South Carolina is a tax-friendly state for most residents, and especially so for retirees: there’s no tax on Social Security, no estate or inheritance tax, a full deduction for long-term capital gains, a favorable 4% assessment ratio on owner-occupied homes, and layered deductions that shelter a sizable chunk of retirement and age-65 income. The weak spots are local sales tax add-ons that can push the combined rate into the 9% to 10% range and an annual personal property tax on vehicles that catches newcomers off guard.
Income Tax Rates and Who Actually Pays Them
South Carolina’s personal income tax starts with your federal taxable income, so the deductions and adjustments on your federal return mostly carry through.1South Carolina Department of Revenue. Individual Income Tax The state recently collapsed six brackets into two and brought the top rate down from 7%. For tax year 2026, income up to $30,000 is taxed at 1.99%, and anything above that is taxed at 5.21%.2South Carolina Legislature. 2025-2026 Bill 4216 – Income Tax
On its own, a 5.21% top rate is middle-of-the-road for the Southeast. What makes South Carolina friendlier than that number suggests is the stack of deductions that follow, particularly for anyone over 65 or drawing retirement income.
Social Security and Retirement Income
South Carolina does not tax Social Security benefits. Even if your Social Security is partially taxed at the federal level, you exclude the entire amount from your state return.3South Carolina Department of Revenue. IIT FAQs – Section: Retirees and Seniors For retirees living primarily on Social Security, that alone can mean a zero state income tax bill.
On top of that, two separate deductions apply to other income:
- A retirement income deduction under S.C. Code Section 12-6-1170 of up to $3,000 per year if you’re under 65 and drawing from a qualified plan (401(k), 403(b), IRA, 457, or public pension), rising to $10,000 once you turn 65. Each spouse claims their own.4South Carolina Legislature. South Carolina Code 12-6-1170 – Retirement Income Deduction From Taxable Income for Individual
- An age-65 deduction of up to $15,000 against any South Carolina taxable income, regardless of source. Wages, rental income, investment income, business income, retirement distributions all qualify, and you don’t need any retirement income to claim it. If both spouses on a joint return are 65 or older, the combined cap doubles to $30,000.5South Carolina Department of Revenue. Age 65 and Older Deduction – General and Military Retirement Deductions and Earned Income Offset
The two don’t fully stack. The $15,000 age-65 ceiling is reduced by whatever you already deducted under the retirement provision. A 65-year-old claiming the full $10,000 retirement deduction can add $5,000 more under the age deduction, for $15,000 total sheltered. A 65-year-old with no retirement income can claim the full $15,000 against wages.
Military retirement pay is separately and fully exempt, with no age restriction. A surviving spouse receiving military retirement for a deceased service member also qualifies, and this exemption is on top of any retirement or age-based deduction claimed on the taxpayer’s own income.5South Carolina Department of Revenue. Age 65 and Older Deduction – General and Military Retirement Deductions and Earned Income Offset
Capital Gains
South Carolina allows a deduction for net capital gains, and the phase-in reached 100% for tax years beginning in 2024 and after. Long-term capital gains are now effectively tax-free at the state level.6South Carolina Legislature. South Carolina Code 12-6-1150 – Capital Gain Deduction “Net capital gain” follows the federal definition, which generally means assets held longer than one year. If you’re selling a business, liquidating a portfolio, or downsizing real estate, the state takes nothing. Few states match this.
Property Tax
Property tax in South Carolina strongly favors people who live in the homes they own. Under S.C. Code Section 12-43-220, a primary residence and up to five contiguous acres are assessed at 4% of fair market value. Second homes, rentals, and commercial property are assessed at 6%.7South Carolina Legislature. South Carolina Code 12-43-220 – Classifications Shall Be Equal and Uniform A $300,000 primary home has an assessed value of $12,000; a $300,000 vacation home is assessed at $18,000. The county’s millage rate applied to that assessed value produces your bill, and millage rates vary widely across the state.
To get the 4% residential rate, you have to apply through your county. The typical deadline is May 31 of the tax year. Miss it and you’re taxed at the 6% rate until the next cycle.
Senior and Disability Homestead Exemption
Under S.C. Code Section 12-37-250, qualifying residents can exempt the first $50,000 of their primary home’s fair market value from all property taxes, including county, municipal, school, and special assessment levies.8South Carolina Legislature. South Carolina Code 12-37-250 – Homestead Exemption for Taxpayers Sixty-Five and Over or Those Totally and Permanently Disabled or Legally Blind You qualify if you are age 65 or older by December 31 of the tax year and have been a South Carolina resident for at least one year, or if you are totally and permanently disabled as classified by a state or federal agency, or if you are legally blind. Apply through your county auditor’s office with proof of age, disability status, or blindness, plus residency documentation.
Sales Tax
The statewide sales tax rate is 6%.9South Carolina Department of Revenue. Sales Tax Counties can add 1% to 4% through voter-approved local option taxes, which puts the combined rate anywhere from 6% to 10% depending on where you live.10South Carolina Department of Commerce. Sales and Use Tax Incentives Most residents land in the 7% to 9% range. This is where South Carolina’s “tax-friendly” label weakens; sales tax is not a selling point.
Two carve-outs matter. Unprepared food that qualifies for food stamps is exempt from the 6% state sales tax when sold for home consumption, though local option taxes may still apply to groceries unless the county specifically exempts them.11South Carolina Department of Revenue. Chapter 21 – Unprepared Food Exemption Prescription medications are also exempt from state sales tax. Residents 85 or older are entitled to a 1% reduction on the state sales tax for items purchased for personal use.9South Carolina Department of Revenue. Sales Tax
Vehicle Tax and Registration Fees
This is the surprise. South Carolina taxes motor vehicles annually based on assessed value. Personal cars and light trucks are assessed at 6% of fair market value; heavier vehicles at 10.5%. The county millage rate is applied to that assessed value to produce the annual bill. Because vehicles depreciate, the tax generally decreases each year you own the same car, but it’s a recurring cost that residents of states without personal property tax on vehicles don’t expect.
When you first register a vehicle here, you also owe a one-time infrastructure maintenance fee. For a vehicle bought from an in-state dealer or private seller, it’s 5% of the sale price or fair market value, capped at $500.12South Carolina Department of Revenue. South Carolina Infrastructure and Economic Development Reform Act If you’re bringing a vehicle in from another state, the fee is a flat $250.13South Carolina Legislature. South Carolina Code 56-3-627 – Infrastructure Maintenance Fee Active-duty military members, their spouses, and dependents are exempt.
Estate and Inheritance Tax
South Carolina imposes neither an estate tax nor an inheritance tax. The estate tax statute is still on the books, but it ties the state tax to the old federal state death tax credit that Congress phased out in the mid-2000s. With the federal credit at zero, the state tax equals zero.14South Carolina Legislature. South Carolina Code of Laws – Title 12 – Chapter 16 Estate Tax No separate state estate tax return is required, and beneficiaries owe the state nothing when they inherit. Federal estate tax may still apply to very large estates, but that’s federal, not South Carolina.
Combined with the capital gains exclusion, the lack of any death tax makes South Carolina one of the better states in the region for retirees with assets they plan to pass on.