South Carolina Capital Gains Tax Rate (2026)
South Carolina capital gains tax overview
Three brackets: 0% up to $3,640, 3% and 6%. There is a 44% exclusion for gains from SC assets held more than one year (reducing the effective top rate to about 3.36%).
Federal + South Carolina combined rates
Your total capital gains tax bill includes both layers — federal and state. Here is what a South Carolina investor pays in 2026 for long-term gains:
| Federal Long-Term Rate | South Carolina State Rate | Combined Rate | Plus NIIT (if applicable) |
|---|---|---|---|
| 0% | 6% | 6% | 9.8% |
| 15% | 6% | 21% | 24.8% |
| 20% | 6% | 26% | 29.8% |
The NIIT (Net Investment Income Tax) adds an extra 3.8% for taxpayers whose MAGI exceeds $200,000 (single) or $250,000 (married filing jointly). It is a federal tax only — South Carolina does not have an equivalent.
How South Carolina compares to other states
South Carolina's top rate of 6% places it in the upper-middle tier of state capital gains taxation. For comparison:
- Zero-tax states (FL, TX, NV, etc.): 0% — total with 15% federal = 15%
- Low-rate states (AZ, IN, PA): 2.5–3.1% — total with 15% federal = 17.5–18.1%
- South Carolina: 6% — total with 15% federal = 21.0%
- High-rate states (NY, NJ): 10.75–10.9% — total with 15% federal = ~26%
- California: 13.3% — total with 15% federal = 28.3%
Tax-reduction strategies for South Carolina residents
With a top state rate of 6%, minimizing capital gains tax is particularly important in South Carolina. Key strategies:
- Hold over 1 year for long-term federal rates (0/15/20%). South Carolina does not offer a preferential state rate, but federal savings alone are often 7–17%.
- Tax-loss harvesting: Offset your gains with losses realized in the same year. A $20,000 loss offsets $20,000 of gains dollar-for-dollar, saving up to 26% ($5,200) on that $20,000 at top rates.
- 0% bracket planning: In lower-income years (retirement, sabbatical, between jobs), realize gains at the federal 0% rate. You still owe South Carolina state tax, but eliminating the federal component is significant.
- Donate appreciated stock directly to charity or a donor-advised fund to avoid capital gains tax entirely while generating a charitable deduction for the full fair market value.
- Installment sales: If selling a business or real estate, structuring as an installment sale spreads the gain over multiple years, potentially keeping each year's gain in a lower bracket.
Detailed South Carolina capital gains tax rules
Tax history and legal basis
South Carolina taxes capital gains as ordinary income but offers a significant deduction that reduces the effective rate substantially.
Exemptions and special treatment
South Carolina allows a 44% deduction on net long-term capital gains. This reduces the effective tax rate dramatically — the top statutory rate is 6.4%, but after the 44% deduction, the effective rate on long-term gains is approximately 3.58%. This makes SC one of the more favorable states for long-term investors.
Filing requirements
File Form SC1040 (resident). South Carolina starts with federal taxable income. The capital gains deduction is calculated on Schedule SC1040TC. Estimated payments required if owing $100+. Filing deadline is April 15.
Recent changes and legislative updates
South Carolina's 44% capital gains deduction has been in effect for years and makes the effective rate on long-term gains quite competitive (~3.58%). Combined with no tax on Social Security benefits and favorable property tax rates, SC is increasingly popular with retiring investors from Northeastern states.
Worked example: $50,000 capital gain in South Carolina
Here's exactly what a South Carolina resident would owe on a $50,000 long-term capital gain with $80,000 in other income (single filer, 2026):
| Component | Amount | Notes |
|---|---|---|
| Capital gain | $50,000 | Long-term (held over 1 year) |
| Federal tax (15%) | −$7,500 | Based on $80,000 ordinary income + gain |
| South Carolina state tax (3.58%) | −$1,790 | Applied to the full gain amount |
| Total tax owed | −$9,290 | Federal + state combined |
| You keep | $40,710 | 81.4% of your gain |
After both federal and South Carolina state tax, you keep $40,710 of your original $50,000 gain. The effective combined rate is 18.6%.
Frequently asked questions — South Carolina
Does South Carolina tax short-term and long-term gains differently?
No — South Carolina taxes both short-term and long-term capital gains as ordinary income at the same rates as wages. There is no state-level preferential rate for patience. The federal system, however, taxes long-term gains at 0/15/20% vs. up to 37% for short-term — a significant difference that applies regardless of state.
Do I need to file a South Carolina tax return if I only have capital gains?
If you have capital gains income and meet South Carolina's filing threshold, you are required to file a South Carolina state income tax return. The threshold is typically similar to the standard deduction amount — check the SC Department of Revenue for the current year's filing requirements.
What if I moved to South Carolina mid-year?
If you moved to South Carolina during the year, you are a part-year resident. South Carolina generally taxes capital gains realized while you were a South Carolina resident. Gains realized before you moved may be taxable by your prior state. Keep detailed records of when each sale occurred relative to your move date.