South Carolina Taxes On Retirees

Between the scenic coastlines, mild winters, and a welcoming culture, South Carolina has become a favorite among retirees seeking a laid-back lifestyle. Beyond its natural beauty, the lower living expenses add to the appeal, making this Southern spot stand out.

As retirees explore destinations across the United States, many discover that the Palmetto State offers unique tax advantages. This article explores the tax considerations for retirees, highlighting income tax details, property taxation, sales taxes, and more. Whether you’re new to the area or have lived in South Carolina for years, these insights can help guide your retirement finances.

How Tax-Friendly Is South Carolina for Retirees?

One significant advantage for South Carolina’s retirees is how the state handles Social Security benefits. Unlike some parts of the country, these benefits are not taxed at the state level, freeing up more funds for daily expenses or leisure activities.

Additionally, the qualified retirement income tax deduction for individuals 65 and older can reduce your taxable amounts from various retirement income sources. Depending on filing status and personal circumstances, you can deduct a notable slice of your retirement account distributions. This structure can benefit your quality of life when paired with the state’s moderate living costs.

However, it’s not just income that shapes your overall tax responsibility—property and sales taxes matter too. South Carolina has a relatively low average effective property tax rate, plus several programs designed to help seniors lower their annual bill. That said, the state does have a less-than-favorable sales tax rate when compared to the rest of the country. All of these taxes should be looked into further before making a permanent retirement decision.

South Carolina’s Income Tax

Retirement means different things to different people. Some folks entirely exit the workforce, while others keep earning from consulting, freelancing, or part-time roles. Whatever your path, it helps to understand South Carolina income taxes thoroughly.

The state has seen movement in the top marginal tax rate over recent years and may continue to do so. Following a retroactive cut from 6.4 to 6.2 percent for 2024, the rate is set to revert to 6.3 percent for 2025. However, revenue forecasts suggest another triggered decrease to 6.2 percent is imminent, and both the governor’s budget and withholding tables already reflect this expectation. Looking ahead, if certain revenue targets are met, the rate could eventually be lowered to 6.0 percent.1

The top percentage applies to higher taxable incomes, but many retirees don’t enter that tier, given that withdrawals from pensions and other distributions may be partially reduced by state-specific rules.

For instance, when you file your income tax return, you might qualify for credits or exemptions that lower your taxable total. If you meet the age threshold, these benefits can be especially helpful, keeping more of your resources in your pocket. Also, if you only earn income from pensions, IRAs, or Social Security, your bracket could end up being modest.

It’s worth noting, though, that federal laws also overlap. For example, certain thresholds for taxable Social Security remain in place at the federal level, so confirm how your combined amounts fit with federal requirements.  It’s important to note that at the state level, South Carolina’s overall system is typically considered favorable for retirees.

Retirement Income Exclusion

In South Carolina, the concept of a “retirement exclusion” is slightly different than in some other states that use the word “exclusion” more formally. Nonetheless, the end result is similar: you may subtract certain types of retirement income, including pensions, 401(k) payments, IRAs, and more, from your taxable base.

A standard deduction is available for those aged 65 and older, frequently covering up to $10,000 of annual retirement distributions. Under certain circumstances—depending on filing status and the nature of the income—the allowable amount can rise higher, occasionally reaching $15,000.2 This helps lower the total included in South Carolina taxable income, resulting in fewer state dollars owed each tax year.

Before turning 65, an individual taxpayer can deduct up to $3,000 of retirement income annually; beyond that milestone, the figure increases to $10,000. Once you qualify as aged 65 and older, you may claim a $15,000 deduction against your South Carolina income. Still, any retirement or military retirement income deduction previously taken typically reduces that $15,000 (unless you’re a surviving spouse). 

For veterans, military retirement income can be especially beneficial, thanks to provisions granting a full exemption for qualified pay, regardless of age; similar relief often applies to surviving spouses as well.2 If this pertains to you, confirm that your benefits meet the requirements for complete exemption. 

Social Security Benefits

One of the biggest perks for retirees is that South Carolina does not impose additional taxes on Social Security benefits. Once you decide to start collecting Social Security, you can expect the entire check, minus any federal obligations, to land in your bank account. That’s a significant advantage if Social Security is a substantial part of your retirement plan.

However, don’t forget that the IRS might tax a portion of those benefits at the federal level depending on your provisional income. Provisional income generally includes half of your annual Social Security benefits, your adjusted gross income (excluding Social Security), and any tax-exempt interest.

Here’s a breakdown of how you may be taxed:3

• If your provisional income is between $25,000 and $34,000 as a single filer (or $32,001 and $44,000 jointly), as much as 50% of your Social Security benefits could be subject to tax.
• Should your provisional income exceed $34,000 (or $44,000 for joint filers), you may owe taxes on up to 85% of those benefits.

South Carolina Property Taxes

Retirees often dream of a cozy house on the coast, a pleasant condo near golfing communities, or a quiet home in a laid-back neighborhood. Luckily, property taxation in South Carolina is relatively gentle compared to many other parts of the country. 

Overview of Rates

When you pit South Carolina against states with heftier real estate obligations, you’ll notice that the average effective property tax rate here tends to be lower. 

The figure generally hovers around 0.51% to 0.53%, which is competitive if you’ve ever considered living in places where taxes are double that.4 Each county sets its own millage rates, so final bills can differ. Still, the broad statewide pattern is one of moderation.

Homestead Exemptions

Many homeowners appreciate South Carolina’s property relief programs, particularly the homestead exemption. This property tax relief program grants eligible homeowners an exemption that covers taxes on the first $50,000 of the fair market value of their primary residence. To qualify, you’ll need to meet several core requirements related to residency, ownership, and age or health status.

Key points regarding South Carolina’s homestead benefits include:5

Program Overview: This property tax benefit applies to taxes on the first $50,000 of your primary residence’s assessed value. Eligible homeowners enjoy reduced tax obligations once they meet certain qualifications related to ownership, residency, and specific personal criteria.

Ownership and Residency Requirements: To qualify, you must hold complete title to your home, have a life estate in the property, or be the beneficiary of a trust that owns the residence. In addition, you must have lived in South Carolina as your permanent home for one full year by December 31 preceding the tax year of exemption.

Eligibility by Age, Disability, or Blindness: You must be at least 65 years old by December 31 of the prior year, have documentation from an authorized state or federal agency stating you are totally and permanently disabled, or provide certification from an ophthalmologist confirming legal blindness.

Application Process: Your local County Auditor’s Office is your first resource. They can provide the correct forms, explain deadlines, and provide guidance on additional county-specific rules.

Required Proof: Documents verifying age might include a birth certificate or a valid South Carolina driver’s license. A disability declaration typically comes from a recognized government body, though the Vocational Rehabilitation agency can assist if you need an evaluation. Proof of legal blindness is issued by a licensed ophthalmologist, and those with a trust arrangement should supply a copy of the trust agreement showing beneficiary status.

Maintaining the Exemption: Once approved, you do not have to reapply each year unless you move your primary residence or if the homeowner who qualified for the exemption passes away.

Surviving Spouse Guidelines: A spouse may continue receiving this tax benefit after the eligible homeowner’s death if they secure ownership or life estate (or maintain beneficiary status in a trust) within nine months, keep the home as their permanent residence, and remain unmarried.

Relocating to a New Home: You can still benefit from the Homestead Exemption if you move to another residence in South Carolina, as long as you continue to satisfy the same ownership, residency, and age/disability/blindness criteria for the new property.

Please Note: In addition to these breaks, South Carolina keeps the assessment ratio for primary residences at 4%. If you own a second home or rental property, the rate rises to 6%.6 Thus, if your aim is to settle into a main dwelling, you’ll benefit from that lower ratio alongside any applicable exemptions.

South Carolina Estate Tax and Other Taxes

It’s not just about yearly bills; many retirees also ask if there’s a separate estate or inheritance levy. Currently, South Carolina does not impose an estate or inheritance tax. That’s great news if you plan to leave property, cash, or other assets to loved ones.

Still, federal rules remain in place, so if the total value of your estate exceeds the federal threshold, you might face taxes from Uncle Sam. For the majority of households, however, this limit is comfortably high, meaning no separate bite at the time of inheritance. Nonetheless, prudent estate planning is always wise, as transferring assets can involve probate or other legal steps with their own costs.

Sales Tax Structure

South Carolina’s sales tax rate begins at 6% across the state. However, counties can layer additional local options on top of that figure, pushing the total to somewhere between 7% and 9%.7 If you’re used to states with no sales tax or extremely low rates, this can definitely be an adjustment. 

On the upside, non-prepared food items and prescription medications are excluded from the base state sales tax.8 That means your regular supermarket visit or standard prescriptions aren’t taxed at the standard 6%. This softens everyday expenses for many retirees.

Vehicle Taxes and Other Specifics

Beyond your home and daily shopping, you’ll likely have to consider transportation if you plan to drive in South Carolina. The state generally imposes a “maximum sales tax” (often referred to as an infrastructure maintenance fee). The fee is 5% of the purchase price, capped at $500, meaning once you hit that amount, you don’t owe more.9 This structure can be advantageous if you’re buying an expensive car, as it avoids ongoing percentage-based taxes beyond the $500 threshold.

If you’re relocating from another state, you’ll also have to register your vehicle with South Carolina officials, which can come with distinct fees or a one-time payment. Gas taxes exist, as in most places, so it’s good to keep that in mind if you go on a lot of road trips or are exploring. Plus, watch out for local tourism taxes if you dine in special districts or visit certain hotspots, as these can add a few extra dollars to your bill.

Tax Planning Strategies for South Carolina Retirees

Careful preparation of your retirement finances can make a meaningful difference in how much of your nest egg you actually keep. While every retiree’s financial picture is unique, there are several common practices worth considering to make the most of your tax position in the Palmetto State. 

Consider the following strategies:

Withdrawing Strategically: By spacing out your withdrawals from IRAs or similar retirement accounts, you might keep your retirement income taxes lower in any given year. If your total income approaches a higher bracket, consider delaying some distributions until a time when you project a smaller income.

Roth IRA Conversions: If you foresee landing in a higher tax bracket later on, converting a portion of your Traditional IRA to a Roth sooner could be advantageous. Yes, you’ll pay taxes on the converted portion this year, but future qualified distributions could be tax-free. Just ensure you’re mindful of how the extra current-year income might push you into a higher bracket.

Capital Gains Timing: South Carolina extends a 44% exclusion on certain net long-term capital gains (those held two years or more), which helps cut your state tax on these profits.10 If you’re considering selling appreciated assets, look at your timing. A short wait could make the difference between a short-term gain taxed at ordinary rates and a long-term gain that receives partial relief.

Tax-Loss Harvesting: Selling underperforming assets and realizing a loss can offset capital gains from better-performing investments. Under federal “wash sale” guidelines, you must avoid repurchasing an identical asset within 30 days, or your realized loss may not be recognized. Done correctly, however, this strategy can trim your overall taxable gain.

Charitable Giving: Donating to qualifying charitable organizations can unlock both federal and state tax advantages. A Qualified Charitable Distribution (QCD) from your IRA, for instance, may allow you to contribute directly to a charity without counting the amount as part of your taxable income—assuming you meet the age and account requirements. This strategy can be beneficial if you’re looking to reduce required minimum distributions.

Leverage Available Exclusions: In states like South Carolina, you may benefit from various exclusions that reduce the taxable portion of retirement income. Identifying which streams of income qualify—and how those allowances change as you grow older—can help you plan your withdrawals to fit within these parameters. By doing so, you could preserve more of your resources over the long run.

Comparing Financial Advisors and Accountants for Retirees

As your money picture changes in retirement, seeking professional input is wise. Yet many people wonder which expert to approach – especially regarding taxes.

Here’s a snapshot overview of what advisors and accountants can help you with tax-wise:

Financial Advisors: Financial advisors offer a broader perspective, focusing on long-term strategies designed to preserve and grow your assets. In terms of taxes, they can help you pinpoint ideal withdrawal schedules, assess when a Roth conversion might be beneficial, and structure investments in a tax-efficient manner. They’ll also consider estate goals, lifestyle needs, and risk preferences to recommend holistic approaches that reduce overall tax liability over time, rather than just in the current year.

Accountants: On the other hand, accountants or CPAs handle the nitty-gritty details of filing obligations, calculating your exact tax owed, and ensuring compliance with both federal and state taxes. They might propose specific moves (like bunching deductions in one year) to reduce your short-term burden.

When your finances grow more complex, hiring both professionals can be transformative. For instance, a financial advisor may time IRA withdrawals to avoid higher brackets, while an accountant precisely calculates thresholds and files necessary forms. By uniting the advisor’s strategy with the accountant’s detail, you avoid costly mistakes and keep more of your retirement funds where they belong—in your pocket.

We Can Help You Further

Moving to or staying in a spot where you feel comfortable is part of what makes retirement fulfilling. Still, the tax landscape is important to get right. If you’d like personalized guidance on navigating South Carolina income taxes, property rules, or any other financial concerns, consider contacting financial advisory professionals with expertise in the Palmetto State.

Our team can help you design a plan that addresses everything from daily living costs to potential estate questions, so you’re not caught off guard. Whether you’re curious about income tax deduction thresholds, want to confirm you’re claiming all the property breaks you deserve, or need someone to clarify the interplay of federal and state rules, we’re here to help you.

With the right approach, you can make the most of this welcoming region and spend more time focusing on the activities and relationships that truly enrich your life. If you’re ready to take the next step, please schedule a complimentary consultation at a time that works for you.