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More than a quarter of South Carolina homeowners could face a surprise tax bill if they decide to sell. According to new data from the National Association of Realtors®, 25.8% of the state’s homeowners have built up more home equity than the IRS allows to be excluded from capital gains tax. And 6.3% have exceeded the $500,000 cap for married couples, exposing them to one of real estate’s most overlooked tax burdens.
The federal exemption—$250,000 for single sellers and $500,000 for joint filers—was set in 1997 and hasn’t moved since. Meanwhile, home prices nationwide have risen more than 260%, making the exemption increasingly irrelevant. Sellers today are more likely to find themselves penalized just for watching their homes appreciate over time.
South Carolina taxes capital gains as income but provides a 44% deduction on long-term gains. Still, when combined with federal taxes, the hit can be significant. The longer a homeowner has stayed put, the more likely they’ll face a bill at sale.
Appreciation that comes with a price
For many South Carolina homeowners, rising property values have turned their home into a major financial asset. But appreciation also brings exposure to the home equity tax. That’s the tax triggered when profits from a sale exceed the exclusion—and the financial consequences can be steep.
In metro areas like Charleston, Columbia, and Greenville, decades of steady growth have pushed prices far beyond original purchase points. Homes once worth $150,000 may now go for double that or more. That means even modest homes could come with unexpected tax bills.
This has created a “stay-put penalty,” discouraging longtime owners from downsizing or relocating. Fewer listings means tighter inventory for younger buyers. The result: fewer available homes and higher competition.
(Realtor.com)
How South Carolina compares in the Southeast
At 25.8%, South Carolina’s exposure rate is below states like Florida (47.8%) and Georgia (31.3%). It’s similar to neighboring states like North Carolina, where 33.9% exceed the $250K threshold, but South Carolina’s 6.3% exposure at the $500K level is comparatively modest.
Capital gains tax used to affect only high-end sellers. But in today’s market, it’s becoming a middle-class issue. Even homeowners in smaller towns and suburbs are finding that appreciation pushes them into taxable territory.
The view toward 2035
Looking ahead, nearly 70% of all U.S. homeowners could surpass the $250,000 cap by 2035. In South Carolina, that would mean millions more exposed to capital gains tax—just for trying to tap their home equity.
The average tax liability for those above the limit is expected to reach $74,708 by then. In high-growth regions, that number could be even higher.
There’s growing support for the More Homes on the Market Act, a federal proposal that would double the exclusion and link it to inflation. Supporters say this change could unlock equity, improve inventory, and ease the pressure on older owners.
Until then, South Carolina sellers should understand how appreciation and tax rules intersect. Because in today’s market, what looks like a win might come with a tax sting.
This article was produced with editorial input from Dina Sartore-Bodo, Gabriella Iannetta, and Allaire Conte.