Updated October 4, 2026. Quick answer: Yes, but only 56% of a long-term gain is taxed. The code allows a deduction “equal to forty-four percent of net capital gain recognized in this State”, and the Department says “For 2025, the top tax rate is 6%.” The rest is taxed at the ordinary rates.
Selling your home? How the state taxes the profit, from its own tax documents: Does South Carolina tax the profit from selling your home?.
The same question for dividends and interest: does South Carolina tax dividends and interest.
How South Carolina treats capital gains
| Item | What the documents say |
|---|---|
| Treatment | Net capital gain is reduced by a 44% deduction, then taxed at the ordinary rates |
| Top rate, 2025 | 6% (SCDOR policy manual and SC1040 book) |
| Statute’s brackets | S.C. Code 12-6-510 prints 0% up to $3,200, 3% from $3,200 to $16,040 and 6% on $16,040 or more, with indexing; the indexed 2025 amounts are not printed in the documents read |
| Holding period | “holding period for long-term capital gains is the same as the federal” |
A $50,000 long-term gain
On a $50,000 long-term gain the deduction is $50,000 x 44% = $22,000, leaving $28,000 taxable (56% of the gain).
For a filer in the top bracket, $28,000 x 6% = $1,680 of South Carolina tax on the gain.
What changes in 2026
The Department lists 6.0% for 2026 only as a conditional, phased-down figure, so no 2026 rate is stated here.
Federal rules
The state’s treatment sits on top of the federal one. The IRS explains the federal tax on gains in Topic no. 409, Capital Gains and Losses and Publication 550, Investment Income and Expenses.
Related: whether South Carolina taxes pensions, how South Carolina taxes retirement income, the capital gains tax by state table, and the federal capital gains tax calculator.
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Answer againSources
- S.C. Code of Laws Title 12 Chapter 6: Sec. 12-6-510 (rates) and Sec. 12-6-1150 (net capital gain deduction): https://www.scstatehouse.gov/code/t12c006.php
- South Carolina Tax Incentives and Exemptions Digest, Chapter 3 Individual Income Taxes (Sept. 2025): https://dor.sc.gov/sites/dor/files/Documents/Policy%20Manuals/SCTIED-2025-Chapter%203.pdf
- 2025 SC1040 Individual Income Tax Form and Instructions: https://dor.sc.gov/sites/dor/files/forms/IITPacket_2025.pdf
- Tax Legislative Update for 2025 (June 2025): https://dor.sc.gov/sites/dor/files/Documents/Policy%20Manuals/Legislative%20Update%20for%202025.pdf
Sources: the primary documents linked above, read on October 4, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the plan administrator or the agency itself is the right place to confirm anything consequential.