Like a majority of states, South Carolina has an income tax that applies to profits made on real estate transactions. While this tax applies to both residents of South Carolina and non-residents, there is a difference on when the money is collected by the state.
For residents of South Carolina, the money is collected when they file their annual South Carolina income tax return. For non-residents, the money is withheld at the time of the closing of the transaction by the closing attorney. South Carolina instituted this policy because of poor compliance with the law in the past.
Essentially, if ownership is in the name(s) of an individual, 7% of the gain on the money collected at closing of the sale is to be withheld to be applied against the South Carolina income tax. If ownership is in a corporate name, 5% of the gain must be withheld. When you file your South Carolina income tax return, you may owe this amount, owe more, or be due a refund.
If you expect no capital gain for the sale of the property, you will not have anything withheld at closing.
I recommend that you speak with your attorney, your CPA, or the closing attorney prior to closing so that you can do the property planning. You will be required to fill out an affidavit before closing regarding the sale of your property.
If you are thinking about selling your property please call 843-424-6900 or email us for other useful tips and information including a FREE CMA.