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 someone who lived in South Carolina, you owe the state nothing based on the value of what you received. Federal estate tax can still reach very large estates, and a few other tax rules can affect what you keep, but at the state level the answer is simply: no tax on the inheritance itself.
Why South Carolina Charges Nothing
South Carolina’s estate tax statute is tied to the old federal state death tax credit. Congress effectively eliminated that credit in 2005, which dropped South Carolina’s estate tax liability to zero, and it 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 deceased — spouse, child, sibling, friend — has no bearing on what you owe South Carolina.
Practically, this means you can inherit any amount from a South Carolina resident without filing a state return or paying a state death tax.
When Federal Estate Tax Can Still Apply
The federal government taxes very large estates before assets reach heirs. For people who die in 2026, federal estate tax applies only to estates worth more than $15 million per individual.2Internal Revenue Service. Frequently Asked Questions on Estate Taxes The One, Big, Beautiful Bill, signed on July 4, 2025, set the exclusion at this level and made it permanent, with inflation adjustments starting in 2027.3Internal Revenue Service. What’s New — Estate and Gift Tax
Amounts above $15 million are taxed at rates up to 40 percent. The estate — not you as the heir — files IRS Form 706 and pays the tax within nine months of the date of death.4Internal Revenue Service. Instructions for Form 706 If the deceased person’s total assets are below $15 million, no federal estate tax return is required and no federal estate tax is owed.
Income Tax on Inherited Retirement Accounts
Most inherited assets arrive free of income tax. Retirement accounts are the big exception. Distributions from an inherited Traditional IRA or 401(k) are taxed as ordinary income at your marginal rate, which runs from 10 percent to 37 percent for 2026.5Internal Revenue Service. Federal Income Tax Rates and Brackets You report the withdrawals on your personal return in the year you take them.
The timing of those withdrawals depends on who you are to the account owner. A surviving spouse can roll the inherited account into their own IRA and delay withdrawals until their own required beginning date. Most other individual beneficiaries — adult children, siblings, friends — have to empty the account within ten years of the original owner’s death.6Internal Revenue Service. Retirement Topics – Beneficiary If the owner died before their required beginning date, you can wait until year ten to withdraw the whole balance. If the owner died after that date, you generally have to take annual distributions during the ten years too.
A narrow group of “eligible designated beneficiaries” can still stretch withdrawals over their own life expectancy instead of following the ten-year rule: minor children of the account owner, disabled or chronically ill individuals, and beneficiaries who are no more than ten years younger than the deceased.6Internal Revenue Service. Retirement Topics – Beneficiary
Other Income the Deceased Had Not Yet Received
The same principle covers any income the deceased person earned but had not collected before death. Unpaid wages, accrued bonuses, sales commissions, and deferred compensation are all taxable to whoever receives them, in the year they are received.7Office of the Law Revision Counsel. 26 USC 691 – Recipients of Income in Respect of Decedents
Step-Up in Basis on Inherited Stocks and Real Estate
When you inherit stocks, mutual funds, or real estate, the tax basis resets to the property’s fair market value on the date of death, not the price the original owner paid.8Office of the Law Revision Counsel. 26 USC 1014 – Basis of Property Acquired From a Decedent All the appreciation that built up during the deceased person’s lifetime is wiped out for capital gains purposes.
Say a parent bought stock for $20,000 and it was worth $200,000 the day they died. Your basis is $200,000. Sell right away and you owe no capital gains tax. Hold on and sell later at $250,000, and only the $50,000 of post-inheritance gain is taxable. To document the stepped-up basis, get a date-of-death appraisal for real estate and save brokerage statements showing the value of financial assets on the date of death.9Internal 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, not the stepped-up value.9Internal Revenue Service. Publication 551 – Basis of Assets
Property Tax When You Inherit a South Carolina Home
Inheriting real estate in South Carolina does not trigger an automatic reassessment. A county assessor generally cannot reassess a property at fair market value outside of a countywide reassessment cycle just because ownership changed.10South Carolina Department of Revenue. SC Revenue Advisory Bulletin 02-7 – Assessment of Real Property in a Non-reassessment Year What can change, and change sharply, is the assessment ratio.
Owner-occupied homes qualify for a 4 percent assessment ratio when the owner uses the property as their primary legal residence. Second homes, rental properties, and vacant land are assessed at 6 percent.11South 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 do not move in, the ratio moves to 6 percent. That is a 50 percent jump in the taxable assessment, and it can add hundreds of dollars or more to the annual bill.
If you do plan to live in the inherited home, apply through the county assessor’s office and certify that it is your legal residence and domicile.12South Carolina Department of Revenue. Individual Property Tax – Chapter 5 The application has to be filed before the first penalty date for property tax payment in the year you first claim the lower rate. If you move in within 90 days of taking ownership, the 4 percent ratio can apply retroactively to the date of ownership.
Homestead Exemption
If you are at least 65 years old, totally and permanently disabled, or legally blind, you may qualify for the homestead exemption on top of the 4 percent rate. It exempts the first $50,000 of fair market value of a legal residence from all property taxes.13South Carolina Department of Revenue. Exempt Property Apply through your county auditor’s office. You have to meet the eligibility requirements as of December 31 of the year before the tax year.
What If the Inheritance Comes From Another State?
South Carolina has no inheritance tax, but five states do: Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. If you live in South Carolina but inherit from someone domiciled in one of those states, or you inherit real property physically located there, you could owe that state’s inheritance tax regardless of where you live. Rates and exemptions vary a lot by your relationship to the deceased. Spouses and direct descendants often pay little or nothing; unrelated beneficiaries can face rates as high as 15 to 18 percent.
Maryland is the only state that levies both an estate tax and an inheritance tax. If any part of your inheritance ties back to one of these five states, the cost of a tax professional familiar with that state’s rules is usually worth it.