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StructuredSales.org
South Carolina sellers spent the spring of 2026 watching a rate cut arrive after some of them had already signed letters of intent. Act 110, H. 4216, was signed on March 30, 2026, and it applies to tax years beginning after December 31, 2025. A closing in January is taxed under the new schedule, not the old 6% top rate. The 44% net-capital-gain deduction was left in place. The planning question is how those two rules sit on top of an installment schedule, not whether the state invented a special capital-gains bracket. It did not.
The people running that math are a mixed group: Williamsburg and Darlington County families selling cropland that has been rented for a decade, lowcountry timber owners, Greenville and Spartanburg manufacturers whose buyers are out-of-state strategics, and Charleston or Hilton Head landlords who are done being landlords. A move to Florida is a common second chapter. Florida will not tax the gain. South Carolina may still tax the land.
For 2026, South Carolina tax on taxable income under $30,000 is 1.99%. Taxable income of $30,000 or more is taxed at 5.21% of the whole amount, minus $966, which is what keeps the tax continuous at the bracket line. The dollar thresholds are adjusted later by the chained consumer price index. Above $30,000, added taxable income costs 5.21 cents on the dollar.
Forty-four percent of net capital gain recognized in South Carolina is deductible under section 12-6-1150. The other 56% is taxed at up to 5.21% in 2026. On a dollar of long-term gain that is already in the top bracket, that is about 2.92% of the full gain (0.56 × 5.21%).
Section 12-6-1150 defines net capital gain by Internal Revenue Code section 1222. Partnership and S corporation capital gain flows into South Carolina income. H. 4216 also starts the return from federal adjusted gross income, decouples from the federal standard and itemized deductions, and creates a South Carolina Income Adjusted Deduction of $15,000 single or married filing separately, $22,500 head of household, and $30,000 married filing jointly, subject to reduction as income rises. The Department's summary of the bill does not repeal the 44% deduction. The estimate below ignores that income-adjusted deduction and its phase-down.
From 2027, further cuts to the 5.21% rate depend on a Board of Economic Advisors projection that collections will rise enough to fund a reduction, until the top rate reaches 1.99% and, later, possibly lower. A payment received in a future year uses whatever rate is actually in effect. The table does not assume a cut.
Act 110 points the individual return at federal adjusted gross income and then modifies it. Gain reported on Form 6252 is therefore in the federal starting point for the year it is recognized. Section 12-6-1210(D) is the state's own installment coordination rule, and it is easy to misread. If a taxpayer already reported the entire gain for South Carolina purposes in an earlier year, later federal installment gain is subtracted so South Carolina does not tax it twice. If a taxpayer elected installment reporting for South Carolina and not for federal purposes, the South Carolina gain keeps being reported on top of other income. For a new sale that uses IRC § 453 on both returns, the ordinary path is one schedule: the federal recognized gain comes into the South Carolina return, and the 44% deduction applies to net capital gain recognized in the state that year.
Section 12-6-2220(4) allocates gain on real property to the state where the property sits, except that gain which simply returns depreciation previously deducted in a South Carolina computation is allocated to South Carolina to that extent. A seller who deeds a Pee Dee farm, moves to Florida, and collects installment principal still has South Carolina-source land gain each year. Florida has no individual income tax. Gain on intangible property that is not connected with a business is allocated to the seller's domicile, so stock can follow a move in a way the land cannot. Georgia sources and withholds a Savannah River tract under its own statute.
Coastal-plain farmland and timber are the sales where basis is often a number from a parent's estate a generation back, or from a purchase in the 1990s. The farmland allocation still comes first: tile, irrigation, and equipment can throw depreciation recapture that is taxed in the year of sale and is not capital gain, so it is outside the 44% deduction. The land is the installment candidate. Heirs should read inherited farmland basis before they assume the whole price is gain. A 1031 exchange remains the alternative when the family wants more land rather than income.
Upstate sales follow the business-sale pattern: goodwill that is capital gain can use the installment method and the 44% deduction, while § 1245 recapture and a consulting covenant are ordinary, taxed at up to 5.21% with no 44% haircut, and due in the year of sale. Charleston rentals add unrecaptured section 1250 gain, which can be installment income and is taxed federally at up to 25% as received. See selling rentals without a 1031 and, for a house, gain above the federal home-sale exclusion.
The couple sells cropland and woods for $1,500,000. Basis is $300,000. Long-term gain is $1,200,000, assumed to qualify for the federal long-term rates and for the 44% South Carolina deduction, with no recapture in the price. An eight-year level principal schedule collects $187,500 a year. The gross-profit percentage is 80%, so recognized gain is $150,000 a year. Interest is omitted from the tax column; it would be ordinary income when received. The sale price is under the $5 million threshold for the federal § 453A interest charge.
Federal assumptions are Rev. Proc. 2025-32 for a joint return: 0% long-term gain through $98,900 of taxable income, 15% through $613,700, 20% above that, a $32,200 standard deduction, and the 3.8% net investment income tax over $250,000 of modified adjusted gross income. Other adjusted gross income is $72,200, so other taxable income is $40,000 and $58,900 of the 0% band remains. Each installment year taxes the rest of the $150,000 gain at 15% ($13,665) and stays under the 3.8% threshold. The lump-sum year uses that same 0% room, then $514,800 at 15% and $626,300 at 20%, and it owes 3.8% on $1,022,200.
The South Carolina line in the table pretends the included gain is the only South Carolina taxable income, so each year restarts the 1.99% bracket. Included gain is 56% of recognized gain: $672,000 in the lump-sum year and $84,000 in each installment year. Tax is 5.21% of that amount minus $966, because both figures are over $30,000. Rounded to the nearest dollar, that is $34,045 once, or $3,410 a year for eight years ($27,283). The new income-adjusted deduction and its phase-down are not in these figures. Brackets are also held at 2026 dollars, though the statute inflates them.
| Tax on the $1.2 million gain | Lump sum in 2026 | Eight-year total |
|---|---|---|
| Federal long-term capital gain tax | $202,480 | $109,320 |
| Federal 3.8% net investment income tax | $38,844 | $0 |
| South Carolina tax on 56% of the gain | $34,045 | $27,283 |
| Combined | $275,369 | $136,603 |
About $6,762 of that difference is South Carolina, from using the $966 bracket adjustment eight times instead of once. The rest, about $132,004, is federal. If other South Carolina taxable income is already over $30,000, the state column changes: 5.21% × $672,000 is $35,011 on the lump sum and the same $35,011 spread across the installment years. State savings fall to zero, aside from any later triggered rate cut, which this table does not assume. Federal savings in that case are the reason to run the schedule. Related-party resales and depreciation recapture can pull gain back into the closing year under §§ 453(e) and 1245. Those rules are not optional and they are not in the table.
For tax years beginning after 2025, South Carolina tax is 1.99% of taxable income under $30,000 and 5.21% of taxable income of $30,000 or more, minus $966. Act 110 (H. 4216), signed March 30, 2026, made that structure effective for 2026. Long-term gain is not taxed at a special rate. Individuals may deduct 44% of net capital gain recognized in South Carolina, so 56% of the gain enters taxable income.
The codified statute, section 12-6-1150, still allows individuals, estates, and trusts a deduction equal to 44% of net capital gain recognized in South Carolina. The Department of Revenue's summary of H. 4216 lists the new brackets, the decoupling from federal itemized and standard deductions, and the South Carolina Income Adjusted Deduction. It does not list a repeal of the capital-gain deduction. Net capital gain follows Internal Revenue Code section 1222.
Only if a cut actually takes effect for that payment's tax year. Beginning in 2027, the 5.21% top rate is reduced when the Board of Economic Advisors projects a large enough increase in individual income tax collections, until the top rate reaches 1.99% and, after that, possibly lower. Those cuts are conditional. A payment received in a later year is taxed under the rates in force for that year, not under a rate promised in advance.
Florida does not tax individual income. South Carolina allocates gain on real property to the state where the property is located. Installment gain on South Carolina land generally stays South Carolina income in the year it is recognized, and the 44% deduction applies to net capital gain recognized in the state that year. Gain on intangible property that is not connected with a business is allocated to the individual's domicile, which is a different rule.
The 44% deduction applies either way, so it is not an installment benefit. South Carolina's lower bracket covers only the first $30,000 of taxable income. Restarting that bracket each year saves a few thousand dollars on a large gain if the seller has little other South Carolina taxable income, and it saves nothing at the state level if other taxable income is already past $30,000. Most of the arithmetic difference in a large sale is federal: the 20% long-term bracket and the 3.8% net investment income tax.
Last reviewed: October 22, 2026.
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