children may pay little or nothing, while distant relatives or non-family members may owe more.
Even though an inheritance tax and an estate tax sound like they’d be for the same thing, they’re not. Sometimes, they’re even used interchangeably, but they mean very different things.
An estate tax is a levy applied to the entire estate of a person who has passed away. Estate tax is applied before any of the assets are distributed to beneficiaries. To put it another way, the estate pays the estate tax, not the individual inheritors.
The federal estate tax may also apply if the estate’s total value goes over the established federal exemption limit. This limit is adjusted each year by the governing body.
An inheritance tax, however, is a tax paid by the person after receiving assets. This tax will vary depending on state laws, and the
South Carolina, as a state, does not impose either an inheritance tax or an estate tax. This means that when you pass property or other assets from one person to another, after death, the state does not collect additional taxes on that transfer. However, transferring assets may still trigger a federal estate tax if the value of the estate exceeds the federal exemption limit.
For 2025, the federal estate tax exemption is capped at $13.61 million per individual. Estates valued at less than the threshold amount are typically exempt from federal taxation. Those above it will face a progressive tax rate that can approach 40%. This is calculated on the sale price, but you’ll pay it after your closing costs.
Since SC has no specific state inheritance tax or estate tax, the rules that apply are nearly all federal in scope. The IRS oversees how large estates are taxed. The process generally depends on the estate’s total value at the time of death.
If an estate goes over the federal exemption, the executor of the estate is responsible for filing a Form 706. This form details the estate’s total assets, real property, investments, and personal property. Any taxes that are owed must be paid before the remaining assets can be distributed to beneficiaries.
Individuals who inherit property or assets from another state that imposes inheritance taxes may be required to pay that state’s tax, depending on the asset type and location.
On top of that, estates large enough to exceed the federal exemption limit will be subject to federal estate tax, regardless of where the deceased lived. These cases often involve significant assets such as high-value real estate, investment portfolios, or business interests.
For most South Carolina homeowners, inheritance transfers will not trigger taxes at the state level.
South Carolina residents have an easy answer, at first. There are no state-level inheritance taxes. The state does not impose a levy on assets transferred through inheritance, regardless of the total value or the beneficiary’s relationship to the deceased.
Even though South Carolina does not impose an inheritance tax, understanding the available federal exemptions and deductions can help reduce or eliminate tax obligations at the national level.
Some of the most common methods for tax reduction include:
Effective and early estate planning is one of the best ways to minimize or even avoid inheritance tax problems for future generations. The laws in South Carolina are relatively straightforward, but federal estate tax rules can complicate things rapidly. This is particularly true for larger estates worth a significant amount.
Reliable and somewhat common strategies include creating irrevocable trusts and placing the assets in them. This lowers the taxable value of your whole estate. You can also choose a joint ownership arrangement or make gifts to lower the value of their estate before death.
Additionally, working with an estate planning attorney or financial advisor can make sure your strategy is aligned with federal law. Planning also means that when the inevitable happens, there’s no confusion or unnecessary tax burdens related to your estate.
Reducing taxes on inherited property requires careful timing and strategic planning. Start by determining the stepped-up basis of the home to understand potential gains. If market conditions favor sellers, you may want to sell sooner rather than later to avoid additional appreciation that could increase your tax liability.
Making qualified home improvements before listing can also help increase the property’s value while reducing taxable gains. Repairs, renovations, and real estate fees are often deductible expenses when selling.
Finally, consider whether selling to a cash buyer is right for your situation. This option can help you avoid long listing times and make everything much simpler. For property in hot markets like West Columbia or Seven Oaks, accepting a cash offer can close your deal and get money in your pocket in as little as a week.
Reducing taxes on inherited property depends on strong, strategic planning. First, start by determining the stepped-up basis of the home. This is a critical step to understanding your potential gains.
If the market favors sellers, you may want to sell sooner rather than later. This will help you avoid additional appreciation that could cause your tax burdens to grow.
Another strategy is to make qualified home improvements before listing. This can inflate your property’s value, which also cuts taxable gains. Repairs, renovations, improvements, and real estate fees are all usually deductible for the seller.
Also, think about listing versus getting a cash buyer. A cash offer can help you simplify the transaction and cut costs, while still letting you make a more informed financial decision.
The absence of a state inheritance tax can make estate transfers in South Carolina simpler for most homeowners. That said, having a solid understanding of the federal tax obligations and keeping your documentation accurate is critical.
Gather all records related to the property’s appraised value, the will or trust documents, and any receipts tied to maintenance or improvements.
If there are multiple heirs involved or disputes, communication is key. Working together can determine if selling, renting, or keeping the property is the right solution. Knowing the potential tax implications ahead of time helps everyone involved avoid last-minute surprises.
As you can see, even though South Carolina doesn’t have its own inheritance tax, beneficiaries must still be cautious. Inherited assets are typically still subject to federal estate tax or capital gains taxes when selling inherited property.
If you’ve recently inherited a home that you need to sell quickly, count on High Noon Home Buyers for a fair cash offer. We’re a team of local experts who specialize in buying homes directly from South Carolina owners. This way, you can skip repairs, delays, dealing with time-wasters, and listing fees. Learn more about our process and request your no-obligation offer now.
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