Property tax surprises more first-time Charleston investors than any other line in the budget. The seller’s tax bill is often a poor guide to what you will pay, because South Carolina taxes a home very differently once it stops being the owner’s primary residence.
How the assessment ratio works
South Carolina applies an assessment ratio to a property’s value to get its taxable value, then applies the local millage rate.
| Use | Assessment ratio |
|---|---|
| Owner’s legal residence | 4% |
| Rentals and other residential property | 6% |
On top of the higher ratio, homes that qualify for the 4% rate are exempt from most school operating millage, while rentals pay it. Together, the two effects can make a rental’s tax bill several times larger than an owner-occupant’s on the same house.
Why the bill changes after you buy
If the seller lived in the house, their bill reflects the 4% ratio and the school operating exemption. Once the house becomes a rental, it is assessed at 6% and the exemption no longer applies. A sale can also trigger a reassessment to the purchase price.
Estimating it
- Look up the property on the county assessor’s site and note the current assessed value and the millage for its tax district.
- Apply 6% to the price you are paying.
- Multiply by the full millage rate, including school operating millage.
- Divide by 12 and put that figure in the monthly payment.
If the numbers are close, call the county assessor or ask your closing attorney for an estimate.
Why lenders care
A DSCR loan is sized on the rent divided by the full payment, and tax is part of that payment. Using the seller’s owner-occupied tax figure can make a deal look like it covers its payment when it does not. We underwrite on the rental figure.
See how the ratio works on the DSCR rental loans page.