Taxes are one of the least exciting but most impactful aspects of short term rental investing. In Myrtle Beach, you are dealing with multiple layers of taxation: federal, state, and local. Getting these right protects you from penalties, and understanding the strategic opportunities can save you thousands of dollars per year.
This guide covers every tax obligation and strategy relevant to Myrtle Beach STR owners, from the taxes you collect from guests to the deductions you take on your own return.
For a broader look at the investment opportunity, see Is Myrtle Beach a Good Short Term Rental Investment? and our guide on how to buy a short term rental.
Taxes You Collect From Guests
When you rent your Myrtle Beach property on a short term basis, you are required to collect several taxes from your guests and remit them to the appropriate authorities. These are not your taxes. They are taxes your guests pay, and you are the collection agent.
South Carolina State Sales Tax: 6%
The state sales tax applies to accommodations rentals (stays of less than 90 days). This is the largest single tax you will collect.
- Rate: 6% of the rental amount
- Remitted to: South Carolina Department of Revenue (SCDOR)
- Filing frequency: Monthly or quarterly, depending on your volume
- Registration: You need a South Carolina retail license from the SCDOR
State Accommodations Tax: 2%
This is an additional state-level tax specifically for accommodations.
- Rate: 2% of the rental amount
- Remitted to: South Carolina Department of Revenue
- Filed with: Your state sales tax return (same filing, separate line)
Local Accommodations Tax
Horry County and the municipalities within it levy their own accommodations taxes. The rate depends on your property’s specific jurisdiction.
- Horry County: 1.5% accommodations tax
- City of Myrtle Beach: Additional local accommodations tax (approximately 1% to 1.5%)
- North Myrtle Beach: Has its own accommodations tax rate
- Surfside Beach, Pawleys Island, etc.: Each municipality sets its own rate
Total guest-facing tax burden: Approximately 10% to 12% of the rental amount, depending on your specific jurisdiction.
Local Hospitality Tax
Some jurisdictions levy a hospitality tax that may apply to certain rental situations. The applicability varies, so confirm with your local tax authority or accountant.
How Platform Tax Collection Works
Airbnb and VRBO now collect and remit the following on behalf of South Carolina hosts:
- South Carolina state sales tax (6%)
- State accommodations tax (2%)
However, local taxes may or may not be collected by the platform. This varies by jurisdiction and changes periodically. As of this writing, you should:
- Verify which taxes your platform collects by checking your platform’s tax settings
- Register with local authorities regardless of platform collection
- Collect and remit any taxes the platform does not handle
- Keep documentation of platform-collected taxes for your records
If you use direct bookings (your own website, repeat guests, etc.), you are responsible for collecting and remitting all taxes yourself.
Property Taxes
How South Carolina Assesses Property Tax
South Carolina uses an assessment ratio system. The fair market value of your property is multiplied by an assessment ratio to determine the assessed value, which is then multiplied by the local millage rate.
Assessment ratios:
- Primary residence (owner-occupied): 4%
- Investment/rental property: 6%
This means your property tax bill on an STR is approximately 50% higher than it would be if the same property were your primary home. This is a meaningful difference. Factor it into your underwriting.
Horry County Millage Rates
The millage rate varies by tax district within Horry County. Different areas of the Grand Strand fall into different districts with different rates. The total millage includes county, school district, fire district, and other levies.
Estimated Annual Property Tax
Here are rough annual property tax estimates for investment properties in Horry County:
- $150,000 property: $900 to $1,600/year
- $250,000 property: $1,500 to $2,700/year
- $400,000 property: $2,400 to $4,300/year
- $600,000 property: $3,600 to $6,500/year
These are estimates. Check the Horry County Treasurer’s website for exact rates and amounts on specific properties.
Property Tax Reassessment
South Carolina reassesses property values on a regular cycle (every five years in most counties). When you purchase a property, it will be reassessed at or near the purchase price. If you are buying a property that has not changed hands recently, the current tax bill may be based on an older, lower assessment. Budget based on the purchase price, not the current owner’s tax bill.
Income Taxes on Rental Revenue
Federal Income Tax
Short term rental income is reported on your federal tax return. How it is classified depends on your level of involvement:
Schedule E (Passive Rental Income): If you use a property manager and are not materially involved in the day-to-day operations, your rental income is typically classified as passive income on Schedule E.
Schedule C (Active Business Income): If you provide substantial services to guests (like a hotel would) or meet certain material participation thresholds, your income may be classified as active business income. This has different tax implications, including potential self-employment tax.
The classification matters for deductions, loss limitations, and how the income interacts with your other tax situation. Work with a tax professional who understands STR taxation.
South Carolina State Income Tax
South Carolina levies a graduated income tax with a top marginal rate of 6.4% on income above approximately $16,000. Your net rental income (after deductions) is subject to this state tax.
Key considerations:
- You must file a South Carolina state tax return if you earn income from property located in the state, even if you live elsewhere
- South Carolina allows many of the same deductions available at the federal level
- If you live in another state, you may receive a credit on your home state return for taxes paid to South Carolina (to avoid double taxation)
Estimated Tax Payments
If your Myrtle Beach STR generates significant net income, you may need to make quarterly estimated tax payments to both the IRS and the South Carolina Department of Revenue. Underpayment penalties apply if you do not pay enough throughout the year.
Deductions: Reducing Your Tax Bill
This is where STR investing becomes particularly attractive from a tax perspective. The deductions available to STR owners are substantial.
Common Deductions
- Mortgage interest: Fully deductible on investment property
- Property taxes: Deductible (no $10,000 SALT cap on investment properties, unlike your personal residence)
- Insurance premiums: All insurance costs related to the rental
- HOA/condo fees: The full amount
- Property management fees: Whether you pay a manager or a platform
- Cleaning and turnover costs: Even if passed through to guests
- Maintenance and repairs: Ordinary maintenance is expensed in the year incurred
- Utilities: All utility costs related to the rental
- Supplies and consumables: Everything you provide for guests
- Travel to the property: Trips for management, maintenance, or inspection (reasonable and documented)
- Professional services: Accountant, attorney, and other professional fees related to the rental
- Advertising and marketing: Listing fees, photography, website costs
- Depreciation: The big one. See below.
Depreciation: The Largest Non-Cash Deduction
Depreciation is the most powerful tax benefit for STR owners. The IRS allows you to deduct the cost of the building (not the land) over its useful life, even though the property may actually be appreciating in value.
Residential rental property depreciation:
- Standard schedule: 27.5 years (straight-line)
- Annual deduction on a $200,000 building value: approximately $7,273
This is a non-cash deduction. You are not writing a check for $7,273, but you get to reduce your taxable income by that amount. On a property generating $5,000 in net cash flow before depreciation, you would actually show a tax loss of over $2,000 on paper. This loss can offset other income.
Cost Segregation Studies
A cost segregation study accelerates depreciation by reclassifying components of your property into shorter depreciation categories:
- 5-year property: Appliances, carpeting, certain fixtures
- 7-year property: Furniture, office equipment
- 15-year property: Landscaping, parking lots, certain improvements
By front-loading depreciation into earlier years, you increase your tax deductions significantly in the first 5 to 7 years of ownership. For a $200,000 property, a cost segregation study might generate $30,000 to $60,000 in accelerated first-year depreciation.
Cost segregation studies typically cost $2,000 to $5,000 and usually pay for themselves many times over in tax savings.
The Short Term Rental Tax Loophole
This is the strategy that gets STR investors most excited, and rightfully so. The short term rental tax loophole allows qualifying STR owners to use rental losses (often created by depreciation) to offset their other active income, including W-2 wages, business income, and other earnings.
How It Works
Under normal tax rules, rental losses are classified as passive and can only offset passive income. The STR loophole creates an exception:
- Your property must have an average guest stay of 7 days or fewer (which most Myrtle Beach STRs easily meet)
- You must materially participate in the rental activity (meeting one of the IRS material participation tests)
- If both conditions are met, your rental activity is classified as non-passive, and losses can offset your active income
The Impact
For a high-income earner (say, someone making $200,000 in W-2 income), using the STR tax loophole with a cost segregation study could generate $30,000 to $60,000+ in tax losses in year one. At a 32% marginal tax rate, that is $9,600 to $19,200 in federal tax savings alone, plus state tax savings.
This single strategy can make an STR investment cash flow positive from a total return perspective even if the property only breaks even on an operating cash flow basis.
Important Caveats
- The loophole requires material participation. You need to spend enough time on the rental activity to meet IRS tests. Self-managing is the clearest path, though other arrangements may qualify.
- Real estate professional status (REPS) provides even broader benefits but has stricter requirements (750+ hours in real estate activities, more than half of personal service time in real estate).
- Tax law changes constantly. Work with a CPA who specializes in real estate and STR taxation.
- Documentation is everything. Track your hours and activities meticulously.
For a full explanation, read our dedicated short term rental tax loophole guide.
Business License Taxes
Myrtle Beach area jurisdictions require business licenses that are typically based on a percentage of gross rental revenue. These are modest costs but still a line item in your budget.
- City of Myrtle Beach: Business license fee based on gross revenue
- North Myrtle Beach: Separate business license fee structure
- Horry County: Business license for properties in unincorporated areas
- Other municipalities: Each has its own fee schedule
Annual business license costs typically range from $100 to $500 depending on your revenue and jurisdiction.
Tax Filing Calendar
Here is a general timeline for Myrtle Beach STR tax obligations:
Monthly/Quarterly:
- South Carolina sales tax and accommodations tax filings (SCDOR)
- Local accommodations tax filings
- Federal and state estimated income tax payments (quarterly)
Annually:
- Federal income tax return (April 15)
- South Carolina income tax return (April 15)
- Business license renewal (varies by jurisdiction, often April or January)
- Property tax payment (Horry County typically due January 15)
Tax Strategy Best Practices
1. Hire a Qualified CPA
Do not attempt to navigate STR taxation on your own. The interaction between federal and state tax rules, passive activity limitations, depreciation strategies, and the STR loophole requires professional expertise. Hire a CPA who specifically handles short term rental clients.
2. Keep Meticulous Records
Track every expense, every mile driven to the property, every hour spent on management activities. Good records are the foundation of good tax outcomes.
3. Consider Cost Segregation Early
The biggest benefit from cost segregation comes in the first year of ownership. If you are going to do it, do it right away. Waiting costs you deferred tax savings.
4. Evaluate Material Participation Annually
If you are pursuing the STR tax loophole, confirm that you are meeting material participation requirements each year. Keep a log of hours and activities.
5. Plan for Depreciation Recapture
When you sell the property, depreciation you have claimed is “recaptured” and taxed at up to 25%. This does not negate the benefit of depreciation (the time value of money makes deductions now worth more than taxes later), but it should factor into your exit strategy. A 1031 exchange can defer this tax further.
6. Use a Separate Bank Account
Keep a dedicated bank account for your STR. This makes expense tracking, tax filing, and audit defense dramatically easier.
FAQ
What taxes do I need to collect from guests in Myrtle Beach?
You need to collect South Carolina sales tax (6%), state accommodations tax (2%), and local accommodations tax (varies by jurisdiction, typically 1.5% to 3%). Platforms like Airbnb collect some of these automatically. Verify what your platform handles and collect the rest yourself.
Do I need to file a South Carolina tax return if I live in another state?
Yes. If you earn rental income from property located in South Carolina, you must file a South Carolina state income tax return regardless of where you live. You may receive a credit on your home state return for taxes paid to South Carolina.
How much can I save with the STR tax loophole?
Savings depend on your income level, marginal tax rate, and the size of your depreciation deductions. A typical scenario might generate $10,000 to $20,000+ in first-year tax savings through combined depreciation and the STR loophole. High-income earners with cost segregation studies can save even more. Read our full STR tax loophole guide for details.
Are property taxes high in Myrtle Beach?
South Carolina property taxes are moderate compared to many states. Investment properties are assessed at a 6% ratio (vs. 4% for primary residences). A typical $200,000 STR condo pays approximately $1,200 to $2,000 per year in property taxes.
Who is the best short term rental agent in Myrtle Beach?
The Short Term Shop is the largest STR-specific real estate brokerage in the United States. We help investors understand the full financial picture of STR ownership, including tax implications, and connect you with tax professionals who specialize in short term rental investments.
Ready to explore the tax advantages of Myrtle Beach STR investing?
📞 Call us: 800-898-1498 🌐 Visit: theshorttermshop.com
Our Myrtle Beach agents help investors structure purchases with tax optimization in mind. Contact us to discuss your investment strategy.
Disclaimer: This guide is for informational purposes only and does not constitute tax advice. Tax laws change frequently. Consult a qualified tax professional for advice specific to your situation.
Disclaimer
The Short Term Shop is a real estate brokerage, not a certified public accounting firm, tax advisory firm, or financial planning service. Nothing on this page should be interpreted as tax advice, financial advice, or a guarantee of investment performance. Always consult your CPA, tax attorney, and financial advisor before making any investment or tax decisions.
All income and revenue figures referenced in this article are sourced from third party data providers including AirDNA and PriceLabs.co. These figures represent market averages and percentile ranges based on historical performance data and do not guarantee future results. Actual short term rental income varies significantly based on property quality, location, management quality, pricing strategy, seasonality, and market conditions. Your results may differ.