South Carolina does not tax Social Security benefits. The state removes them from your taxable income entirely, no matter your age and no matter how much you earn. Under South Carolina Code Section 12-6-1120, gross income for state purposes is calculated without applying the federal rule that makes a portion of Social Security taxable.1South Carolina Legislature. South Carolina Code Title 12 – Section 12-6-1120 – Gross Income Modifications Railroad retirement benefits taxed at the federal level receive the same treatment under the same section.2South Carolina Department of Revenue. Frequently Asked Questions
There is no income threshold to meet, no age you have to reach, and no cap on the amount excluded.3South Carolina Department of Revenue. Retirees – Lower Your Individual Income Tax Bill With These Five Tips Whatever the IRS taxes, South Carolina lets you subtract back out.
How to Claim the Exemption on Your Return
On Form SC1040, subtract whatever amount of Social Security or railroad retirement the federal government taxed on Line o, in the Subtractions From Federal Taxable Income section.4South Carolina Department of Revenue. 2024 Individual Income Tax Instructions SC1040 The figure should match what appears on your federal return. Mismatched numbers between the two returns are a common cause of processing delays.
Federal Tax Still Applies
The state exemption does not affect what the IRS does. Federal tax on Social Security is determined by “combined income,” which the IRS defines as your adjusted gross income plus nontaxable interest plus half your Social Security benefits. If that total exceeds $25,000 for a single filer or $32,000 for a couple filing jointly, up to 50 percent of your benefits may be taxed federally. Above $34,000 single or $44,000 joint, up to 85 percent may be taxed.5Internal Revenue Service. Publication 915 – Social Security and Equivalent Railroad Retirement Benefits Whatever the federal share turns out to be, South Carolina lets you back it out on the state return.
Other Retirement Income Deductions
Social Security is the cleanest case, but South Carolina also cushions other retirement income. These deductions are worth understanding because they interact with each other in ways that are easy to miscount.
Retirement Income Deduction
Pensions, 401(k) distributions, and IRA withdrawals qualify for a deduction under South Carolina Code Section 12-6-1170(A). If you are under 65, you can deduct up to $3,000 per year of qualified retirement income. Once you turn 65, that amount rises to $10,000 per year.6South Carolina Legislature. South Carolina Code Title 12 – Section 12-6-1170 – Retirement Income Deduction From Taxable Income You must be the original owner of the account.
Spouses on a joint return each claim their own deduction against their own retirement income. A couple both 65 or older could deduct up to $20,000 combined.2South Carolina Department of Revenue. Frequently Asked Questions Enter these amounts on Lines p-1 and p-2 of SC1040.4South Carolina Department of Revenue. 2024 Individual Income Tax Instructions SC1040
Age 65 and Older Deduction
Separately, South Carolina offers a deduction of up to $15,000 for residents who have turned 65, and it applies to any type of taxable income, not just retirement distributions.3South Carolina Department of Revenue. Retirees – Lower Your Individual Income Tax Bill With These Five Tips Wages, investment income, and rental income all qualify. If both spouses on a joint return are 65 or older, the combined limit is $30,000.7South Carolina Department of Revenue. Age 65 and Older Deduction for Any Type Income
These two deductions do not stack cleanly. Any amount you claim under the retirement income deduction reduces your $15,000 age 65 deduction dollar for dollar.7South Carolina Department of Revenue. Age 65 and Older Deduction for Any Type Income So if you are 65 and claim the full $10,000 retirement income deduction, your remaining age 65 deduction is $5,000, for a combined $15,000. The value of the age 65 deduction is really in its flexibility: it can shelter income the retirement-specific deduction cannot reach. Claim it on Line q of SC1040.4South Carolina Department of Revenue. 2024 Individual Income Tax Instructions SC1040
Military Retirement
Military retirement pay is fully exempt at the state level under Section 12-6-1171, with no age requirement and no dollar cap.8South Carolina Legislature. South Carolina Code Title 12 – Section 12-6-1171 – Military Retirement Income Deduction A surviving spouse receiving military retirement income from a deceased spouse’s service can claim the same full deduction, and can claim a separate retirement income deduction on their own retirement income as well. One caution: if you are 65 or older, the military retirement deduction also reduces your $15,000 age 65 deduction dollar for dollar, the same way the civilian version does.3South Carolina Department of Revenue. Retirees – Lower Your Individual Income Tax Bill With These Five Tips
Property Tax, Estate Tax, and Inheritance Tax
South Carolina’s homestead exemption removes the first $50,000 of your primary residence’s fair market value from property tax if you are over 65, totally and permanently disabled, or legally blind.9South Carolina Department of Revenue. Exempt Property You apply through your county auditor. It is not automatic. Owner-occupied primary residences are also assessed at 4 percent of market value rather than the 6 percent that applies to second homes and other residential property, and that lower ratio stacks with the homestead exemption.
There is no state estate tax and no state inheritance tax in South Carolina. Federal estate tax rules still apply, but the federal exemption is $13.99 million per individual for 2025, so most estates owe nothing at either level.
If You Are Moving to South Carolina for the Tax Benefits
South Carolina determines residency by domicile, not by a 183-day count. Domicile is the place you consider your true, permanent home and where you intend to return whenever you are away.10South Carolina Department of Revenue. A Guide to Determining a Taxpayers Domicile for Income Tax Purposes The Department of Revenue looks at where you registered your vehicle, where you vote, where your bank accounts are, and similar ties, not just where you sleep on a given night.
To establish South Carolina as your domicile, you have to actually live there with the intent to make it your principal home. A plan to move later does not qualify. If you split time between two states, align the concrete markers: driver’s license, voter registration, primary bank accounts, and the home you treat as your main residence. That is what heads off a dispute over which state gets to tax your income.