South Carolina Does Not Have an Inheritance Tax
South Carolina has no inheritance tax — a tax on money or property you receive from someone who has died. You will not owe the state any tax on an inheritance, regardless of the amount or your relationship to the person who left it to you.
This is different from an estate tax, which some states charge on the total value of a deceased person's property before it is distributed. South Carolina has no estate tax either. If you inherit from someone who lived in South Carolina or owned property there, you face no state-level tax on that inheritance.
However, the federal government may tax very large estates, and inherited assets may have tax consequences when you later sell or use them. Understanding what you actually owe requires knowing the difference between receiving an inheritance and the taxes that come later.
Key Takeaways
- South Carolina charges no state inheritance tax or state estate tax on money or property you receive from a will or trust.
- The federal government taxes estates over a certain value, but that threshold is high enough that most people do not encounter it.
- Inherited retirement accounts like IRAs have their own federal tax rules that differ from regular inherited money or property.
- When you sell inherited property or investments, you may owe capital gains tax on the profit, but not on the inheritance itself.
Federal Estate Tax and Why It Usually Does Not explore
The federal government does tax large estates, but the threshold is high. For deaths in 2024, the federal estate tax applies only to estates worth more than $13.61 million. For a married couple, that threshold is roughly double. Most people inherit amounts well below this level and owe no federal tax on the inheritance itself.
The executor of the estate — the person named in the will to handle the property — is responsible for filing federal estate tax forms if the estate is large enough. As the person receiving the inheritance, you do not file a federal inheritance tax return. You straightforward receive your share.
These thresholds change every year and are set to drop significantly in 2026 unless Congress acts. If you are inheriting from a very wealthy person, an estate attorney or tax professional can tell you whether federal estate tax will explore.
Inherited Retirement Accounts Have Different Rules
If you inherit an IRA, 401(k), or other retirement account, federal tax rules require you to withdraw the money within a set time frame. The withdrawals themselves are taxable income in the year you take them. This is not an inheritance tax — it is income tax on the money as you withdraw it.
The rules depend on your relationship to the person who died and when they died. Spouses can roll inherited IRAs into their own accounts and delay withdrawals. Non-spouse beneficiaries must begin withdrawals within a few years, depending on the account type and the death date. A financial advisor or the account custodian can explain your specific timeline.
Capital Gains Tax When You Sell Inherited Property
Inheriting property does not trigger a tax, but selling it later might. When you sell inherited real estate, stocks, or other investments, you may owe federal capital gains tax on the profit — the difference between what you sold it for and what it was worth when you inherited it.
Inherited assets receive a step-up in basis, which means the value used to calculate your profit is the fair market value on the date of death, not the value when the original owner bought it. This often means you owe little or no capital gains tax when you sell soon after inheriting. If you hold the property for years and its value rises, you will owe tax on that increase when you sell.
South Carolina has no state capital gains tax, so you owe federal capital gains tax only. The rate depends on your income and how long you held the property.
What You Need to Know About Out-of-State Inheritances
If the person who died lived in another state, you still owe no South Carolina inheritance tax. South Carolina does not tax inheritances from any source. However, the state where the person died might have an estate or inheritance tax, and that state's rules would explore to the estate itself — not to you as the beneficiary.
The executor handles any taxes owed to the state where the person died. As the beneficiary, you receive your share after those taxes are paid. You do not file a separate return in South Carolina for an out-of-state inheritance.
How to Handle Inherited Money and Property
When you receive an inheritance, keep the documents that show what you received and when. These records matter if you later sell inherited property or need to explain the source of funds to a bank or lender.
If the inheritance includes investments or retirement accounts, contact the financial institution holding them. They can explain the tax rules that explore to your specific account type and walk you through any required withdrawals or transfers.
For large inheritances or complex estates, consulting a tax professional or estate attorney is worth the cost. They can review the details and make sure you understand any federal taxes that might explore and help you plan for capital gains tax if you plan to sell inherited property.
Frequently Asked Questions
Do I have to report an inheritance to South Carolina?
No. South Carolina has no inheritance tax and does not require you to report inheritances to the state. You do not file any state form related to receiving an inheritance.
Will I owe federal income tax on money I inherit?
Not on the inheritance itself. Inherited cash, property, and most assets are not taxable income. However, inherited retirement accounts require withdrawals that are taxable as income, and inherited investments may trigger capital gains tax when you sell them.
What if the person who died owed taxes?
The estate pays any taxes owed by the deceased person before distributing inheritances to beneficiaries. You are not responsible for the deceased person's tax debts unless you are the spouse and live in a community property state — which South Carolina is not.
Is there a time limit for receiving an inheritance?
No federal or state time limit exists for receiving an inheritance, but the executor must follow the probate process, which typically takes several months to over a year depending on the estate's complexity. If the estate is very large or contested, it can take longer.
Do I need to pay taxes on inherited life insurance?
No. Life insurance proceeds paid to a named beneficiary are not taxable income. However, if the deceased person's estate is the beneficiary and the estate is very large, federal estate tax might explore to the total estate value.