South Carolina
A 1031 exchange in South Carolina, where the intermediary can hold the withholding.
South Carolina requires buyers to withhold from nonresident sellers, and it has a specific procedure for exchanges: the withholding can sit with the qualified intermediary and is paid only if the exchange fails.
If you do not live in South Carolina and you sell South Carolina property, the buyer has to withhold state income tax. For a delayed 1031 exchange, the Department of Revenue's Revenue Ruling 09-13 lets that withholding be handed to your qualified intermediary instead of the state, to be paid only if the exchange fails. Set it up before closing, because it depends on documents signed at closing.
onezero3one acts as qualified intermediary for exchanges of South Carolina property, subject to a review of each file before an exchange agreement is signed. We work with your closing agent and tax advisor; we do not give tax or legal advice.
What is specific to this state
The federal rules in IRC §1031 decide whether an exchange qualifies. The items below are state requirements that sit alongside them at closing or on the return. Each links to the official source it was checked against; confirm the current version with your closing agent and tax advisor before relying on it.
| Issue | What applies | Usually handled by | Source |
|---|---|---|---|
| Withholding by the buyer (nonresident sellers) | The buyer of South Carolina real property from a nonresident withholds at the state's top individual income tax rate (individuals, partnerships, trusts and estates) or 5% (corporations), on the amount realized or on the gain if the seller gives a gain affidavit (Form I-295), and reports on Form I-290 by the 15th of the following month. A 2024 amendment replaced the old flat 7%; confirm the rate for the year of sale. Nonresident sellers. | Buyer is liable; the closing attorney remits what it withholds | S.C. Code §12-8-580 (as amended 2024); Forms I-290, I-295 Checked September 30, 2026 |
| Exchanges through a qualified intermediary | Revenue Ruling 09-13 (which superseded Revenue Advisory Bulletin 02-6) gives a delayed exchange two routes. Either the seller pays the withholding from other funds and later claims a refund on Form I-290X, or the seller gives an affidavit of intent to exchange (I-295 box 16c), the buyer gives the qualified intermediary a completed I-290 and the withholding amount, and the intermediary files and pays only if the exchange fails, by the 15th of the month after it is abandoned or the exchange period ends. If the exchange succeeds, nothing is filed. Delayed exchanges of South Carolina property by nonresident sellers. | Seller, buyer and the qualified intermediary, under a written contract | SCDOR Revenue Ruling 09-13, Q&A 22 Checked September 30, 2026 |
| Deed recording fee | South Carolina charges a deed recording fee of $1.85 per $500 of value ($1.30 state, $0.55 county), owed by the seller. SCDOR treats a 1031 exchange as a transfer for consideration, so the exchange deeds are subject to the fee unless another listed exemption applies. Every deed. | Closing attorney | S.C. Code §§12-24-10, 12-24-90; SCDOR Revenue Ruling 99-2 Checked September 30, 2026 |
Withholding on nonresident sellers
The buyer withholds at the state's top individual income tax rate for individuals, partnerships, trusts and estates, or 5% for corporations, on the amount realized, or on the gain if you give the buyer a gain affidavit (Form I-295). A 2024 amendment replaced the old flat 7%, and older guidance still quotes 7%, so confirm the rate for the year you sell. The buyer is liable for it and reports on Form I-290 by the 15th of the following month.
Two ways to handle it in an exchange
Revenue Ruling 09-13, which superseded Revenue Advisory Bulletin 02-6, gives a delayed exchange two options:
| Option | How it works | Effect on your exchange |
|---|---|---|
| 1. Pay from other funds | You pay the withholding from money outside the sale; the buyer remits it on Form I-290. If the exchange qualifies, you claim a refund on Form I-290X. | All sale proceeds go to the exchange; your own cash is tied up until the refund. |
| 2. Qualified intermediary holds it | You give the buyer an affidavit of intent to exchange (Form I-295, box 16c). The buyer completes Form I-290 as if the sale were taxable and gives it, with the withholding amount, to the intermediary under a contract that the intermediary files and pays if the exchange fails. | If the exchange succeeds, nothing is filed or paid. If it fails, the intermediary pays by the 15th of the month after it is abandoned or the exchange period ends. If only part of the proceeds is reinvested, the intermediary files a modified I-290. |
Under option 2 the buyer remains liable to the Department, which is why the buyer's attorney will want the contract with the intermediary in the closing file. The ruling also notes that withholding applies where replacement property has not been identified at the time of sale; ask your advisor how that note is applied to your delayed exchange.
Deed recording fee
South Carolina's deed recording fee is $1.85 per $500 of value ($1.30 state and $0.55 county), owed by the seller. The Department treats a 1031 exchange as a transfer for consideration, so the exchange deeds are subject to the fee unless another statutory exemption applies.
State income tax
South Carolina adopts the Internal Revenue Code and starts from federal taxable income, so a deferred exchange is deferred for South Carolina. Individuals may deduct 44% of net capital gain recognized in the state, which matters for any boot.
Questions South Carolina sellers ask
Can I avoid having South Carolina tax withheld from my exchange proceeds?
Yes, through the intermediary procedure in Revenue Ruling 09-13 (option 2 above), or by paying from other funds and claiming a refund later.
Which box on Form I-295 applies to an exchange through an intermediary?
Box 16c, the seller's statement of intent to complete a like-kind exchange using a qualified intermediary under the ruling's procedure.
Is the deed fee waived for an exchange?
No; the Department treats exchanges as transfers for consideration.
Related
Sources
- SCDOR, Revenue Ruling 09-13 (withholding on nonresident sellers; supersedes RAB 02-6) (checked September 30, 2026)
- S.C. Code Title 12, ch. 8 (§12-8-580) (checked September 30, 2026)
- SCDOR, Form I-295 (seller's affidavit) (checked September 30, 2026)
- SCDOR, Form I-290 (withholding on nonresident sellers) (checked September 30, 2026)
- S.C. Code Title 12, ch. 24 (deed recording fee) (checked September 30, 2026)
- SCDOR, Revenue Ruling 99-2 (deed recording fee) (checked September 30, 2026)
Selling South Carolina property?
Tell us the county, whether you live in South Carolina, and the closing date. The withholding arrangement is agreed before closing.
Discuss your South Carolina exchange