Giant disclaimer- you should always consult a tax professional and a real estate attorney for detailed information about your specific situation. 

With that out of the way, we wanted to share a heads up that according to South Carolina Code Section 12-8-580, buyers must withhold between 6% - 7% (it fluctuates every year) of the gain for individual non-resident sellers and 5% for corporations. This withholding happens at closing, which means less money in your pocket when you walk away from the table. Why? Because out of state sellers are not typically filing a South Carolina tax return and South Carolina is going to make sure they get paid taxes on any gain of a real estate transaction. 

Who Qualifies as a Non-Resident Seller?

The state considers you a non-resident seller if you're: 

• An individual whose permanent home is outside South Carolina on closing day
• A corporation incorporated outside South Carolina
• A partnership with its principal place of business outside South Carolina
• A trust administered outside South Carolina
• An estate where the deceased person's permanent home was outside South Carolina

If multiple people own the property, each owner's residency status is determined separately. So you could have one resident owner and one non-resident owner on the same transaction.

The Primary Residence Exception:

The most common way to avoid this withholding is through the primary residence exclusion. If you used the property as your main home for at least two of the last five years, and you didn't use it for business or rental purposes, you may qualify for an exclusion of up to $250,000 per seller under IRS Section 121.

This means if your gain is $250,000 or less and you meet the primary residence requirements, no withholding would apply. If your gain exceeds $250,000, withholding would only apply to the amount over $250,000.

Other Exceptions Exist:

There are additional situations where withholding doesn't apply, including certain gifts, inheritances, and like-kind exchanges under IRS Section 1031. Each situation is unique, and determining which exceptions might apply requires careful review of your specific circumstances.

How Gain is Calculated:

The burden is on you as the seller to provide the gain calculation. This is typically done by comparing your original cost basis (what you paid for the property plus improvements) to your net proceeds from the sale.

We strongly recommend working with your CPA or tax advisor to calculate your gain accurately. Getting this wrong could result in unnecessary withholding or compliance issues down the road.

Our Recommendation:

If you're an out-of-state seller considering selling property in South Carolina, contact us early in the process. We can talk through your scenario and  connect you with the right professionals to ensure accurate calculations.

Nobody likes surprises at the closing table, especially when it means less money than you expected. By addressing these requirements upfront, we can help you plan accordingly and avoid any last-minute complications. We provide a detailed Net to Seller estimate that includes ALL of your potential costs so you can make an informed decision when selling your property. 

If you have questions about South Carolina's withholding requirements or need guidance on selling property as a non-resident, please don't hesitate to reach out. We're here to help navigate these requirements and ensure a smooth transaction.