South Carolina Form I-295, the Seller’s Affidavit, is what a nonresident uses at closing to reduce or eliminate the state income tax the buyer would otherwise withhold from the sale proceeds. Without it, the buyer must withhold on the full amount realized from the sale. With it, withholding is calculated only on your gain, or eliminated entirely if you qualify for one of the listed exemptions. The form has to be completed, notarized, and in the closing attorney’s hands before funds are disbursed.1South Carolina Department of Revenue. South Carolina Form I-295 Seller’s Affidavit
Why the Affidavit Matters
Under SC Code Section 12-8-580, a buyer purchasing South Carolina real property from a nonresident must withhold state income tax and remit it to the Department of Revenue.2South Carolina Legislature. South Carolina Code 12-8-580 – Withholding by Buyer of Real Property or Associated Tangible Personal Property From Nonresident Seller For individuals, partnerships, trusts, and estates, the rate is the state’s maximum individual income tax rate, which is 5.21% for the 2026 tax year.3South Carolina Department of Revenue. Information About H. 4216 Corporations and other nonresident entities pay 5%.
Here is the practical difference the I-295 makes. Without an affidavit, that percentage applies to the entire sale price. With an affidavit stating your gain, it applies only to the gain. On a property you bought years ago for far less than you’re selling it for, the two numbers are worlds apart. If your situation qualifies for an outright exemption, withholding drops to zero. The form is worth filling out even when you can’t claim a full exemption.
If a buyer fails to withhold the correct amount, the buyer becomes personally liable for the tax.4South Carolina Legislature. South Carolina Code Title 12 Chapter 8 That is why closing attorneys insist on having the I-295 in the file before they release funds. If it isn’t there, they withhold the maximum.
Which Exemption Box Applies to You
The I-295 has a set of checkboxes, and you check only the one that fits. Each corresponds to a different way of getting your withholding down.
Resident or Deemed Resident
If you are actually a South Carolina resident under SC Code Section 12-6-30, you check the “Resident” box and no withholding applies. This comes up when a closing attorney can’t confirm residency and wants the affidavit as documentation.
A nonresident business entity can qualify as a “deemed resident.” A corporation formed outside the state qualifies if its principal place of business is in South Carolina and it does no business in its state of incorporation. Other nonresident businesses qualify if they have been operating in South Carolina for the last two tax years (including the year of sale), will continue the same business after the sale, have filed at least one South Carolina income tax return, are not delinquent on any returns, and hold a certificate of authority or registration to do business in the state.5South Carolina Department of Revenue. SC Revenue Ruling 09-13 – Withholding on Sales of Real and Associated Tangible Personal Property by Nonresidents The deemed resident must also agree to report the sale on a timely filed South Carolina return.
Principal Residence or Involuntary Conversion
If you’re selling your primary home and qualify for the federal gain exclusion under IRC Section 121, check this box. You generally need to have owned and lived in the home for at least two of the five years before the sale, and your gain must fall under the federal exclusion: $250,000 for a single filer or $500,000 for a married couple filing jointly.6Office of the Law Revision Counsel. 26 U.S. Code 121 – Exclusion of Gain From Sale of Principal Residence The two years don’t have to be consecutive; they just have to total 24 months inside that five-year window. If you already claimed this exclusion on another home sale within the previous two years, you can’t claim it again on this one.
If you lived in the home less than two years but sold because of a job move, a health issue, or an unforeseen event, you may qualify for a partial exclusion.7Internal Revenue Service. Publication 523, Selling Your Home In that case, state the taxable portion of the gain in item 12 and withholding is calculated on that amount. Sales through an involuntary conversion under IRC Section 1033 (condemnation, casualty, or theft) also fit under this checkbox.
1031 Like-Kind Exchange
The form has three sub-options for 1031 exchanges. A simultaneous swap deferring the entire gain gets no withholding. A partial exchange with recognized gain (because you received cash or other non-like-kind property) gets withholding on the recognized amount, which you enter in item 12.
For a deferred exchange using a qualified intermediary, check the third sub-option and authorize the intermediary to release transaction information to the Department of Revenue. You must identify a replacement property within 45 days of the sale and close on it within 180 days, and those deadlines don’t extend except in a presidentially declared disaster.8Internal Revenue Service. Like-Kind Exchanges Under IRC Section 1031 If the exchange falls through, you’ll need to file an amended South Carolina return and pay the tax you would have owed.
Other Categories
Several less common situations have their own boxes:
- Tax-exempt organization under IRC Section 501(a), or an insurance company exempt from South Carolina income tax.
- Withholding would consume all net proceeds after paying off liens and mortgages. Any lien or credit line advance taken within one year before closing must not have been made in anticipation of the sale.
- Installment sale, with an amortization schedule attached showing principal and interest. Withholding isn’t required if the total annual withholding would be less than $350.9South Carolina Department of Revenue. I-290 Nonresident Real Estate Withholding
- Employer-sponsored relocation program.
If none of these apply but you know your gain, state it in item 12 and the buyer withholds on that number instead of the full sale price.
Filling Out the Form
Download the current version from the Department of Revenue’s website. An outdated version can cause problems at closing.
At the top, enter the county where the property sits and its tax map number, both of which appear on the county property tax bill or the county assessor’s website. Then fill in the closing date, which should match the date on the deed.
Next comes your identifying information: full legal name, street address with city, state, and ZIP, and your Social Security Number or Federal Employer Identification Number. A nonresident individual without an SSN needs an Individual Taxpayer Identification Number, applied for on IRS Form W-7 with a federal tax return and identity documents attached.10Internal Revenue Service. How to Apply for an ITIN Start that application weeks before closing; ITINs are not fast.
Check the single box that matches your situation. If your category involves a stated gain (partial residence exclusion, partial 1031 exchange), enter the dollar figure in item 12. For an installment sale, attach the amortization schedule.
Every field should match the deed and closing documents exactly. Discrepancies push a cautious closing attorney to withhold anyway rather than risk personal liability.
Notarization and Delivery
The I-295 is a sworn affidavit. You sign under penalties of perjury, acknowledging that the affidavit may be disclosed to the Department of Revenue and that a false statement can bring fines, imprisonment, or both. The form has a notary block: a notary public must witness your signature, affix a seal, and note the commission expiration date.
If you’re signing for a business, trust, or partnership, add your title (Managing Member, Trustee, and so on) next to your signature.
If you can’t be at the closing table, get the form notarized where you are and deliver the notarized original to the closing attorney before the closing date. Many closing attorneys won’t proceed without the original in hand. Do not send this form to the Department of Revenue; the form’s own instructions say to keep it in your tax records and not mail it to SCDOR unless specifically requested. Keep a copy for yourself, because you’ll want it when you document the exemption on your South Carolina return.
Mistakes That Trigger Withholding Anyway
The most common failure is not having the affidavit ready. Sellers assume the closing attorney handles it, then discover on closing day that they need a notarized document they can’t produce remotely. Notarize and deliver several days ahead.
Misstating the gain is the second common trap. If you write a gain figure in item 12 and the Department of Revenue later finds the actual gain was higher, you can face penalties for a false affidavit. Calculate your adjusted basis carefully: original purchase price, closing costs from that purchase, and any capital improvements. Get a tax professional involved if the numbers aren’t obvious.
Principal residence claimants sometimes miscount their occupancy. The rule looks at whether you owned and used the home for at least 24 months within the five years ending on the sale date, and gaps in occupancy are fine as long as the total works.6Office of the Law Revision Counsel. 26 U.S. Code 121 – Exclusion of Gain From Sale of Principal Residence A prior Section 121 exclusion within the last two years disqualifies you regardless.
What the Buyer Still Has to File
Even when your I-295 zeroes out the withholding, the buyer still has a reporting obligation. The buyer files Form I-290 by the 15th of the month after the closing month to document the transaction with the Department of Revenue.9South Carolina Department of Revenue. I-290 Nonresident Real Estate Withholding A skipped I-290 can prompt an inquiry from SCDOR months later, so it’s worth confirming with the closing attorney that the I-290 will be filed regardless of the withholding amount. Names and tax identification numbers on the I-290 must match what’s on your I-295, or the Department of Revenue can’t process it.