Updated October 7, 2026. Quick answer: Generally no, if you qualify for the federal exclusion. South Carolina follows the “Internal Revenue Code of 1986, as amended through December 31, 2024”, and its withholding statute recognizes gain “excluded in accordance with Internal Revenue Code Section 121”. Gain above it is taxed at graduated rates; the 2025 instructions reduce net capital gain by 44%. For 2026, Act 110 of 2026 sets two brackets with a top rate of 5.21%.
South Carolina tax on home sale profit at a glance
| Item | What the documents say |
|---|---|
| Profit on your main home | Follows the Internal Revenue Code as amended through December 31, 2024; the withholding statute recognizes gain excluded under section 121 |
| Rate on gain above the exclusion | Graduated, top marginal rate 6% for tax year 2025 and 5.21% for 2026 (Act 110 of 2026); the 2025 instructions reduce net capital gain by 44% |
| Collected at the sale | Nonresident sellers only: buyer withholds the maximum individual tax rate on the gain (Form I-290); none to the extent the gain is excluded under section 121. The deed also carries a recording fee of $1.85 for each $500 of value, the grantor’s liability |
| Source | South Carolina Legislature; South Carolina Department of Revenue |
What the South Carolina documents say
South Carolina’s income tax chapter adopts the “Internal Revenue Code of 1986, as amended through December 31, 2024”, and the 2025 SC1040 starts from federal taxable income (from 2026, Act 110 starts South Carolina taxable income from federal adjusted gross income). The withholding chapter treats gain on a principal residence as not subject to withholding to the extent it is “excluded in accordance with Internal Revenue Code Section 121”.
On the rate, the SC1040 instructions say “Net capital gains included in taxable income are reduced by 44%”, and the Department’s packet says “the top marginal Individual Income Tax rate changed to 6%” for tax year 2025. For 2026 the Department’s Information Letter #26-20 prints “$30,000 or more (5.21% times taxable income) minus $966”, with 1.99% below $30,000.
What the federal exclusion requires
Most state answers start here. The statute says “Gross income shall not include gain from the sale or exchange” of property that, during the five years before the sale, you owned and used as your principal residence for periods adding up to two years or more. The limit is “shall not exceed $250,000”, or $500,000 for a husband and wife who make a joint return and meet the statute’s conditions. See CMG’s home sale taxes page and exclusion calculator.
A worked example at a $400,000 gain
An illustration, not a return: a married couple in South Carolina sells their main home with a gain of $400,000 and meets the federal ownership and use tests. The gain is below the $500,000 joint exclusion, so it is not in federal adjusted gross income and, on the documents read, $0 is taxed by South Carolina. As a second illustration, computed below, suppose the gain were $600,000. The amount above the exclusion would then be $100,000; after the 44% deduction, $56,000 would be taxed, and at the 2025 top rate of 6% the tax would be no more than $3,360; with the same deduction and the 2026 top rate of 5.21%, no more than $2,917.60, before any other adjustment.
What is collected at the sale
Under S.C. Code 12-8-580 the buyer of real property from a nonresident seller withholds a percentage “equal to the maximum individual tax rate of the gain recognized”, or of the amount realized if there is no affidavit of gain. Form I-290 says to “multiply line 1 by South Carolina’s top marginal Individual Income Tax rate”. The rule applies to nonresident sellers and recognizes the section 121 exclusion.
South Carolina also charges a deed recording fee. S.C. Code 12-24-10 sets it at “one dollar eighty-five cents for each five hundred dollars, or fractional part of five hundred dollars, of the realty’s value”, and 12-24-20 says the fee “is the liability of the grantor, or the joint and several liability of the grantors, but the grantee is secondarily liable for the payment of the fee”, with exceptions for some deeds that were not read.
What changes in 2026
South Carolina: Act 110 of 2026, signed March 30, 2026 and effective for tax years beginning after December 31, 2025, replaces three brackets with two (1.99% below $30,000; 5.21% of taxable income minus $966 at $30,000 or more), starts South Carolina taxable income from federal adjusted gross income instead of federal taxable income, and adds a South Carolina Income Adjusted Deduction. The Department’s letter lists no change to how a home sale excluded under section 121 is treated.
What the documents do not say
- The 2026 rates come from the Department’s Information Letter #26-20; the SC1040 instructions read are for 2025. An older Revenue Advisory Bulletin still prints a different withholding rate; this page follows the statute’s wording, which refers to the maximum individual tax rate.
Common mistakes
- Treating the Form I-290 withholding as a rule for South Carolina residents; it applies to nonresident sellers.
- Forgetting the 44% deduction for net capital gain when estimating tax on gain above the exclusion.
- Assuming the answer for one state applies to another, or that the state answer changes the federal tax on the sale.
Related: home sale taxes, state tax on home sale profit, how South Carolina taxes capital gains, South Carolina retirement taxes, and home sale exclusion calculator.
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Answer againSources
- South Carolina Code of Laws Title 12 Chapter 6 (Income Tax): https://www.scstatehouse.gov/code/t12c006.php
- South Carolina Code of Laws Title 12 Chapter 8 (Withholding): https://www.scstatehouse.gov/code/t12c008.php
- 2025 SC1040 Instructions: https://dor.sc.gov/sites/dor/files/SoftwareDeveloperForms/SC1040Inst.pdf
- 2025 Individual Income Tax Packet: https://dor.sc.gov/sites/dor/files/forms/IITPacket_2025.pdf
- Form I-290 Nonresident Real Estate Withholding (Rev. 7/17/23): https://dor.sc.gov/forms-site/Forms/I290.pdf
- SC Information Letter #26-20, Individual Income Tax Reform (August 31, 2026): https://dor.sc.gov/sites/dor/files/policies/IL26-20.pdf
- 26 U.S.C. 121, Exclusion of gain from sale of principal residence (U.S. Code, GovInfo): https://www.govinfo.gov/content/pkg/USCODE-2023-title26/html/USCODE-2023-title26-subtitleA-chap1-subchapB-partIII-sec121.htm
- S.C. Code Title 12 Chapter 24, Deed Recording Fee (South Carolina Legislature; read October 8, 2026): https://www.scstatehouse.gov/code/t12c024.php
Sources: the primary documents linked above, read on October 7, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.