South Carolina does not have an inheritance tax, and it does not have a state estate tax either. If you inherit cash, a house, retirement accounts, or any other assets from a South Carolina resident, the state takes nothing based on the value of what you receive. A few other taxes can still reach the money, including federal estate tax on very large estates, income tax on inherited retirement accounts, and changes to the property tax rate on an inherited home. The rest of this guide walks through where tax can still show up.
What South Carolina Does Not Charge
South Carolina’s estate tax statute is tied to the federal state death tax credit, and Congress effectively eliminated that credit in 2005. Because the credit dropped to zero, the state’s estate tax liability dropped to zero with it and has stayed there.1South Carolina Legislature. South Carolina Code Title 12 – Taxation Chapter 16 Estate Tax The state also has no separate inheritance tax, so your relationship to the person who died (spouse, child, cousin, friend) does not change what you owe the state. The answer is the same in every case: nothing.
That means you can inherit an estate of any size from a South Carolina resident without filing a state death-tax return or paying a state death-tax bill.
When Federal Estate Tax Can Still Apply
The federal government taxes very large estates before assets ever reach the heirs. For people who die in 2026, federal estate tax applies only to estates valued above $15 million per individual, known as the basic exclusion amount.2Internal Revenue Service. Frequently Asked Questions on Estate Taxes The One, Big, Beautiful Bill, signed into law on July 4, 2025, raised the exclusion to that level and made the increase permanent, with inflation adjustments starting in 2027.3Internal Revenue Service. What’s New — Estate and Gift Tax
Any value above $15 million is taxed at rates up to 40 percent. The estate itself pays the tax, not the individual heirs. The executor files IRS Form 706 and pays within nine months of the date of death.4Internal Revenue Service. Instructions for Form 706 Below $15 million, no federal estate tax return is required and no federal estate tax is owed.
A married couple can shield roughly twice that amount by using portability. When the first spouse dies, the executor can file Form 706 to transfer the unused exclusion to the surviving spouse, potentially shielding up to $30 million from federal estate tax. The election has to be made within nine months of the first death (fifteen with an extension), or up to the fifth anniversary of the death under IRS Revenue Procedure 2022-32.5Internal Revenue Service. Instructions for Form 706 – Portability of the DSUE Amount
Income Tax on Inherited Retirement Accounts
Most inherited assets arrive free of income tax. Retirement accounts are the big exception. Money you pull out of an inherited Traditional IRA or 401(k) is taxed as ordinary income at your own marginal rate, which ranges from 10 to 37 percent for 2026.6Internal Revenue Service. Federal Income Tax Rates and Brackets You report each distribution on your personal return in the year you take it.
How quickly you have to drain the account depends on who you are. A surviving spouse can roll the account into their own IRA and wait until their own required beginning date to start withdrawals. Most other individual beneficiaries, including adult children, siblings, and friends, must empty the account within ten years of the original owner’s death.7Internal Revenue Service. Retirement Topics – Beneficiary If the original owner had already started required distributions, the beneficiary generally has to take annual withdrawals during that ten-year period as well. If the owner died before that point, the beneficiary can wait and clean out the account in year ten.
A narrow group of “eligible designated beneficiaries” can still stretch distributions over their own life expectancy: minor children of the account owner, disabled or chronically ill individuals, and beneficiaries no more than ten years younger than the deceased.7Internal Revenue Service. Retirement Topics – Beneficiary
The same principle reaches other income the deceased earned but had not yet collected. Unpaid wages, accrued bonuses, sales commissions, and deferred compensation all count as income in respect of a decedent. Whoever actually receives the payment, whether the estate or a beneficiary, includes it in gross income for the year it comes in.8Office of the Law Revision Counsel. 26 USC 691 – Recipients of Income in Respect of Decedents
Step-Up in Basis on Most Other Assets
Stocks, mutual funds, real estate, and most other appreciated property get a step-up in basis when you inherit them. The tax basis resets to fair market value on the date of death, erasing every dollar of appreciation that built up during the deceased person’s lifetime for capital gains purposes.9Office of the Law Revision Counsel. 26 USC 1014 – Basis of Property Acquired From a Decedent
Say a parent bought stock for $20,000 and it was worth $200,000 on the day they died. Your basis is $200,000. Sell immediately and you owe no capital gains tax. Hold it until it climbs to $250,000, and only the $50,000 gained after you inherited is taxable. Get a date-of-death appraisal for real estate and keep brokerage statements showing values on the date of death, because those documents prove your stepped-up basis if the IRS ever asks.10Internal Revenue Service. Publication 551 – Basis of Assets
One narrow exception: if you gave appreciated property to someone and they died within a year, the property comes back to you at the decedent’s original adjusted basis rather than the stepped-up value.10Internal Revenue Service. Publication 551 – Basis of Assets
Property Tax Changes on an Inherited South Carolina Home
Inheriting a house in South Carolina does not force a reassessment of its value. A county assessor generally cannot bump the appraised value to fair market just because ownership changed hands outside the regular countywide reassessment cycle.11South Carolina Department of Revenue. SC Revenue Advisory Bulletin 02-7 – Assessment of Real Property in a Non-reassessment Year What can change, and often does, is the assessment ratio.
Owner-occupied primary residences in South Carolina are assessed at 4 percent. Second homes, rentals, and vacant land are assessed at 6 percent.12South Carolina Legislature. South Carolina Code 12-43-220 – Classifications of Property and Assessment Ratios If the person you inherited from had the 4 percent rate and you keep the house as a second home or a rental, the assessment ratio jumps to 6 percent. That is a 50 percent increase in the taxable assessment and can add hundreds of dollars or more to the annual bill.
If you plan to move in and make the house your primary residence, apply with the county assessor’s office and certify the home as your legal residence and domicile.13South Carolina Department of Revenue. Individual Property Tax – Chapter 5 File before the first penalty date for property tax in the year you first claim the lower rate. If you occupy the property within 90 days of acquiring ownership, the 4 percent ratio can apply retroactively to the date you became the owner.
If you are at least 65, totally and permanently disabled, or legally blind, the homestead exemption shields the first $50,000 of fair market value of your legal residence from property tax entirely. You apply through the county auditor’s office and must meet eligibility as of December 31 of the year before the tax year.14South Carolina Department of Revenue. Exempt Property
Inheriting From Someone Outside South Carolina
South Carolina’s “no inheritance tax” answer only covers inheritances from South Carolina residents and property located here. Five other states still charge an inheritance tax: Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. If you inherit from someone who lived in one of those states, or inherit real estate physically located in one of them, you can owe that state’s inheritance tax even though you live in South Carolina. Rates depend on your relationship to the deceased. Spouses and children often pay little or nothing; unrelated beneficiaries can see rates as high as 15 to 18 percent. Maryland is the only state that charges both an estate tax and an inheritance tax. If any part of the inheritance connects to those states, a tax professional familiar with that state’s rules is worth the call.