Overview of South Carolina Retirement Tax Friendliness
South Carolina does not tax Social Security retirement benefits. It also provides a $15,000 taxable income deduction for seniors receiving any other type of retirement income. The state has some of the lowest property taxes in the country.
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Annual Social Security Income
Annual Retirement Account Income
Year of Birth
Annual Income from Private Pension
Annual Income from Public Pension
|is toward retirees.|
|Social Security income is taxed.|
|Withdrawals from retirement accounts are taxed.|
|Wages are taxed at normal rates, and your marginal state tax rate is %.|
- Our Tax Expert
Jennifer Mansfield, CPA Tax
Jennifer Mansfield, CPA, JD/LLM-Tax, is a Certified Public Accountant with more than 30 years of experience providing tax advice. SmartAsset’s tax expert has a degree in Accounting and Business/Management from the University of Wyoming, as well as both a Masters in Tax Laws and a Juris Doctorate from Georgetown University Law Center. Jennifer has mostly worked in public accounting firms, including Ernst & Young and Deloitte. She is passionate about helping provide people and businesses with valuable accounting and tax advice to allow them to prosper financially. Jennifer lives in Arizona and was recently named to the Greater Tucson Leadership Program.
South Carolina Retirement Taxes
Planning your retirement escape? If warm weather, sandy beaches and low taxes are among your priorities, South Carolina may be a good choice. The Palmetto State has some of the country’s most beautiful shoreline, and it's retirement tax-friendly to boot.
What makes South Carolina a good choice for budget-conscious seniors? Well, for starters, its cost of living is a bit lower than the national average. On top of that, it provides a full income tax exemption for all Social Security retirement benefits and multiple other deductions for retirement income and total income.
A financial advisor in South Carolina can help you plan for retirement and other financial goals. Financial advisors can also help with investing and financial plans, including taxes, homeownership, insurance and estate planning, to make sure you are preparing for the future.
Is South Carolina tax-friendly for retirees?
South Carolina does not tax Social Security retirement benefits whatsoever. It provides a substantial deduction on all other types of retirement income, including income from retirement accounts. Retirees who own a home in South Carolina will fare especially well, as the state has some of the lowest property taxes in the country.
Is Social Security taxable in South Carolina?
Any Social Security that is included in your Adjusted Gross Income (AGI) for federal purposes can be subtracted out of your AGI on your South Carolina tax return. This, along with the low cost of living in South Carolina, means it is possible for some seniors in the Palmetto State to survive on Social Security retirement benefits alone.
Are other forms of retirement income taxable in South Carolina?
Yes, but they are also largely deductible. For taxpayers under the age of 65 the deduction is $3,000. For seniors 65 and older the deduction is $15,000. This can be applied across all types of retirement income, including income from a 401(k), an IRA, a government pension or a public pension.
If you are a senior and your total income from all those sources is less than $15,000, you will not pay any South Carolina income taxes. Above that limit, you may need to pay taxes at the rates shown in the table below.
Income Tax Brackets
|South Carolina Taxable Income||Rate|
|$0 - $3,070||0%|
|$3,070 - $6,150||3%|
|$6,150 - $9,230||4%|
|$9,230 - $12,310||5%|
|$12,310 - $15,400||6%|
How high are property taxes in South Carolina?
South Carolina’s property taxes are among the lowest in the United States. The average effective property tax rate is just 0.55%. This means homeowners can expect to pay about $550 for every $100,000 in home value.
Indeed, most South Carolina homeowners pay less than $1,000 annually in property taxes. This contributes to the low cost of housing in South Carolina. But for seniors, costs may be even lower. The Homestead Exemption in the state can significantly reduce property taxes.
What is the South Carolina Homestead Exemption?
Homeowners 65 and older qualify for the South Carolina Homestead Exemption. If the property has served as your primary residence for at least one year, the first $50,000 of your home’s fair market value is exempt from taxation. This can lead to hundreds of dollars of savings each year off South Carolina’s already low property taxes. Apply for the exemption at your county auditor’s office.
How high are sales taxes in South Carolina?
Sales taxes in South Carolina are somewhat higher than the national average. They range from 6% (the state rate) to a maximum of 9%. In most of the state, the rate is either 7% or 8%.
Prescription drugs and groceries are fully exempt from sales taxes. However, clothing is taxable, as are motor vehicles indirectly through the infrastructure maintenance fee.
What other South Carolina taxes should I be concerned about?
If you plan on supporting yourself during retirement with investments that are not held in a retirement account, it’s important to be aware of South Carolina’s tax on long-term capital gains. Gains made on investments, whether they were held for more than or less than one year, are subject to the South Carolina income tax rates shown in the table above. Long-term gains, which are held for at least one year, receive a 44% deduction, though.
South Carolina does not have an estate or inheritance tax.
Most Tax Friendly Places for Retirees
SmartAsset’s interactive map highlights the places in the country with tax policies that are most favorable to retirees. Zoom between states and the national map to see the most tax-friendly places in each area of the country.
Methodology To find the most tax friendly places for retirees, our study analyzed how the tax policies of each city would impact a theoretical retiree with an annual income of $50,000. Our analysis assumes a retiree receiving $15,000 from Social Security benefits, $10,000 from a private pension, $10,000 in wages and $15,000 from a retirement savings account like a 401(k) or IRA.
To calculate the expected income tax this person would pay in each location, we applied the relevant deductions and exemptions. This included the standard deduction, personal exemption and deductions for each specific type of retirement income. We then calculated how much this person would pay in income tax at federal, state, county and local levels.
We calculated the effective property tax rate by dividing median property tax paid by median home value for each city.
In order to determine sales tax burden we estimated that 35% of take-home (after-tax) pay is spent on taxable goods. We multiplied the average sales tax rate for a city by the household income after subtracting income tax. This product is then multiplied by 35% to estimate the sales tax paid.
For fuel taxes, we first distributed statewide vehicle miles traveled to the city level using the number of vehicles in each county. We then calculated miles driven per capita in each city. Using the nationwide average fuel economy, we calculated the average gallons of gas used per capita in each city and multiplied that by the fuel tax.
For each city we determined whether or not Social Security income was taxable.
Finally, we created an overall index weighted to best capture the taxes that most affect retirees. The income tax category made up 40% of the index, property taxes accounted for 30%, sales taxes 20% and fuel taxes 10%.
Sources: Internal Revenue Service, Social Security Administration, state websites, local government websites, US Census Bureau 2018 American Community Survey, Avalara, American Petroleum Institute, GasBuddy, UMTRI, Federal Highway Administration