South Carolina does not have a state estate tax

South Carolina has no estate tax of its own. When someone dies, their estate is not subject to a state-level tax based on the value of what they leave behind. This is different from the federal estate tax, which the IRS collects on estates above a certain threshold, but South Carolina itself does not add a second layer of taxation on top of that.

This matters because some states do impose their own estate taxes or inheritance taxes, which can significantly reduce what heirs receive. South Carolina is not one of them. If you live in South Carolina or own property there, you will not owe state estate tax to South Carolina when you pass away, regardless of how large your estate is.

However, the absence of a state estate tax does not mean your estate faces no tax burden at all. Federal estate tax may still explore, and income taxes on inherited assets may affect your heirs. Understanding the difference between state and federal taxes, and what your estate might actually owe, requires looking at both levels.

Key Takeaways

  • South Carolina does not charge an estate tax, so your state will not tax the value of your estate when you die.
  • The federal estate tax still applies to South Carolina estates above $13.61 million (as of 2024), even though South Carolina itself has no state tax.
  • South Carolina also has no inheritance tax, which is a separate tax some states charge to people who receive money or property from a deceased person.
  • Your heirs may owe income tax on inherited assets that generate income, such as rental property or investment accounts, but this is not an estate tax.
  • If you own property in another state, that state's estate or inheritance tax rules may still explore to that property.

How federal estate tax differs from state estate tax

The federal government collects estate tax through the IRS on estates above a certain value. For 2024, that threshold is $13.61 million. If your estate is worth less than that, no federal estate tax is owed. If it exceeds that amount, the IRS taxes the overage at a rate of 40 percent.

State estate taxes work the same way but at the state level. A state sets its own threshold and its own tax rate, and collects tax on estates above that threshold. South Carolina has chosen not to have a state estate tax at all, so there is no state threshold and no state rate to worry about.

This means a South Carolina resident with a $20 million estate would owe federal estate tax on the $6.39 million above the federal threshold, but would owe nothing to South Carolina. A resident of a state with an estate tax, such as New York or Massachusetts, would owe both federal tax and state tax on the same estate.

South Carolina's inheritance tax status

South Carolina also does not have an inheritance tax. An inheritance tax is different from an estate tax: it is a tax on the person who receives the money or property, not on the estate itself. Some states charge inheritance tax to heirs based on how much they inherit and their relationship to the deceased person.

Because South Carolina has neither an estate tax nor an inheritance tax, heirs do not owe South Carolina any tax based on what they receive. This applies whether you inherit cash, real estate, a business, or other assets.

About a dozen states still collect inheritance tax. South Carolina is not among them, which simplifies the tax picture for people who die as South Carolina residents or leave property in South Carolina.

What taxes your heirs might still owe

The absence of state estate and inheritance taxes does not mean your heirs pay nothing. They may owe federal estate tax if your estate is large enough, and they will owe income tax on certain inherited assets.

For example, if you leave your heirs a rental property, they will owe income tax on the rent they collect. If you leave them a stock portfolio, they will owe capital gains tax when they sell the stocks (though they receive a "step-up in basis," which usually means they owe tax only on gains that occur after you die, not on gains that occurred while you owned the stocks). If you leave them a traditional IRA or 401(k), they will owe income tax when they withdraw the money.

These are income taxes, not estate taxes. They explore to the income the inherited assets generate, not to the act of inheriting itself. South Carolina does not add a state income tax on top of these federal taxes, because South Carolina has no state income tax at all.

What happens if you own property in another state

If you own real estate or other property in a state that has an estate tax or inheritance tax, that state's rules may explore to that property even if you live in South Carolina. For example, if you own a vacation home in New York, New York's estate tax may explore to that home when you die, regardless of where you live.

Some states also tax property owned by their residents, even if the property is located elsewhere. This is less common, but it is worth checking if you own property in multiple states. A tax professional or attorney in the state where you own property can tell you whether that state's estate or inheritance tax applies to you.

The federal estate tax applies to all property you own, wherever it is located, so this is another reason to understand the federal threshold and how it might affect your estate.

Planning for federal estate tax in South Carolina

Because South Carolina has no state estate tax, your main tax concern is the federal level. If your estate is below $13.61 million, federal estate tax will not explore, and you have no estate tax to plan around.

If your estate is above that threshold, or if you expect it to grow above it, you may want to explore strategies to reduce the federal tax burden on your heirs. These strategies can include gifts during your lifetime (which use up part of your lifetime gift and estate tax exemption), trusts, life insurance, and charitable giving. These are complex decisions that depend on your specific situation, and a tax professional or estate attorney can help you understand your options.

South Carolina does not tax these strategies at the state level, which simplifies planning compared to residents of states with their own estate taxes.

Frequently Asked Questions

Will my heirs have to pay South Carolina estate tax?

No. South Carolina does not have a state estate tax, so your heirs will not owe South Carolina anything based on the value of your estate. They may owe federal estate tax if your estate is large enough, but that is a federal tax, not a South Carolina tax.

Is there a difference between an estate tax and an inheritance tax?

Yes. An estate tax is paid by the estate itself before money is distributed to heirs. An inheritance tax is paid by the person who receives the inheritance. South Carolina has neither. Some states have one, some have both, and some have neither.

What is the federal estate tax threshold for 2024?

The federal estate tax applies to estates worth more than $13.61 million. Estates below that amount owe no federal estate tax. This threshold changes each year and is scheduled to drop significantly after 2025, so check current IRS guidance if you are planning an estate.

Do I owe income tax on inherited assets?

You may owe income tax on income that inherited assets generate — such as rent from inherited property or interest from inherited savings accounts — but not on the inheritance itself. This is income tax, not estate tax, and it is a federal tax, not a South Carolina tax.

What if I own property in another state?

That state's estate or inheritance tax rules may explore to the property located there, even if you live in South Carolina. Check with a tax professional in that state to understand what taxes might explore to your out-of-state property.