A closer look at S.C. and the taxes you pay to live here
With its sandy beaches and warm weather, South Carolina can be an attractive choice for outsiders looking to relocate. The state’s license plates read, “Smiling Faces, Beautiful Places,” but is the tax system in the Palmetto State as welcoming to newcomers as the scenery and people? The answer depends on the specifics of your situation. While South Carolina’s top income tax of 7 percent is one of the highest in the country, the bottom rate (0 percent) is the lowest. The state also has some of the lowest property and gas taxes in the country, but its total sales tax, when including local rates, ranks in the top 20 of U.S. states. INCOME TAX: Like the federal income tax, the South Carolina state income tax applies marginal tax rates based on income tax brackets. To put it another way: As income increases to higher brackets, so does the percentage of income you pay in taxes. SALES TAX: Sales tax is required on most purchases, with some exceptions. Most services are not taxable in South Carolina, except for hotels and motels, laundry services, electricity services and communications services (including TV and Internet service). While groceries are typically exempt from the statewide sales tax, local tax rates still apply to all food. Automobiles, boats, aircraft and other recreational vehicles are subject to a sales tax cap of $500 and local taxes are not due on these purchases. South Carolinians looking for a break from sales tax get one weekend of sales-tax-free purchases of certain items. The sales tax holiday begins on the first Friday in August and runs through the weekend. During that time, purchases of clothing, school supplies, computers, linens and bathroom items (such as towels, shower curtains and bath mats) are exempt from sales tax. PROPERTY TAX: By law, the local option sales taxes in South Carolina are enacted in order to reduce county property taxes. That, in part, explains why property taxes in the Palmetto State are so low. The state’s average effective property tax rate (annual taxes paid as a percentage of home value) are the seventh-lowest in the country at just 0.57 percent. South Carolinians pay an average of $851 a year in property taxes. CAPITAL GAINS TAX: Capital gains are taxed at two different levels in South Carolina. First, short-term capital gains (those realized in less than a year) are considered normal taxable income. For long-term gains, 44 percent of the “net capital gain” is exempt. The net capital gain is the net long-term gain (of more than a year) minus any short-term loss for the taxable year. CIGARETTE TAX: The South Carolina cigarette tax is just 57 cents per pack of 20. That’s the seventh-lowest rate in the country. ALCOHOL TAX: Alcoholic beverage excise and sales taxes in South Carolina are among the highest in the U.S. In addition to general state and local sales taxes, the state collects excise taxes of $5.42 per gallon of liquor (28th-highest), $1.08 per gallon of wine (18th-highest) and 77 cents per gallon of beer (seventh-highest). GAS TAX: The state collects a gas excise tax of just 22 cents, with an additional 0.75 cents in fees, for a total tax of 22.75 cents. This is one of the lowest gas taxes in the country, but it’s on its way up. The state will raise the tax 2 cents every year until it reaches 28 cents in July 2022. That higher rate will put South Carolina’s gas tax closer to the national average.