South Carolina has no separate capital gains tax. A gain is part of your income and is taxed at the ordinary income tax rates, but state law lets individuals, estates and trusts deduct 44% of net capital gain, so only 56% of a qualifying gain is taxed. The income tax rates themselves were rewritten for 2026: the top rate fell to 5.21%.
This guide uses the South Carolina Code of Laws on the legislature's website, the South Carolina Department of Revenue (SCDOR) individual income tax page, SCDOR Information Letter 26-20, the 2025 SC1040 form and two IRS pages, all read on 3 November 2026. Where the sources do not settle a point, we say so instead of guessing.
Section 12-6-1150 of the South Carolina Code says individuals, estates and trusts are allowed a deduction from South Carolina taxable income equal to forty-four percent of net capital gain recognized in this State during a taxable year. For estates and trusts the deduction applies only to income taxed to the estate or trust or to individual beneficiaries, not income passed through to nonindividual beneficiaries. The same section says South Carolina income includes capital gains and losses from partnerships and S corporations.
The statute defines net capital gain by reference to Internal Revenue Code Section 1222. IRS Topic 409 explains that term as the amount by which your net long-term capital gain for the year is more than your net short-term capital loss, and that you generally have a long-term gain if you hold the asset more than one year. The 2025 SC1040 form labels the matching subtraction as 44% of net capital gains held for more than one year. Net short-term capital gains, by contrast, are taxed federally as ordinary income at graduated rates (IRS Topic 409); we read that as meaning a short-term gain does not earn the 44% deduction, but the statute does not say so in those words.
SCDOR says South Carolina now has two individual income tax brackets, with tax year 2026 rates of 1.99% for income under $30,000 and 5.21% minus $966 for income from $30,000 and above. SCDOR Information Letter 26-20 (31 August 2026) explains that Act 110 of 2026 was signed on March 30, 2026 and applies to tax years beginning after 2025, and that the bracket amounts are indexed each year.
The top rate for earlier years, as SCDOR lists them: 6% for 2025, 6.2% for 2024 and 6.4% for 2023.
The Information Letter adds that, beginning with tax year 2027, the 5.21% top rate will be decreased if the Board of Economic Advisors projects that income tax revenue will grow by at least 5%, and that this reduction will continue until the top rate reaches 1.99%. We found no announced 2027 rate in the sources we read, so a sale planned for 2027 should be checked against SCDOR first.
This table is our arithmetic, not an official calculation. It shows the extra South Carolina tax a gain adds when it sits on top of other income that already puts you in the 5.21% (2026) or 6% (2025) top rate. It applies the 44% deduction (so 56% of the gain is taxed) and ignores credits, other deductions and the income-adjusted deduction, rounded to the nearest dollar. The last column shows the 2026 tax if there were no deduction.
| Net capital gain | Added tax, 2026 (5.21% on 56%) | Added tax, 2025 (6% on 56%) | 2026 without the deduction |
|---|---|---|---|
| $10,000 | $292 | $336 | $521 |
| $50,000 | $1,459 | $1,680 | $2,605 |
| $100,000 | $2,918 | $3,360 | $5,210 |
| $500,000 | $14,588 | $16,800 | $26,050 |
Worked example (ours): a single filer has $100,000 of wages and a $50,000 long-term gain in 2026. Federal adjusted gross income is $150,000. The 44% deduction is $22,000, leaving $128,000 before other items. SCDOR's income-adjusted deduction (SCIAD) for a single filer is $0 at federal AGI of $95,000 or more, so none applies. Tax is 5.21% times $128,000 minus $966, or $5,703. Without the gain, taxable income would be $100,000 and tax $4,244. The gain adds $1,459, about 2.9% of the gain. Real returns differ because of credits, adjustments and other items.
For 2026 SCDOR says South Carolina decoupled from the federal deductions in Internal Revenue Code Sections 63(b) through (g), so the calculation of South Carolina taxable income begins with federal adjusted gross income instead of federal taxable income. A gain reported on your federal return is therefore in the starting figure, and the 44% deduction comes off as a South Carolina adjustment. We read the 2025 SC1040, where the subtraction is a numbered line; we did not read a 2026 form, so check the line on the 2026 return when it is published.
The new income-adjusted deduction replaces the federal standard deduction. SCDOR lists $15,000 for single or married filing separately, $22,500 for head of household and $30,000 for married filing jointly or a surviving spouse, reduced as federal AGI rises. Because a large gain raises your AGI, it can reduce or remove that deduction; the Information Letter has the formula.
Under Section 12-6-1720, a nonresident reports South Carolina income as a resident would, but only for amounts attributable to ownership of an interest in real or tangible personal property located in this State, a business or services carried on in the State, income of South Carolina pass-throughs, and lottery or bingo winnings. Gains from intangible personal property count only when derived from property employed in a business carried on in South Carolina, and the statute says a taxpayer is not considered to carry on a business there solely by reason of buying and selling property for the nonresident's own account. The Information Letter adds that a nonresident reduces the SCIAD in the same proportion as South Carolina AGI is to federal AGI.
A part-year resident may compute tax as a full-year resident and use the credit in Section 12-6-3400, or compute as a nonresident with resident-period income fully included (Section 12-6-1710).
When a nonresident sells South Carolina real property, the buyer must withhold under Section 12-8-580. With the seller's affidavit stating the gain, the amount is a percentage equal to the maximum individual tax rate of the gain; the statute gives no number in that sentence, so ask SCDOR for the current percentage. The buyer remits it by the 15th day of the month after the sale and is liable for collecting and paying it. The seller can file an amended statement to request a refund of excess withholding.
IRS Topic 701 says you may qualify to exclude up to $250,000 of the gain from the sale of your main home, or up to $500,000 if you file a joint return. The withholding statute for nonresident sellers treats as not a sale any transaction to the extent the gain on a principal residence is excluded under Internal Revenue Code Section 121, and gain above the exclusion is subject to withholding. For a resident, South Carolina starts from federal AGI, so we read excluded gain as not entering the starting figure; the SCDOR pages we read do not say this in so many words. Any taxable gain above the exclusion would then be a capital gain eligible for the 44% deduction if it is a net capital gain.
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