No, South Carolina does not tax Social Security benefits. The exemption is total: it applies no matter your age, no matter your income, and no matter how much of your benefit the IRS taxes on your federal return. Railroad retirement benefits receive the same treatment.
How the State Exemption Works
Under South Carolina Code Section 12-6-1120, the state calculates your gross income 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 So even if the IRS taxes up to 85 percent of your benefits, South Carolina taxes none of it.2South Carolina Department of Revenue. Retirees – Lower Your Individual Income Tax Bill With These Five Tips The same code section covers railroad retirement benefits taxed federally.3South Carolina Department of Revenue. Frequently Asked Questions
You do not have to meet an income threshold or an age requirement. There is no phase-out at higher incomes. If you receive Social Security and file a South Carolina return, the benefit is excluded.
Federal Tax Still Applies
The state exemption only governs state tax. The IRS can still tax a portion of your benefits based on a “combined income” formula: your adjusted gross income, plus nontaxable interest, plus half your Social Security. If that total exceeds $25,000 for a single filer or $32,000 for a joint return, up to 50 percent of your benefits may be taxed. Above $34,000 single or $44,000 joint, up to 85 percent can be taxed.4Internal Revenue Service. Publication 915 – Social Security and Equivalent Railroad Retirement Benefits
Whatever amount the federal government taxes, you subtract on your South Carolina return. The net state tax on your Social Security is zero either way.
Claiming the Exemption on Your SC1040
On Form SC1040, the exemption shows up in the “Subtractions From Federal Taxable Income” section. Enter the Social Security and railroad retirement amount that was taxed on your federal return on Line o.5South Carolina Department of Revenue. 2024 Individual Income Tax Instructions SC1040 The figure should match your federal return exactly. Mismatches here are a common cause of processing delays.
Most residents file electronically. Refunds from error-free electronic returns take up to eight weeks from your filing date or from February 2, whichever is later.6South Carolina Department of Revenue. Refunds Paper returns take longer.
Other Retirement Income Deductions
If you receive Social Security, you likely have other retirement income too. South Carolina does not fully exempt pensions, 401(k) distributions, or traditional IRA withdrawals the way it does Social Security, but it offers substantial deductions.
Retirement Income Deduction
Under Section 12-6-1170(A), you can deduct up to $3,000 per year of qualified retirement income before age 65. At 65, the cap rises to $10,000.7South Carolina Legislature. South Carolina Code Title 12 – Section 12-6-1170 – Retirement Income Deduction From Taxable Income You have to be the original owner of the account. Each spouse on a joint return claims their own deduction against their own retirement income, so a couple both over 65 can deduct up to $20,000 combined.3South Carolina Department of Revenue. Frequently Asked Questions Claim these on Lines p-1 and p-2 of Form SC1040.5South Carolina Department of Revenue. 2024 Individual Income Tax Instructions SC1040
Age 65 and Older Deduction
Starting in the year you turn 65, South Carolina offers a separate deduction of up to $15,000 against any type of taxable income, not just retirement distributions.2South Carolina Department of Revenue. Retirees – Lower Your Individual Income Tax Bill With These Five Tips A joint return where both spouses are 65 or older has a combined limit of $30,000.8South Carolina Department of Revenue. Age 65 and Older Deduction for Any Type Income
These two deductions overlap. Any amount you claim under the retirement income deduction reduces the $15,000 age 65 deduction dollar for dollar.8South Carolina Department of Revenue. Age 65 and Older Deduction for Any Type Income If you are 65 and deduct $10,000 in pension income, your age 65 deduction drops to $5,000, giving you $15,000 total, not $25,000. The age 65 deduction still matters because it can shelter wages, investment income, rental income, and other sources the retirement-specific deduction does not reach. It goes on Line q.5South Carolina Department of Revenue. 2024 Individual Income Tax Instructions SC1040
Military Retirement Pay
Military retirement income is fully deductible with no age or income limit under Section 12-6-1171. A surviving spouse receiving military retirement based on a deceased spouse’s service claims the same full deduction, and may also claim a separate retirement income deduction on their own retirement income.9South Carolina Legislature. South Carolina Code Title 12 – Section 12-6-1171 – Military Retirement Income Deduction If you are 65 or older, the military deduction reduces your $15,000 age 65 deduction the same way the civilian retirement deduction does.2South Carolina Department of Revenue. Retirees – Lower Your Individual Income Tax Bill With These Five Tips
Disability Retirement
Retirement income paid because of permanent and total disability may be fully exempt rather than capped at the standard $3,000 or $10,000. You have to meet the same disability standard the state uses for its homestead property tax exemption. If the plan later converts to a regular retirement plan, either automatically at a set age or by your election, the full exemption ends and the standard retirement income deduction applies.10South Carolina Department of Revenue. SC Revenue Ruling 96-1 – Disability Retirement (Income Tax)
If You Are Moving to South Carolina for the Tax Treatment
The Social Security exemption applies to South Carolina residents, and the state defines residency by domicile rather than a 183-day count. Domicile is your true, permanent home — the place you intend to return to whenever you are away.11South Carolina Department of Revenue. A Guide to Determining a Taxpayers Domicile for Income Tax Purposes The Department of Revenue weighs where you registered your car, where you vote, where your bank accounts sit, and similar ties.
Simply planning to move at some future date does not establish domicile. You must actually reside in the state with genuine intent to make it your principal home. If you divide time between two states, line up your driver’s license, voter registration, primary accounts, and main residence in South Carolina so the other state cannot claim you as a resident and tax your retirement income.