South Carolina Income Tax: Rates, Brackets, and Deductions

South Carolina does have a state income tax. Starting with the 2026 tax year, it uses a two-bracket structure topping out at 5.21%, paired with deductions and exclusions generous enough that many retirees, veterans, and moderate-income households end up owing little or nothing. The reason the state keeps showing up on “low-tax” lists is not that the tax doesn’t exist, but that the code stacks exemptions in a way that drives the effective rate toward zero for a large share of filers.

Rates and Brackets for 2026

H. 4216 collapses the old bracket structure into two tiers for the 2026 tax year, with returns due April 15, 2027:

Income under $30,000: 1.99%
Income of $30,000 and above: 5.21%, minus a $966 adjustment

That top rate is a sharp drop from recent years. The top marginal rate was 7% as recently as 2021 and had come down to 6% across a three-bracket system by 2025.¹ A single filer with $50,000 in taxable income after deductions will owe roughly $1,639 in state income tax under the new structure.²

How the New Deduction Works

The biggest mechanical change in 2026: South Carolina no longer piggybacks on the federal standard or itemized deduction. Your federal adjusted gross income (AGI) becomes the starting point for the state return, and a new South Carolina Income Adjusted Deduction (SCIAD) replaces the old federal deduction carryover.¹

The SCIAD amounts are:

Single or married filing separately: $15,000
Head of household: $22,500
Married filing jointly or surviving spouse: $30,000

These amounts can be reduced at higher income levels, so high earners should not assume they receive the full deduction.¹ If you filed in prior years, note that the starting figure on your return is now higher (AGI rather than federal taxable income), with the SCIAD offsetting the difference. Filing without understanding this change risks errors in either direction.

Social Security and Treasury Interest

Social Security benefits are completely excluded from South Carolina taxable income, regardless of how much you earn from other sources. The exclusion also covers Tier 1 railroad retirement benefits.³ The state does this by excluding the federal gross-up of Social Security income (IRC Section 86) from South Carolina gross income entirely.⁴

Interest on U.S. government obligations, including Treasury bonds, savings bonds, and Treasury notes, is also excluded.⁴ For a retiree holding a conservative portfolio heavy on Treasuries, the combined effect is that almost no investment income shows up on the state return.

Retirement Account Deduction

Income from 401(k) plans, IRAs, and private pensions qualifies for a dedicated deduction under SC Code 12-6-1170. The amount depends on your age:

Under 65: up to $3,000 per year of qualifying retirement income
65 and older: up to $10,000 per year

You must be the original owner of the retirement account to claim the deduction. It applies to distributions that are otherwise taxable at the state level, so Roth IRA withdrawals don’t need it.⁵

The Age 65 Deduction on Any Income

Once you turn 65, you qualify for an additional deduction of up to $15,000 against any type of South Carolina income. Wages, rental income, business income, investment gains — all eligible.³ This is the provision most people miss.

There is a catch. You must subtract whatever you already claimed under the retirement income deduction or the military retirement deduction. If you deducted $10,000 under 12-6-1170(A), your age 65 deduction drops to $5,000. Surviving spouses claiming a retirement deduction are not required to make this reduction.⁵

For married couples filing jointly, the cap is $15,000 when one spouse is 65 or older and $30,000 when both qualify. A couple with both spouses over 65 could shield up to $60,000 of AGI through the SCIAD and age-based deduction alone, before the retirement-specific deduction and Social Security exclusion even come into play. That math is why many South Carolina retirees genuinely owe nothing.

Military Retirement

South Carolina fully exempts military retirement income. Under SC Code 12-6-1171, enacted through the Workforce Enhancement and Military Recognition Act, an individual taxpayer can deduct all military retirement income included in South Carolina taxable income.⁶ No cap, no age requirement, no phase-out.

The deduction extends to surviving spouses receiving benefits through a military retirement plan, as well as dependency and indemnity compensation tied to the deceased spouse’s service. A surviving spouse with their own separate retirement income can claim an additional retirement exclusion on top of the military deduction.⁶ For a retired service member whose primary income is a military pension plus Social Security, the effective South Carolina income tax rate is zero.

If You Moved In or Work Across State Lines

Part-year residents can choose how to file. You can file as a full-year resident on Form SC1040, reporting all income and claiming a credit for taxes paid to another state, or you can file as a nonresident on Form SC1040 with Schedule NR, reporting only income earned while living in or sourced from South Carolina.⁷

Nonresidents who work in South Carolina but live elsewhere file Form SC1040 with Schedule NR and owe tax only on income earned in the state, with deductions prorated accordingly. If you’re a full-year resident married to a nonresident and you file jointly for federal purposes, both spouses file a joint SC1040 with Schedule NR, and the nonresident spouse reports only South Carolina-sourced income.⁷

The filing-status choice has real financial consequences. If you moved to South Carolina late in the year and earned most of your income elsewhere, nonresident filing with Schedule NR typically produces a lower state tax bill. If you moved early in the year and want to use credits for taxes paid to another state, full-year filing may be simpler.

Property and Sales Tax

Income tax is only part of the picture. Owner-occupied primary residences are assessed at just 4% of fair market value, compared to 6% for commercial and rental property.⁸ A home worth $300,000 has an assessed value of only $12,000 before local millage rates apply.

Residents age 65 or older, those totally and permanently disabled, or those legally blind qualify for the homestead exemption, which removes the first $50,000 of fair market value from the tax roll. You must apply through your county auditor’s office. Vehicles are taxed as personal property at a 6% assessment ratio, with local millage applied on top, which often surprises newcomers from states that charge only a flat registration fee.⁹

The statewide sales tax rate is 6%. Counties can add local-option taxes for capital projects, education, transportation, and other purposes, with combined rates reaching as high as 9% in some counties. Groceries are taxed at a reduced rate.¹⁰ Taken together, the moderate sales tax, low effective income tax for many residents, and favorable property assessment ratios produce a total tax burden that consistently ranks among the lighter ones nationally.

1
South Carolina Department of Revenue. Information About H. 4216
2
South Carolina Department of Revenue. South Carolina Individual Income Taxes
3
South Carolina Department of Revenue. Retirees – Lower Your Individual Income Tax Bill With These Five Tips
4
South Carolina Legislature. South Carolina Code 12-6-1120 – Gross Income
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South Carolina Legislature. South Carolina Code 12-6 – South Carolina Income Tax Act
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South Carolina Legislature. South Carolina Code 12-6-1171 – Military Retirement Income Tax Deduction
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South Carolina Department of Revenue. New to SC Filing?
8
South Carolina Legislature. South Carolina Code 12-43-220 – Classification of Property and Assessment Ratios
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South Carolina Revenue and Fiscal Affairs Office. Property Tax Frequently Asked Questions
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South Carolina Department of Revenue. Sales and Use Tax Index