South Carolina has a state income tax, and it applies to most residents and income sources

Yes, South Carolina taxes income. The state levies a personal income tax on wages, self-employment earnings, investment income, and other sources. The tax rate ranges from 0% to 7%, depending on your income level. Unlike some states, South Carolina does not have a flat tax — the rate increases as your income rises.

If you live in South Carolina or earn income there, you will owe state income tax unless a specific exemption applies. The state also taxes capital gains, dividends, and retirement distributions in most cases, though some retirement income receives preferential treatment under state law.

Key Takeaways

  • South Carolina income tax rates range from 0% to 7% and are progressive, meaning the rate increases with income level.
  • You must file a South Carolina tax return if you are a resident or earned income in the state, unless your income falls below the filing threshold.
  • Military retirement pay, some federal pensions, and Social Security benefits receive special treatment and may not be fully taxed by the state.
  • South Carolina offers a standard deduction and tax credits that can lower your state tax bill, including credits for education and dependent care.
  • If you moved to South Carolina during the year or left the state, you may file as a part-year resident with different income thresholds.

How South Carolina income tax brackets work

South Carolina uses a progressive tax system, meaning different portions of your income are taxed at different rates. The lowest bracket starts at 0% for the first portion of income, and the rate increases as you earn more. The highest rate of 7% applies to income above a certain threshold, which changes yearly.

The brackets themselves adjust each year for inflation. For the current tax year, you can find the exact bracket thresholds on the South Carolina Department of Revenue website or in the tax instructions you receive. Because the brackets shift annually, it is worth checking the current year's rates rather than relying on prior-year numbers.

Your filing status — single, married filing jointly, married filing separately, or head of household — determines which bracket applies to your income. A married couple filing jointly typically reaches higher income levels before hitting the top rate compared to a single filer with the same total household income.

Who must file a South Carolina return

You must file a South Carolina return if you are a resident and your income exceeds the filing threshold for your filing status. The threshold varies by age and filing status; residents over 65 often have a higher threshold than younger filers. Part-year residents — those who moved into or out of South Carolina during the year — must file if their income exceeds the threshold for the portion of the year they lived in the state.

Non-residents who earned income in South Carolina may also need to file, even if they do not live there. This applies to people who worked in South Carolina temporarily or earned income from South Carolina sources like rental property or a business operated in the state.

Even if your income falls below the filing threshold, you may want to file anyway if you had taxes withheld from your paychecks or if you are due a refund. Filing allows you to recover overpaid taxes.

Retirement income and special tax treatment

South Carolina offers preferential tax treatment for certain types of retirement income. Military retirement pay is exempt from state income tax entirely, regardless of the amount. Federal pensions and some other government pensions may also receive exemptions or exclusions, though the rules vary by the type of pension and when you retired.

Social Security benefits are not taxed by South Carolina. However, distributions from traditional IRAs, 401(k)s, and similar retirement accounts are taxed as ordinary income. Roth IRA withdrawals of contributions (not earnings) are not taxed, but Roth earnings may be taxed depending on how long you have held the account.

If you are over 59½ and receive distributions from a retirement account, you do not receive an automatic exemption — the income is still subject to state tax. However, you may be able to exclude a portion of retirement income if you meet specific age and income requirements under South Carolina's retirement income exclusion. The rules are detailed and depend on your total income and the source of the retirement funds.

Deductions and credits that lower your bill

South Carolina allows a standard deduction that reduces your taxable income. The amount depends on your filing status and age. Residents 65 and older receive a higher standard deduction than younger filers. You can also itemize deductions instead of taking the standard deduction if your itemized deductions exceed the standard amount, though this is less common for most taxpayers.

The state offers several tax credits that directly reduce the tax you owe. The Earned Income Tax Credit (EITC) is available to low- and moderate-income workers and can result in a refund even if you owe no tax. South Carolina also offers credits for dependent care expenses, education-related costs, and property taxes paid. Each credit has income limits and specific requirements.

Unlike federal tax law, South Carolina does not allow a deduction for state income taxes paid. However, you can deduct federal income taxes if you itemize deductions on your state return.

How to file and where to send your return

You file your South Carolina return using Form SC 1040 or a simplified version if your income is below a certain level. The state accepts electronic filing through approved tax software and the IRS Free File program if you meet income requirements. You can also file by mail by sending your completed return to the South Carolina Department of Revenue.

The filing important date is the same as the federal important date — typically April 15 of the following year, or the next business day if April 15 falls on a weekend or holiday. If you need more time, you can request an extension, which gives you until October 15 to file. An extension to file does not extend the important date to pay; taxes owed are still due by April 15.

If you file electronically, you will receive confirmation of receipt. If you mail your return, keep a copy for your records. The Department of Revenue processes returns and issues refunds within a few weeks of receipt if you are due a refund.

Part-year residents and those who moved during the year

If you moved to South Carolina partway through the year, you file as a part-year resident. You report only the income you earned while living in South Carolina, not income earned before you moved. The filing threshold is also adjusted based on the number of months you lived in the state.

Similarly, if you left South Carolina during the year, you report only the income earned while you were a resident. You may also owe tax to the state you moved to on income earned after you left South Carolina. Some states offer credits for taxes paid to other states to avoid double taxation, though the rules vary.

When you move, notify both the South Carolina Department of Revenue and the tax authority in your new state. Provide your move date and new address so your records are updated correctly.

Frequently Asked Questions

Do I owe South Carolina tax if I work remotely for a company in another state?

If you live in South Carolina and work remotely, you owe South Carolina tax on your wages, even if your employer is based elsewhere. South Carolina taxes income earned by residents regardless of where the employer is located. Your employer may not withhold South Carolina tax automatically, so you may need to make estimated tax payments or adjust your withholding.

What if I did not file a South Carolina return in prior years?

Contact the South Carolina Department of Revenue to discuss your situation. The state has a statute of limitations on assessments, typically three years from the filing important date, but penalties and interest accrue on unpaid taxes. Filing back returns, even late, is usually better than ignoring the debt, as it stops additional penalties from accumulating.

Can I deduct property taxes or sales taxes on my South Carolina return?

You cannot deduct South Carolina sales taxes on your state return. You can deduct property taxes only if you itemize deductions, and the deduction is subject to limits. Most South Carolina taxpayers use the standard deduction, which is simpler and often results in a lower tax bill.

Is there a South Carolina tax on capital gains?

Capital gains are taxed as ordinary income in South Carolina. If you sell an investment at a profit, the gain is added to your other income and taxed at your regular rate. Long-term capital gains (assets held over one year) are not taxed at a preferential rate in South Carolina the way they are federally.

What happens if I owe South Carolina tax but cannot pay by April 15?

You can request a payment plan from the South Carolina Department of Revenue. Interest and penalties accrue on unpaid taxes, so paying as soon as possible reduces the total amount you owe. The state also offers an installment agreement that allows you to pay over time, though you will still owe interest on the balance.