A Short History of Estate Tax in South Carolina
Explore the ins and outs of estate tax in South Carolina, focusing on federal implications since the state levy does not exist.
The story of the estate tax in South Carolina is mostly a story of exit. Today, South Carolina does not impose a separate estate tax or inheritance tax. That result took shape through federal changes and state conformity choices over several decades.
For years, South Carolina—like many states—used a “pick-up tax” or “sponge” tax. Instead of a standalone levy, the state collected an amount equal to the federal credit allowed for state death taxes. It didn’t increase the overall bill; it simply redirected part of the federal tax to the state. When Congress passed the 2001 tax law (EGTRRA), it phased out that federal credit and ended it entirely in 2005, undercutting state pick-up systems.
South Carolina chose not to “decouple” from the federal change. With the federal credit gone after January 1, 2005, the estate tax effectively disappeared for decedents on or after that date. The Department of Revenue states this plainly. There is no South Carolina estate tax for decedents dying on or after January 1, 2005. There is also no inheritance tax (a tax on beneficiaries rather than the estate).
What No Estate Tax in South Carolina Means for Folks Who Live or Own Property There
While the state no longer levies its own estate tax, federal estate tax rules still apply to very large estates. State law also retains apportionment provisions—rules about how any estate tax is divided among beneficiaries—primarily relevant when federal tax is due or when other jurisdictions’ taxes apply.
For planning purposes, the absence of a state-level estate tax simplifies many estates. It also means families focus on federal thresholds and on practical steps like titling, beneficiary designations, and trust funding. Meanwhile, policymakers periodically debate federal repeal or changes—so it’s wise to keep an eye on federal law, even though state law currently imposes no separate levy.
To Sum Up
In short, the estate tax in South Carolina moved from a pick-up model to no state tax at all once the federal credit vanished in 2005—and it has stayed that way since.
(Read Further: Learn about revocable trusts in South Carolina versus Nevada.)