South Carolina Taxes in Retirement: What You Need to Know
“The hardest thing in the world to understand is the income tax.” — Albert Einstein
I was born and raised in South Carolina. Still live here. Love it. I have done my share of travel, and there are beautiful places out there. But I do love coming home.
South Carolina is no longer a secret. It is the fastest growing state in the country according to the U.S. Census Bureau.
So this blog is dedicated to the people who live here or thinking about moving to the Palmetto State.
If you’re retired in South Carolina — or thinking about it — you’re in a pretty good spot when it comes to taxes.
No tax on Social Security. No estate tax. No inheritance tax. Generous deductions for retirees. And property taxes that are among the lowest in the country.
But “tax-friendly” doesn’t mean “tax-free.” There are still things you need to understand.
Let me break down what South Carolina taxes look like for retirees — and where the opportunities are.
The Income Tax Basics
For tax year 2025 (returns you’re filing in 2026), South Carolina has a graduated income tax with rates that top out at 6%.
Sources: SC Department of Revenue, “Individual Income Tax,” dor.sc.gov/iit (2025 rates); SC Department of Revenue, “Information about H. 4216,” dor.sc.gov/news/information-about-h-4216 (2026 changes)
Social Security Is Tax-Free
This is the big one.
South Carolina does not tax Social Security benefits. Not a dollar. Not a percentage. Nothing.
If Social Security is a significant part of your retirement income, this is a major advantage. In some states, you’d owe thousands on those benefits. Here, you keep it all.
Keep in mind — the federal government may still tax a portion of your Social Security, depending on your total income. But the state won’t touch it.
Source: SC Department of Revenue, “IIT FAQs,” dor.sc.gov/iit/prepare-you-file/iit-faqs
Retirement Income Gets a Deduction
South Carolina offers deductions on other retirement income too — like pensions, 401(k) withdrawals, and IRA distributions.
Here’s how it breaks down:
Under age 65: You can deduct up to $3,000 per year from qualifying retirement income.
Age 65 and older: You can deduct up to $10,000 per year from qualifying retirement income.
On top of that, once you turn 65, you qualify for an additional $15,000 deduction against any South Carolina income. However, you must subtract any retirement deduction you claim from this $15,000. So if you claim the full $10,000 retirement deduction, your age-based deduction drops to $5,000.
For an individual over 65, that’s $10,000 plus $5,000 — a total of $15,000 in deductions. For a married couple filing jointly with both spouses over 65, that’s up to $30,000 combined. That can zero out a significant chunk of your state tax bill.
South Carolina Department of Revenue has a YouTube channel that explains this in more detail here.
Source: SC Department of Revenue, “Retirees – Lower your Individual Income Tax bill with these five tips,” dor.sc.gov/tax-tips/retirees-lower-your-individual-income-tax-bill-these-five-tips
Capital Gains Get a Break Too
If you’re selling investments in retirement, South Carolina gives you a partial break.
You can deduct 44% of your net long-term capital gains before they’re taxed. Whatever remains gets taxed at your regular income rate.
So if you have $50,000 in long-term capital gains and no other income, you’d exclude $22,000 (44%). The remaining $28,000 would be taxed at 6%, minus the $642 adjustment — for a state tax of about $1,038.
That’s a meaningful discount compared to states that tax capital gains at the full rate.
Source: SC Department of Revenue, “IIT FAQs,” dor.sc.gov/tax/individual-income/faq
Property Taxes Are Low
South Carolina has some of the lowest property taxes in the nation. The average effective rate is approximately 0.5% of a home’s assessed value.
Compare that to New Jersey at over 2%, or Texas at nearly 1.7%. You’re paying a fraction of what you’d owe elsewhere.
And if you’re 65 or older and have lived in South Carolina for at least one full calendar year, you qualify for the Homestead Exemption. This is a complete exemption of taxes on the first $50,000 of your home’s fair market value.
On a $400,000 home, that could save you several hundred dollars a year.
Source: SC Department of Revenue, “Homestead Exemption,” dor.sc.gov/lgs/homestead-exemption
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Who We AreSales Tax Is Moderate
The statewide sales tax is 6%. Counties may impose additional local sales taxes if approved by voters — typically 1% to 2% more, depending on the county.
A few things to know:
Groceries (unprepared food) are exempt from the state sales tax, though some local taxes may still apply. Prescription medications are exempt. There’s a sales tax holiday the first weekend of August. And if you’re 85 or older, you get a 1% discount on state sales tax for personal purchases.
If you’re on a fixed income, the grocery exemption is particularly helpful.
Source: SC Department of Revenue, “Sales & Use Tax Index,” dor.sc.gov/sales-use-tax-index
No Estate or Inheritance Tax
South Carolina has no estate tax and no inheritance tax. In fact, South Carolina has had no estate tax for decedents dying on or after January 1, 2005.
When you pass away, your heirs won’t owe the state anything on what they inherit. This is a big deal for families with significant assets.
At the federal level, estate taxes only apply to estates above $15 million per person in 2026 — or $30 million for married couples. But at the state level, South Carolina takes nothing.
If you’re doing estate planning, this simplifies things considerably.
Sources: SC Department of Revenue, “Fiduciary,” dor.sc.gov/business-income-taxes/fiduciary; IRS, “What’s new — Estate and gift tax,” irs.gov/businesses/small-businesses-self-employed/whats-new-estate-and-gift-tax
Military Retirement Is Fully Exempt
If you’re a military retiree, all of your military retirement pay is exempt from South Carolina income tax. No age requirement. No income cap. It’s fully exempt.
This also applies to surviving spouses receiving military retirement benefits.
Source: SC Department of Revenue, “IIT FAQs,” dor.sc.gov/iit/prepare-you-file/iit-faqs
What About Other Taxes?
Gas tax: As of July 1, 2022, the motor fuel user fee is $0.28 per gallon, plus $0.0075 per gallon in environmental and inspection fees — for a total of $0.2875 per gallon. That’s one of the lower rates in the country.
Vehicle registration: When you purchase a vehicle in South Carolina, you’ll pay an Infrastructure Maintenance Fee (IMF) of 5% of the purchase price, capped at $500. If you’re moving to South Carolina with a vehicle, the IMF is $250. Title fee is $15, and biennial registration fees vary by vehicle weight.
Lottery winnings: Anything over $500 is taxed as income at your applicable rate.
Sources: SC Department of Revenue, “Motor Fuel,” dor.sc.gov/tax-index/motor-fuel; SC DMV, scdmvonline.com
The Bottom Line
South Carolina is genuinely tax-friendly for retirees. No Social Security tax. Generous retirement income deductions. Low property taxes. No estate tax.
But you’ll still owe something on pension income, IRA withdrawals, and investment gains above the deduction limits. And the 6% rate applies to most income over $17,830 for tax year 2025 (though this drops to 5.21% starting in tax year 2026).
The key is understanding how all the pieces fit together — and planning your withdrawals, conversions, and income timing accordingly.
If you’re retired here or thinking about moving here, it’s worth sitting down with someone who understands the full picture.
