Cost Segregation in Charleston, SC

America's #1 city meets global manufacturing hub — Charleston combines premium tourism revenue, Boeing and Bosch employment, and South Carolina's full bonus depreciation conformity for maximum tax-advantaged returns.

Population
830K
Median Home
$465K
Rent (3BR)
$2,400
Property Tax
0.56%
Annual Job Growth
20K+
Ranking
#1 U.S. City (T+L)
Overview

Value Props for Investors

AEROSPACE HUB
Boeing + Volvo + Bosch Manufacturing

Boeing's 787 Dreamliner final assembly, Volvo's first U.S. plant, and Bosch's 4K-employee campus anchor Charleston's advanced manufacturing economy. These employers provide stable, well-compensated tenants earning $65K-$130K with long-term job security.

TOURISM PREMIUM
#1 U.S. City — Premium STR Revenue

Ranked America's #1 city by Travel + Leisure for 10+ consecutive years, Charleston commands $200+ average nightly STR rates. The dual-income opportunity — premium STR during peak season, stable LTR from Boeing/MUSC workers — is unmatched in the Southeast.

FULL CONFORMITY
SC Doubles Your Tax Savings

South Carolina's full bonus depreciation conformity means cost seg benefits apply at both federal AND state levels. A $465K Charleston property generates ~$48K in combined Year 1 tax savings — nearly 4.5 years of cash flow returned in month one.

Tax Strategy

Cost Segregation & Tax Rules in Charleston, SC

Understanding how federal and South Carolina state tax rules interact is critical to maximizing your cost segregation benefits in Charleston.

Cost Seg Overview
State vs. Federal Rules
Tax Landscape
Typical Purchase
$465,000
Building Value
72%
28% land / 72% building
Cost Seg Range
28-42%
of building reclassified
Home Age
30 yrs
Built ~1994
What Gets Reclassified

A cost segregation study identifies building components that can be depreciated over 5, 7, or 15 years instead of the standard 27.5 or 39 years. In Charleston, typical reclassification rates are 28-42% of building value.

Purchase Price Breakdown
Building 72%$334,800
Land 28%$130,200
Building Value Reallocation (with Cost Seg)
5-Year Property20%
$66,290
15-Year Property13%
$44,194
27.5 / 39-Year (Remaining)67%
$224,316

5 & 15-year components ($110,484 = 33% of building) are eligible for bonus depreciation in Year 1.

Overline Study Cost & ROI
Overline Study Cost
$499 - $2,000
Avg. ROI
10-40x

The math: A $465,000 property with 72% building value and 33% reclassification yields ~$40,879 in Year 1 federal tax savings at the 37% bracket — significantly more ROI than traditional studies costing $5,000-$10,000+.

Housing Stock Advantage

With a median build year of 1994, Charleston's housing stock has identifiable components (HVAC, electrical, plumbing, landscaping) that are strong candidates for accelerated depreciation.

Full Conformity
South Carolina Bonus Depreciation Conformity

South Carolina fully conforms to IRC Section 168(k) bonus depreciation. With a top marginal rate of 6.5% on income over $16,040, SC offers meaningful state-level tax savings on top of federal benefits — especially valuable for investors holding multiple rental properties in Charleston, Columbia, or Greenville.

What This Means for Charleston Investors: Cost segregation benefits are amplified in SC — you receive accelerated deductions on both your federal AND state tax returns in Year 1. This makes SC one of the most favorable states for cost seg.

Federal vs. SC Depreciation Timeline
PeriodFederal TreatmentSC State Treatment
Year 1100% bonus depreciation100% bonus depreciation (full conformity)
Years 2+Standard MACRS schedulesSame as federal
Section 179 Expensing
State ConformityConforms

SC conforms to federal Section 179 limits. For coastal properties in Charleston or Hilton Head, this enables immediate expensing of hurricane-rated fixtures and equipment that qualify as personal property.

Key Takeaway

A $280K property with a $220K depreciable basis and 30% cost seg reclassification yields ~$24.4K in federal tax savings PLUS ~$4.2K in SC state tax savings in Year 1 — a total of ~$28.6K.

Bottom Line

SC is a full-conformity state. Every dollar of federal bonus depreciation flows through to your SC state return with no addback or modification. This maximizes your total tax benefit from cost segregation.

Local Property Tax
0.56%
Charleston effective rate
Transfer Tax
Deed recording fee only — no transfer tax
State Income Tax
6.40%
Top Rate
Property Tax Details

SC's 4% owner-occupied assessment vs. 6% investment property assessment applies. Charleston County millage rate varies by municipality. Still among the lowest effective rates nationally.

Assessment Methodology
MethodMarket value at 6% assessment ratio (non-owner-occupied)
Reassessment CycleEvery 5 years (with 15% reassessment cap)
Assessment BodyCounty Assessor
Appeal WindowWithin 90 days of reassessment notice
Appeal Success Likelihood
Moderate
LowModerateGoodVery High

South Carolina's 15% cap on reassessment increases provides strong investor protection. Non-owner-occupied properties are assessed at 6% of market value (vs. 4% for primary residences), making accurate valuation important. The 90-day appeal window is generous compared to most states.

Work with Overline — Our team helps Charleston investors identify over-assessed properties and file tax appeals. A successful appeal can save thousands annually and compounds your cost seg savings.

Illustrative Example

Cost Seg Example for Charleston, SC

This example assumes a purchase eligible for 100% bonus depreciation. All factors below are based on averages from our historical cost segregation studies for SC properties. To see your exact savings, run a property-specific cost seg analysis below.

Typical Charleston, SC Property Details
$
50%95%
5%35%
2%25%
Total Reclassified33% of building
10%37%
Estimated Year 1 Tax Savings
Building Value$334,800
$465,000 x 72%
Normal Annual Depreciation$12,175
$334,800 ÷ 27.5 yr (residential)
5-Year Reclassified$66,960
15-Year Reclassified$43,524
Total Accelerated$110,484
33% of $334,800 building value
Federal Tax Savings (Year 1)$40,879
$110,484 x 37% bracket
SC State Tax Savings (Year 1)$7,071
Total Year 1 Tax Savings$47,950
9.1x normal annual deduction captured in Year 1

SC State Tax: SC has full bonus depreciation conformity — both federal and state savings hit your pocket in Year 1.

Insurance & Risk

Insurance Landscape in Charleston

Insurance costs directly impact your cash flow. Understanding Charleston's risk profile helps you budget accurately and avoid coverage gaps.

Avg. Annual Premium
$2,800
Charleston average
State Average
$2,100
9% below average (inland) / 30-60% above average (coastal)
National Average
$2,300
for comparison
Key Risk Drivers
1
Hurricanes and tropical storms
2
Coastal flooding and storm surge
3
Wind damage from nor'easters
Coverage Recommendations
Separate wind/hail policy in coastal counties (SCWHUA if needed)
Flood insurance mandatory in many coastal zones, recommended statewide
Named storm deductible (typically 2-5% of dwelling coverage)
Loss of rental income coverage for investment properties
Cost Seg + Insurance Connection

Cost seg studies document individual building components and their values — data that directly supports accurate insurance replacement cost estimates. Investors with a cost seg study on file can better substantiate claims and negotiate premiums.

Revenue Comparison

STR vs. Long-Term Rental in Charleston

Compare short-term (Airbnb) and long-term rental income for a typical Charleston investment property.

Long-Term Rental
Monthly Rent (3BR)$2,400
Annual Gross$28,800
Vacancy Rate5%
Net Annual$27,360
Tenant StabilityBoeing and MUSC workers provide reliable long-term tenancy; military BAH covers rent at Joint Base Charleston
Depreciation Schedule27.5 years
Residential rental property
Tax TreatmentPassive Only
Losses can only offset passive income unless you qualify as a Real Estate Professional (750+ hrs/yr)
Short-Term Rental
Avg. Nightly Rate$225
Occupancy Rate71%
Annual Gross Revenue$58,328
Net Annual (after expenses)$43,746
ManagementSelf or 20-25% PM fee
Depreciation Schedule39 years
Classified as commercial / transient use property
Tax TreatmentActive Income Eligible
Losses can offset W-2 / active income if you document 100+ hrs of material participation and meet IRS criteria
Cost Seg + STR Loophole

Charleston's premium STR rates combined with SC's full bonus depreciation conformity create an exceptional tax play. Operating as a materially-participating STR host on a cost-segregated $465K property can unlock $48K in Year 1 deductions while generating 2x the gross revenue of a traditional long-term lease.

Market Fundamentals

Economy & Housing Demand in Charleston

Strong economic engines create stable rental demand. Here is what drives Charleston's economy and housing market.

Median Income
$78,000
Rent-to-Income
29%
Healthy ratio
Vacancy Rate
4.5%
Pop. Growth
+2.3% annually
Major Employers
1
MUSC Health (15K+)
2
Boeing (7K+)
3
Joint Base Charleston (6K+)
4
Bosch (4K+)
5
Blackbaud (2K+)
6
Volvo (4K+)
Top Industries
Aerospace & Manufacturing
Healthcare
Tourism & Hospitality
Military & Defense
Technology
Port & Logistics
Landlord & STR Rules
Landlord Friendliness
Very Friendly
Eviction Timeline
30-45 days
STR Regulation
Restricted in some zones

City of Charleston limits STRs to specific overlay zones on the peninsula. North Charleston and unincorporated Charleston County are less restrictive. Mount Pleasant allows STRs with permits. Research zoning before purchasing for STR.

Why Invest Here

Charleston is a rare hybrid — premium tourism STR revenue plus stable LTR demand from Boeing, MUSC, and military. SC's full bonus depreciation conformity makes the tax math exceptional. The higher entry price is offset by premium rents and some of the lowest property taxes in America (0.56% effective rate).

Where to Invest

Top Neighborhoods in Charleston

#1
North Charleston
Affordable, rapidly developing area near Boeing, airport, and the port with strong blue-collar rental demand
Price
$320k
Rent
$1,850
Yield
6.9%
North Charleston offers the best cash-flow economics in the metro. Boeing (7K jobs), the port, and Joint Base Charleston create massive tenant demand at entry prices 30% below the metro median. STRs are permitted without the peninsula restrictions. The highest rent-to-price ratio in Charleston makes this the investor sweet spot.
$320k$1,8506.9%
North Charleston offers the best cash-flow economics in the metro. Boeing (7K jobs), the port, and Joint Base Charleston create massive tenant demand at entry prices 30% below the metro median. STRs are permitted without the peninsula restrictions. The highest rent-to-price ratio in Charleston makes this the investor sweet spot.
North Charleston offers the best cash-flow economics in the metro. Boeing (7K jobs), the port, and Joint Base Charleston create massive tenant demand at entry prices 30% below the metro median. STRs are permitted without the peninsula restrictions. The highest rent-to-price ratio in Charleston makes this the investor sweet spot.
#2
Mount Pleasant
Affluent suburb east of the Cooper River with top schools, Shem Creek dining, and beach access
Price
$625k
Rent
$2,800
Yield
5.4%
Mount Pleasant is Charleston's premier suburban submarket. Top-10 SC school district and proximity to Sullivan's Island beaches attract high-income families willing to pay premium rents. Lower cash-flow yield is offset by strong 6-8% annual appreciation and extremely low vacancy.
$625k$2,8005.4%
Mount Pleasant is Charleston's premier suburban submarket. Top-10 SC school district and proximity to Sullivan's Island beaches attract high-income families willing to pay premium rents. Lower cash-flow yield is offset by strong 6-8% annual appreciation and extremely low vacancy.
Mount Pleasant is Charleston's premier suburban submarket. Top-10 SC school district and proximity to Sullivan's Island beaches attract high-income families willing to pay premium rents. Lower cash-flow yield is offset by strong 6-8% annual appreciation and extremely low vacancy.
#3
West Ashley
Established neighborhood with Avondale's trendy dining scene, convenient to downtown and MUSC
Price
$380k
Rent
$2,100
Yield
6.6%
West Ashley bridges the gap between affordable North Charleston and premium downtown. MUSC workers, young professionals, and families drive consistent demand. Avondale's restaurant scene has created a gentrification tailwind that's pushing rents and values upward. Solid cash flow with above-average appreciation.
$380k$2,1006.6%
West Ashley bridges the gap between affordable North Charleston and premium downtown. MUSC workers, young professionals, and families drive consistent demand. Avondale's restaurant scene has created a gentrification tailwind that's pushing rents and values upward. Solid cash flow with above-average appreciation.
West Ashley bridges the gap between affordable North Charleston and premium downtown. MUSC workers, young professionals, and families drive consistent demand. Avondale's restaurant scene has created a gentrification tailwind that's pushing rents and values upward. Solid cash flow with above-average appreciation.
#4
Summerville
Fast-growing bedroom community with new construction, family appeal, and lower entry prices
Price
$340k
Rent
$1,900
Yield
6.7%
Summerville is the fastest-growing municipality in the metro, adding 3K+ residents annually. New construction from DR Horton, Lennar, and Pulte keeps inventory flowing at investor-friendly prices. Volvo and Bosch employees in the I-26 corridor are a captive tenant pool. Newer homes yield excellent cost seg returns.
$340k$1,9006.7%
Summerville is the fastest-growing municipality in the metro, adding 3K+ residents annually. New construction from DR Horton, Lennar, and Pulte keeps inventory flowing at investor-friendly prices. Volvo and Bosch employees in the I-26 corridor are a captive tenant pool. Newer homes yield excellent cost seg returns.
Summerville is the fastest-growing municipality in the metro, adding 3K+ residents annually. New construction from DR Horton, Lennar, and Pulte keeps inventory flowing at investor-friendly prices. Volvo and Bosch employees in the I-26 corridor are a captive tenant pool. Newer homes yield excellent cost seg returns.
#5
James Island
Laid-back island lifestyle minutes from downtown and Folly Beach with strong STR potential
Price
$450k
Rent
$2,300
Yield
6.1%
James Island's proximity to both downtown Charleston and Folly Beach creates dual STR demand — tourists wanting beach access and downtown proximity. Unincorporated areas have fewer STR restrictions than the peninsula. The 1970s-1990s housing stock offers above-average cost seg reclassification potential.
$450k$2,3006.1%
James Island's proximity to both downtown Charleston and Folly Beach creates dual STR demand — tourists wanting beach access and downtown proximity. Unincorporated areas have fewer STR restrictions than the peninsula. The 1970s-1990s housing stock offers above-average cost seg reclassification potential.
James Island's proximity to both downtown Charleston and Folly Beach creates dual STR demand — tourists wanting beach access and downtown proximity. Unincorporated areas have fewer STR restrictions than the peninsula. The 1970s-1990s housing stock offers above-average cost seg reclassification potential.
Local Partners

Investor-Friendly Partners in Charleston, SC

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Investor-Friendly Brokers

Top real estate agents who specialize in investment properties and understand cost segregation, 1031 exchanges, and cash-flow analysis.

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Property Management

Vetted property managers who handle tenant screening, maintenance, and rent collection for both long-term and short-term rentals.

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Independent insurance agents who specialize in rental property coverage and can leverage cost seg data for accurate replacement cost estimates.

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Frequently Asked Questions

Cost Segregation FAQ — Charleston, SC

How much can I save with cost segregation in Charleston, SC?

−

On a typical $465K property in Charleston, cost segregation can yield approximately $47,950 in Year 1 combined federal and state tax savings at the 37% bracket, with a study ROI of 738%. Overline studies cost $499-$2,000.

What is the property tax rate in Charleston?

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The effective property tax rate in Charleston is approximately 0.56%. SC's 4% owner-occupied assessment vs. 6% investment property assessment applies. Charleston County millage rate varies by municipality. Still among the lowest effective rates nationally.

Is Charleston a good market for real estate investing?

+

Charleston is a rare hybrid — premium tourism STR revenue plus stable LTR demand from Boeing, MUSC, and military. SC's full bonus depreciation conformity makes the tax math exceptional. The higher entry price is offset by premium rents and some of the lowest property taxes in America (0.56% effective rate).

What is the average insurance cost for rental properties in Charleston?

+

The average annual homeowner insurance premium in Charleston is approximately $2,800. Charleston's coastal location means higher insurance costs. Consider North Charleston and inland suburbs for lower premiums. Flood insurance is essential and adds $800-2,000/year. Factor insurance into your cash flow projections.

What are the STR and landlord rules in Charleston?

+

Charleston is rated "Very Friendly" for landlords. STR regulation: Restricted in some zones. Eviction timeline: 30-45 days. City of Charleston limits STRs to specific overlay zones on the peninsula. North Charleston and unincorporated Charleston County are less restrictive. Mount Pleasant allows STRs with permits. Research zoning before purchasing for STR.

Who are the major employers in Charleston?

+

Major employers in Charleston include MUSC Health (15K+), Boeing (7K+), Joint Base Charleston (6K+), Bosch (4K+), Blackbaud (2K+). Top industries: Aerospace & Manufacturing, Healthcare, Tourism & Hospitality, Military & Defense, Technology, Port & Logistics.

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