South Carolina Estate Tax and Inheritance Tax: What Heirs Actually Owe

The first question most heirs ask when a family member dies: "How much of this is the government going to take?"

In South Carolina, the honest answer is: probably nothing — at least at the state level. South Carolina has no estate tax and no inheritance tax. The state repealed its estate tax in 2005 and has never enacted an inheritance tax. Whatever you inherit from a South Carolina resident, you owe the state zero on the transfer itself.

That said, there are real tax obligations that survivors need to handle correctly. Missing them can trigger penalties, delay estate closure, or cost the estate money unnecessarily. Here is what actually applies.

South Carolina Has No Estate Tax and No Inheritance Tax

South Carolina does not impose any state-level tax on the transfer of a decedent's assets, regardless of the estate's size. This applies whether you are inheriting $50,000 or $5 million — the state of South Carolina will not send a tax bill simply because you inherited property.

This also means:

• There is no South Carolina estate tax return to file
• There is no inheritance tax due from beneficiaries
• Heirs who receive property through a will, intestate succession, or trust pay no state transfer tax on that inheritance

The one exception worth knowing: if you are inheriting real property located in another state that does impose an inheritance tax — Pennsylvania, New Jersey, Maryland, Nebraska, Iowa, and Kentucky all currently have inheritance taxes — that out-of-state property may trigger a tax obligation in that state, not South Carolina. The location of the asset determines which state's rules apply, not where the heir lives.

Federal Estate Tax: When It Applies

Federal estate taxes are an entirely separate matter from South Carolina's laws, and the federal threshold is very high.

For deaths occurring in 2025, the federal estate tax exemption is approximately $13.99 million per individual. This means the entire taxable estate must exceed $13.99 million before any federal estate tax is owed. For married couples who plan properly, the combined exemption effectively doubles through the portability election.

If an estate does exceed the federal threshold, the federal estate tax return (Form 706) must be filed with the IRS within nine months of the date of death, with a possible six-month extension. A South Carolina-based probate attorney or CPA handles this; the South Carolina probate court is not involved.

For the overwhelming majority of South Carolina estates, federal estate tax is not a factor.

The Tax Obligations That Do Exist

Even though there is no estate or inheritance tax, two real tax obligations apply to nearly every estate.

The Decedent's Final Income Tax Return

The personal representative or surviving spouse must file the decedent's final South Carolina individual income tax return (Form SC1040) with the South Carolina Department of Revenue by April 15 of the year following the death. The filing status used must match the federal return.

The form must clearly indicate that the taxpayer is deceased. If filing as a surviving spouse on a joint return, the surviving spouse signs in their own name on the signature line.

If a tax refund is due, the surviving spouse or personal representative must attach Form SC1310 (Statement of Person Claiming Refund Due a Deceased Taxpayer) to direct payment to the rightful recipient.

Income Tax on Inherited Retirement Accounts

Inherited retirement assets — traditional IRAs, 401(k)s, and similar accounts — are not taxed at transfer, but withdrawals trigger ordinary income tax. South Carolina provides some relief here: a surviving spouse receiving qualified retirement income from the deceased spouse's accounts may deduct up to $3,000 or $10,000 from South Carolina taxable income, depending on the age the deceased spouse would have been at the time of the distribution.

Military retirement income is fully deductible from South Carolina taxable income, with no dollar cap. This applies to the surviving spouse's Survivor Benefit Plan (SBP) payments as well.

What About Property Received Through Inheritance?

Real estate, investment accounts, and personal property received through inheritance benefit from a stepped-up tax basis. This means the cost basis for capital gains purposes is reset to the fair market value at the date of death, not the original purchase price. If you inherit a house your parent bought in 1985 for $80,000 and it is worth $300,000 on the date of death, your cost basis is $300,000. If you sell it shortly after for $310,000, capital gains tax only applies to the $10,000 gain.

South Carolina follows the federal treatment on stepped-up basis.

What Survivors Frequently Overlook

Several tax-adjacent issues trip up South Carolina heirs:

Medicaid Estate Recovery: The SC Department of Health and Human Services can file a claim against the estate to recover Medicaid long-term care costs. This is not a tax, but it reduces the assets available to heirs. Only estates with assets over $25,000 and total Medicaid claims over $500 are actively pursued.

Property Tax Exemption Continuity: If the decedent had the Homestead Property Tax Exemption — which exempts the first $50,000 of a home's fair market value for residents over 65, blind, or disabled — the surviving spouse can continue it, but only if they are at least 50 years old and acquire full title within nine months of the death.

Deed Recording Fees on Inherited Real Estate: When real estate passes through probate, the personal representative uses a Deed of Distribution (Form 400ES) to transfer title. This deed is explicitly exempt from South Carolina's standard deed recording fee of $1.85 per $500 of value. Nominal county indexing fees (typically $10–$15 per page) still apply.

The South Carolina Survivor Benefits Navigator walks through the full estate settlement timeline, including all tax filings, SCDHHS notifications, and property transfers required by county probate courts.

Quick Reference: South Carolina Tax Summary for Heirs

South Carolina is one of the most favorable states in the country for wealth transfer. The absence of both estate and inheritance taxes means heirs receive substantially more of what was intended for them — provided the estate is properly administered and the available deductions and exemptions are actually claimed.

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