Most South Carolina landlords know they can deduct expenses like mortgage interest and repairs. But oftentimes they stop there, missing the ones that apply differently in their state than they do elsewhere.

South Carolina’s tax system for rental properties is unique. On the property tax side, the state assesses rental properties at 6% of their value instead of 4% like owner-occupied homes. But it also offers a 6% exemption that can reduce your property tax assessment by up to 25%. 

On the income tax side, how you rent your property matters. Short-term rentals can be taxed at a flat 3% rate if you meet certain requirements, compared to progressive rates for long-term rentals. And unlike federal law, South Carolina doesn’t allow bonus depreciation.

This post covers the deductions and tax strategies specific to South Carolina. You’ll learn how the state taxes your rental income, which exemptions apply to your property, and how to structure your short-term rental to take advantage of the lower tax rate. 

South Carolina rental property tax deduction rules

South Carolina’s rental property tax system has several moving parts. How the state assesses your property for taxes, how it taxes your rental income, and which depreciation strategies are allowed all differ from federal rules. The following sections break down each of these areas so you know exactly what applies to your situation.

How South Carolina taxes rental income

South Carolina taxes rental income using progressive rates that range from 0% to 6% for tax year 2025. Your rental income (after deducting allowable expenses) is added to your other income for the year, and your state tax rate depends on your total income level.

For example, if you have $50,000 in net rental income and your total household income puts you in the 4% tax bracket, you’ll owe $2,000 in South Carolina state income tax on that rental income. If your total income is higher and you’re in the 6% bracket, you’d owe $3,000.

If you’re an out-of-state landlord who owns rental property in South Carolina but resides elsewhere, you’re still required to file a South Carolina state income tax return and pay state income tax on your rental income. The same progressive tax rates apply.

One important detail: rental income is not subject to automatic withholding like wages from an employer. If you expect to owe $1,000 or more in South Carolina state income taxes on your rental income, you’ll need to make quarterly estimated tax payments. These are due on April 15, June 15, September 15, and January 15 of the following year.

For more information on South Carolina’s individual income tax rates and requirements, visit the South Carolina Department of Revenue Individual Income Tax page.

Property tax assessment: the 6% ratio and exemption

South Carolina state law establishes that rental properties are assessed at 6% of their fair market value, compared to 4% for owner-occupied primary residences. While counties administer these assessments, the ratios are set by state law and apply uniformly across all South Carolina counties. 

However, if you purchase a rental property that was also used as a rental by the previous owner, you may qualify for a valuable exemption. The ATI (Assessable Transfer of Interest) Fair Market Value Exemption reduces your taxable value by up to 25% of the purchase price.

Here’s how it works: If you purchase a rental property for $650,000, the exemption allows you to reduce your taxable value by $162,500 (25% of $650,000). Instead of paying property taxes on $650,000, you pay on $487,500. This reduction can save you hundreds of dollars annually, depending on your local property tax rate.

Note that the property is still assessed at the 6% rate. The exemption reduces the value being assessed, not the assessment ratio itself. Also, the exemption cannot reduce your taxable value below the current fair market value shown in county records at the time of purchase.

To claim this exemption, you must notify your county assessor by January 31st in the year following your purchase. This is a one-time application, not an annual claim. Once approved, the exemption continues automatically each year until the property’s classification changes or you sell it.

Accommodations tax and the 3% flat rate for short-term rentals

Short-term rentals (classified as properties rented for less than 90 consecutive days) are subject to South Carolina’s Accommodations Tax. You must collect and remit 2% Accommodations Tax plus 5% sales tax on rental income, plus any applicable local taxes. These rates vary by county and municipality, so check with your local tax authority for exact rates in your area.

If your short-term rental qualifies as “active trade or business income” under South Carolina law, it’s taxed at a flat 3% state income tax rate instead of the progressive rates (0%-6%) that apply to long-term rentals. To qualify, you must be actively involved in the business—providing services beyond simply collecting rent, such as housekeeping or concierge services. Properties operated like hotels or bed and breakfasts are more likely to qualify than occasional rentals on platforms like Airbnb.

South Carolina’s bonus depreciation restriction

Federal tax law allows bonus depreciation, which lets you deduct a large percentage of the cost of certain property improvements in the year you purchase them, rather than spreading the deduction over several years. However, South Carolina does not conform to this federal rule. If you claim bonus depreciation on your federal tax return, you must make an adjustment on your South Carolina state return.

For example, if you spend $10,000 on qualifying improvements (such as appliances or flooring) and claim 100% bonus depreciation on your federal return, you deduct the full $10,000 federally. On your South Carolina return, you must add back the $10,000 bonus depreciation and then subtract only the standard depreciation amount you would have claimed without the bonus. If standard depreciation for those items is $1,000 in the first year, you deduct only $1,000 on your South Carolina return.

This adjustment is required every year you claim bonus depreciation on your federal return. Keeping separate depreciation schedules (one for federal and one for South Carolina) helps ensure you make the correct adjustments when filing your state return.

Additional rental property tax deductions available in South Carolina

Beyond South Carolina’s state-specific tax rules, you have access to the full range of federal deductions available to all landlords. These deductions apply regardless of where you live, and they often represent the largest tax savings available to rental property owners.

Expenses you can claim on Schedule E

IRS Form 1040, Schedule E is where you report your rental income and expenses. Here are the primary write-offs available to South Carolina landlords:

Mortgage interest: You can write off the interest portion of your rental property mortgage payments without any dollar limits. This differs from your personal residence, where mortgage interest is capped.

Other interest: Debt used to purchase or improve your rental property, such as credit card interest or loan interest, qualifies.

Property taxes: All state and local property taxes paid on your rental are fully claimable on Schedule E. Unlike homeowners, you face no cap on this expense.

Insurance: Landlord insurance, liability coverage, flood insurance, and other property-related policies reduce your taxable income.

Property management fees: If you outsource management to a professional, those fees lower your taxable income.

Professional services: Accountant fees, legal services, and tax preparation costs related to your rental all qualify. This includes fees for forming or maintaining an LLC.

Tenant placement commissions: Real estate agent commissions for finding and screening tenants reduce your taxable income.

Maintenance and upkeep: Lawn care, pest control, cleaning services, and similar routine maintenance costs qualify.

Repairs: Costs to fix broken or worn items such as patching drywall, repairing plumbing, or replacing a broken window are claimable in the year paid.

Supplies: Light bulbs, air filters, smoke detector batteries, cleaning products, and similar items qualify.

Utilities: If you pay water, electricity, gas, or trash service for your tenants, these costs reduce your taxable income.

Travel and mileage: Trips to your rental for management, maintenance, or repairs qualify. You can use the IRS standard mileage rate or track actual vehicle expenses.

Advertising: Costs to market your rental like online listings, yard signs, classified ads reduce your taxable income.

Home office: If you use a dedicated space in your home exclusively for rental business management, you may claim these expenses.

Depreciation: It allows you to deduct a portion of your property’s value over 27.5 years for residential rentals. 

Why depreciation is your largest write-off

Depreciation is often the single biggest expense available to landlords. It’s also a non-cash benefit. In other words, you get a tax advantage without going out of pocket.

For residential rentals, you depreciate the building’s value over 27.5 years. You cannot depreciate the land, only the structure and improvements. To calculate depreciation, you need to determine your property’s cost basis by separating the building value from the land value.

Let’s say you purchase a rental property for $650,000. The assessor determines the land is worth $150,000. Here’s how you’d calculate the annual depreciation:

• Annual depreciation = (Rental Property Value – Land Value) / Depreciation Timeline
• ($650,000 – $150,000) / 27.5 = $18,182 annual depreciation benefit

This write-off reduces your taxable income year after year, even though you’re not spending any money. For a landlord in the 24% tax bracket, an $18,182 benefit saves roughly $4,364 annually in taxes.

Personal property such as appliances, carpeting, furniture, and equipment you provide depreciates faster, typically over 5 to 7 years. This shorter timeline means you can write off these items more quickly than the building itself.

Repairs versus improvements: knowing the difference

Understanding this distinction is critical because it determines when you can claim the expense.

Repairs keep your property in working condition without adding significant value or extending its life. You claim repair costs in full in the year you pay them. Examples include fixing a leaky faucet, patching drywall, repainting a room, or replacing a broken appliance.

Improvements add value, extend the property’s useful life, or adapt it to a new use. You cannot claim these immediately. Instead, you add them to your depreciable basis and write them off over time. Examples include installing a new roof, finishing a basement, upgrading to energy-efficient windows, or renovating a kitchen.

The line can blur sometimes. Replacing a few damaged roof shingles is a repair, but replacing the entire roof is an improvement. Repainting is a repair, but installing custom built-in shelving is an improvement.

Tips for managing South Carolina rental property taxes, income, and expenses

Managing rental property finances doesn’t have to mean wrestling with spreadsheets and hunting for receipts at tax time. Tools like Stessa keep your income and expenses organized throughout the year, making tax season straightforward and ensuring you don’t miss any write-offs.

Stessa’s platform offers tools designed specifically for rental property owners:

• Automatic transaction categorization: Connect your rental property bank accounts, credit cards, and mortgage accounts directly to Stessa. Transactions are imported and categorized automatically, giving you an up-to-date view of your income and expenses without manual data entry. This automation helps keep deductions from being overlooked when it’s time to file.
• South Carolina-ready financial reporting: Stessa generates reports that match IRS requirements, including income statements and Schedule E worksheets. Whether you handle your own taxes or work with an accountant, having these reports ready to go makes filing faster and more accurate. 
• Receipt scanning on the go: Use the Stessa mobile app to photograph receipts as soon as you make a purchase. Each receipt is stored digitally, linked to the right property, and accessible whenever you need it. No more digging through piles of paper or lost receipts.
• Custom expense tracking: Stessa is purpose-built for landlords, with expense categories that align with Schedule E. Track property taxes, insurance, repairs, and other rental costs in a way that makes sense for your business, not generic accounting categories.
• Tax-time preparation: When it’s time to file, Stessa provides a complete Tax Package with all the reports and documentation you need. This organized package can save hours of work and gives you confidence that your return is accurate and complete.
• Online rent collection: Use Stessa to collect rent with ACH, credit, and debit cards. Tracking and logging every rent payment gets tedious when you have multiple properties. Stessa’s accounting tools do the hard work for you by capturing every rent payment and automatically assigning them to the correct property.

Good record-keeping is about staying compliant and making sure you’re getting the full tax benefit of every dollar you spend on your rental properties. With a system like Stessa in place, you can spend less time on paperwork and more time growing your rental business. Go here to get started for free.