Does South Carolina Tax Retirement Income? Free Calculator Tool
South Carolina taxes retirement income under its individual income tax system, with specific provisions for qualifying retirement benefits.
Social Security benefits are excluded from South Carolina taxable income, while certain other retirement income may qualify for deductions.
The state also provides an additional income tax deduction for residents age 65 and older.
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South Carolina exempts Social Security and Tier I railroad retirement benefits from state income tax, while most other retirement income is taxable but may qualify for a state deduction.
| Retirement Income | South Carolina Tax Treatment |
|---|---|
| Social Security Benefits | Not Taxed |
| Tier I Railroad Retirement | Not Taxed |
| Private Pensions | Taxed — Deduction May Apply |
| Public Pensions | Taxed — Deduction May Apply |
| 401(k) Withdrawals | Taxed — Deduction May Apply |
| 403(b) Withdrawals | Taxed — Deduction May Apply |
| 457 Plan Withdrawals | Taxed — Deduction May Apply |
| Traditional IRA Withdrawals / RMDs | Taxed — Deduction May Apply |
| Qualified Roth IRA Withdrawals | Generally Not Taxed |
| Taxable Annuity Income | Taxed — Deduction May Apply |
| Interest and Dividends | Generally Taxed |
| Capital Gains | Taxed — Special Deduction May Apply |
South Carolina allows a retirement income deduction of up to $3,000 before age 65 and up to $10,000 at age 65 or older for qualifying taxable income from eligible retirement plans.
Does South Carolina Tax Social Security?
No. South Carolina does not tax Social Security benefits, including benefits that are taxable on your federal return.
If you live in South Carolina, you generally won’t have to pay state income tax on your Social Security benefits.
- Social Security retirement benefits: Fully exempt from South Carolina income tax.
- Social Security disability benefits: Generally exempt from South Carolina income tax.
- Railroad retirement benefits: Exempt from South Carolina income tax.
Pensions, 401(k)s, IRAs, and RMDs
If a distribution from a traditional IRA or pre-tax 401(k) is taxable on your federal return, it generally counts as taxable income in South Carolina, too.
You may then be able to claim South Carolina’s retirement income deduction.
| Retirement Income | Is It Taxable in South Carolina? | Note |
|---|---|---|
| Pension income | Yes, generally | South Carolina taxes pension income, but you may qualify for a retirement income deduction. |
| Traditional IRA withdrawals | Yes, generally | The taxable portion is generally included in South Carolina income. |
| 401(k), 403(b), and 457 withdrawals | Yes, generally | The taxable portion is generally subject to South Carolina income tax. |
| RMDs | Yes, generally | RMDs are generally treated like other taxable retirement account withdrawals. |
| Roth IRA qualified withdrawals | No | Qualified Roth IRA withdrawals are generally tax-free in South Carolina. |
| After-tax contributions | No, generally | You generally aren’t taxed again on money you’ve already paid taxes on. |
| Deferred annuity payments | Generally, to the taxable extent | The taxable portion generally follows the federal tax treatment. |
SC taxes the same portion of pensions/IRA/401(k) distributions as the federal government does, but then subtracts the retiree and age deductions discussed below.
There is no special SC rule for Roth IRAs or after-tax basis; SC simply inherits the federal treatment.
South Carolina Retirement Income Tax Deductions
| South Carolina Tax Deduction | Who Qualifies? | Maximum Deduction | Note |
|---|---|---|---|
| Retirement Income Deduction | Anyone receiving qualifying retirement income | $3,000 if under 65; $10,000 at 65+ | Applies to qualifying pensions, 401(k)s, 403(b)s, 457 plans, IRAs, and other eligible retirement income |
| Age 65+ Deduction | Taxpayers age 65 or older | $15,000 per person | Can reduce any type of South Carolina taxable income, not just retirement income |
| Military Retirement Deduction | People receiving qualifying military retirement pay | 100% of qualifying income | South Carolina fully exempts qualifying military retirement income |
| National Guard & Reserve Income | People receiving qualifying Guard or Reserve retirement income | 100% of qualifying income | Certain military retirement benefits are exempt from South Carolina tax |
| Surviving Spouse Deduction | A surviving spouse receiving qualifying retirement income from a deceased spouse | $3,000 or $10,000 | The amount generally depends on the deceased spouse’s age |
Retirement Income Deduction ($3k/$10k)
South Carolina offers a retirement income deduction for distributions from qualified plans. Per taxpayer (individual), one can exclude up to:
- $3,000 per year if under age 65;
- $10,000 per year once age 65 or older.
These limits apply per plan owner.
If married filing jointly and both spouses have eligible retirement income, each spouse may claim a separate $3K/$10K exclusion.
Age 65 (Senior) Deduction ($15K)
SC also grants all taxpayers 65 and older a standard deduction up to $15,000 per person against total SC taxable income.
For joint filers, if one spouse is 65+, the deduction is $15,000; if both spouses are 65+, the deduction is $30,000.
- It is a flat subtraction from taxable income.
- It applies to any SC income, not just retirement income.
- It is reduced by any retirement income deduction already taken.
Military Retirement Deduction
Any military retirement pay that would otherwise be taxable can be subtracted in full.
This applies to regular armed forces retired pay, military reserve retirement pay, and concurrent receipts for disabled retirees.
For surviving spouses of military retirees, the dependent indemnity compensation or retirement annuity is also deductible.
National Guard and Reserve Pay
SC law also excludes some Guard/Reserve income. Pay for active training and up to 15/14 days of inactive duty is excluded from SC income.
So, your routine drill pay and one two-week annual training tour are non-taxable.
Other Deductions/Credits
- Insurance/Annuity Exemption: SC has no special deduction for private annuity contracts.
- Standard & Dependent Deductions: SC allows a standard or itemized deduction and a dependent exemption, but these are not retiree-specific.
- Credit for Other-State Taxes: A SC resident can claim a credit for income taxes paid to another state on the same retirement income.
How Much Can Retirees Deduct After Age 65?
- Retirement Deduction Increase: Once you reach age 65, your annual retirement deduction increases from $3,000 to $10,000.
- Age 65 Deduction: At 65+, you get the $15,000 senior deduction.
- Cap on Combined Deductions: The sum of the retirement deduction and age-65 deduction cannot exceed $15,000 per taxpayer.
A married couple where both spouses are 65 or older could potentially claim up to $30,000 combined, assuming each spouse qualifies for the full $15,000. These deductions are generally not means-tested.
There are no income brackets that phase out the age deduction; even millionaires aged 65+ get the full amount.
Does South Carolina Tax Military Retirement?
No. South Carolina does not tax qualifying military retirement income.
You can deduct 100% of military retirement income included in your South Carolina taxable income and this applies regardless of your age.
Do not confuse this with active-duty pay or National Guard/Reserve active-duty pay, which is generally taxed normally, except for the limited training exclusion discussed above.
The deduction also applies to Survivor Benefit Plan (SBP) annuities and Dependency and Indemnity Compensation (DIC) received by military survivors.
Does South Carolina Tax Retirement Income From Another State?
| Your Situation | South Carolina Tax Treatment | Notes |
|---|---|---|
| You live in South Carolina | Generally taxable | South Carolina generally taxes your taxable retirement income, even if you earned it in another state. |
| You receive an out-of-state pension | Generally taxable | Your pension can be subject to SC tax based on where you live when you receive it, not where you earned it. |
| You receive IRA or 401(k) withdrawals | Generally taxable | The portion that’s taxable for SC purposes is generally included in your SC income, subject to available deductions. |
| Another state also taxes your retirement income | You may get a tax credit | South Carolina may give you a credit for taxes paid to another state on the same income. |
| You live outside South Carolina | Generally not taxable | South Carolina generally doesn’t tax retirement income received by a nonresident. |
| You moved to South Carolina during the year | Special rules apply | You may be able to file as a full-year resident or use Schedule NR as a nonresident, depending on your situation. |
Is South Carolina Tax-Friendly for Retirees?
South Carolina’s income tax rates are very modest: 1.99% on the first $30,000 of taxable income and 5.21% on amount.
- Social Security Isn’t Taxed: South Carolina does not tax Social Security benefits, which can help you keep more of your retirement income.
- Retirement Income Gets a Deduction: You may deduct up to $3,000 of qualifying retirement income if you’re under 65, or up to $10,000 once you reach 65.
- Seniors Get an Extra Deduction: If you’re 65 or older, you may qualify for an additional deduction of up to $15,000 per person against South Carolina taxable income.
- Military Retirement Is Exempt: If you receive qualifying military retirement pay, South Carolina allows you to deduct the full amount from your state taxable income.
- Out-of-State Pensions Can Still Be Taxed: If you live in South Carolina, your taxable retirement income generally remains subject to state tax even if you earned your pension in another state.
- Retirees May Save on Property Taxes: If you’re 65 or older and meet the requirements, you may qualify for a homestead exemption that removes the first $50,000 of your home’s fair market value from property taxation.
- South Carolina Still Has Income Tax: The state isn’t completely tax-free for retirees. Taxable pensions, IRA withdrawals, and 401(k) distributions can still be subject to state income tax after applicable deductions.
With the large deductions for seniors, the effective tax burden on retirees is very low.
The table below shows estimated South Carolina tax owed and the effective SC tax rate for sample incomes of $30,000 (low), $75,000 (medium), and $150,000 (high) for both single and married filing jointly.
The examples assume all income is retirement income, since Social Security benefits are exempt from South Carolina income tax.
| Filing Status | Income | SC Retirement Deduction + Age Deduction | Taxable Income | SC Tax Owed | Effective SC Rate |
|---|---|---|---|---|---|
| Single (65+) | $30,000 | $15,000 | $15,000 | $298.50 | 1.0% |
| $75,000 | $15,000 | $60,000 | $2,160.00 | 2.88% | |
| $150,000 | $15,000 | $135,000 | $6,067.50 | 4.05% | |
| Married (both 65+) | $30,000 | $30,000 | $0 | $0.00 | 0.0% |
| $75,000 | $30,000 | $45,000 | $1,378.50 | 1.84% | |
| $150,000 | $30,000 | $120,000 | $5,286.00 | 3.52% |
South Carolina Retirement Tax FAQ
No, South Carolina fully exempts Social Security benefits and Tier I Railroad Retirement benefits.
Yes, taxable retirement income is generally subject to South Carolina tax to the extent it is taxable federally. However, you may exclude up to $3,000 if you’re under 65 or $10,000 if you’re 65 or older from qualifying retirement income.
Yes, each spouse may generally claim their own retirement income exclusion on a joint return, subject to the applicable limits.
No, only taxable retirement distributions qualify for the retirement income exclusion. Direct rollovers, such as an IRA-to-IRA rollover, generally are not taxable income.
Yes, South Carolina may provide a lifetime credit for taxes paid to another state on contributions that earned the right to your retirement income.
No, South Carolina fully exempts military retirement pay and survivor benefits that are otherwise taxable federally.
Yes, as a South Carolina resident, you generally owe South Carolina tax on your retirement income regardless of where it was earned. If another state also taxed the income, you may be able to claim a credit for those taxes.
Yes, the key limits are based on age and the applicable per-person deduction caps, not income. If you’re 65 or older, you may qualify for the higher deduction, and there is no income phaseout.
For 2026 and later tax years, South Carolina’s rates are 1.99% on taxable income below $30,000 and 5.21% on taxable income of $30,000 or more, after applicable deductions and adjustments.
Yes, South Carolina offers additional benefits for seniors, including certain property-tax and sales-tax exemptions.
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