South Carolina collects state income tax on wages, retirement income, and most other earnings

Yes, South Carolina has a state income tax. The state taxes wages, salaries, retirement distributions, investment income, and most other forms of personal income. Unlike some states that tax only certain types of income, South Carolina's tax applies broadly to residents who earn money within the state or who live in South Carolina and earn money elsewhere.

The tax rate depends on your total income for the year. South Carolina uses a progressive tax system, meaning the rate increases as your income increases. The state has seven tax brackets, ranging from 0% on the first portion of income to 7% on income above a certain threshold. The exact dollar amounts for each bracket change yearly based on inflation adjustments.

You file South Carolina state income tax using Form SC 1040, which you submit to the South Carolina Department of Revenue. Most people have taxes withheld from their paychecks by their employer, so they may owe nothing additional at tax time or may receive a refund. Self-employed people and those with income not subject to withholding must make quarterly estimated tax payments.

Key Takeaways

  • South Carolina taxes resident income at rates from 0% to 7% depending on how much you earn, using seven different tax brackets.
  • You must file state income tax if you lived in South Carolina on December 31 of the tax year and had income above the filing threshold, which varies by age and filing status.
  • Most employees have state tax withheld automatically from paychecks, so they file to report the total and receive a refund or pay any balance owed.
  • Self-employed people and those receiving income without withholding must send quarterly estimated tax payments to avoid penalties.
  • Certain types of income, such as Social Security benefits and some retirement distributions, may be partially or fully exempt from South Carolina tax.

Who must file a South Carolina state income tax return

You must file a South Carolina state income tax return if you were a resident on December 31 of the tax year and your income exceeded the filing threshold. The threshold depends on your age and filing status. For 2024, a single person under 65 must file if they had gross income of $13,850 or more. A single person 65 or older has a higher threshold of $17,450. Married couples filing jointly have different thresholds based on whether either spouse is 65 or older.

Residency for South Carolina tax purposes means you lived in the state for the entire tax year. If you moved to South Carolina partway through the year, you may still owe tax on income earned while you were a resident. If you moved out of South Carolina, you may owe tax only on income earned before you left, depending on when you established residency elsewhere.

Even if your income is below the filing threshold, you should file if you had state income tax withheld from your paychecks. Filing allows you to claim a refund of the taxes you paid. You should also file if you are claiming a state tax credit, such as the Earned Income Tax Credit or the Child and Dependent Care Credit.

South Carolina income tax brackets and rates for 2024

South Carolina's income tax system uses seven brackets. The rates are 0%, 2.5%, 3.5%, 4.5%, 5.75%, 6.5%, and 7%. Each bracket applies to a specific range of taxable income. For a single filer in 2024, the 0% rate applies to the first $3,510 of taxable income. The 2.5% rate applies to income from $3,510 to $7,020. The rates continue to increase through higher income levels, with the top 7% rate applying to income above $146,000.

The dollar amounts for each bracket adjust annually for inflation. The South Carolina Department of Revenue publishes updated brackets each year, usually in December for the following tax year. If your income spans multiple brackets, you pay the lower rate on the lower portion and the higher rate only on the portion that falls into the higher bracket. This is called marginal taxation.

Married couples filing jointly have different bracket thresholds than single filers, and the thresholds are wider to account for combined income. Heads of household have their own set of brackets as well. You can find the current year's brackets on the South Carolina Department of Revenue website or in the instructions that come with Form SC 1040.

Types of income subject to South Carolina tax

South Carolina taxes most types of income. Wages and salaries from employment are taxable. Self-employment income is taxable. Interest and dividend income from investments are taxable. Capital gains—profit from selling stocks, real estate, or other assets—are taxable. Rental income is taxable. Income from a business, partnership, or S corporation is taxable.

Retirement income is generally taxable, but South Carolina offers a significant exemption. Distributions from retirement accounts such as 401(k)s, IRAs, and pensions are exempt from South Carolina tax if you are 59½ or older. This exemption applies to the full amount of the distribution, regardless of how much you receive. If you are younger than 59½, retirement distributions are taxable unless they may have access to for an exception, such as a hardship withdrawal or a Roth IRA distribution.

Social Security benefits are not taxable in South Carolina. Military retirement pay is exempt. Certain types of federal income, such as interest on U.S. Treasury bonds, are exempt. Workers' compensation is exempt. Disability benefits from the Social Security Administration are exempt. If you receive any of these types of income, you do not report them on your South Carolina return.

How to file your South Carolina state income tax return

You file your South Carolina state income tax return using Form SC 1040, the South Carolina Individual Income Tax Return. You can obtain this form from the South Carolina Department of Revenue website, by phone, or by mail. The form comes with instructions that explain each line and what information to enter.

Most people file electronically using tax software or a tax professional. Electronic filing is faster and reduces errors. The South Carolina Department of Revenue accepts e-filed returns and processes them more quickly than paper returns. If you file electronically, you typically receive a refund within 21 days if you chose direct deposit.

If you file by mail, send your completed Form SC 1040 and any required schedules to the South Carolina Department of Revenue at the address listed in the form instructions. Paper returns take longer to process—typically four to six weeks. Include a check if you owe tax. The deadline to file is April 15 of the year following the tax year, unless that date falls on a weekend or holiday, in which case the deadline moves to the next business day.

What happens if you do not file or pay on time

If you owe South Carolina state income tax and do not file by April 15, the state charges a failure-to-file penalty. The penalty is usually 5% of the unpaid tax for each month or part of a month that the return is late, up to a maximum of 25%. If you file but do not pay the tax you owe by April 15, the state charges a failure-to-pay penalty of 0.5% per month, also up to 25%.

The state also charges interest on unpaid tax. Interest accrues daily from the due date until you pay. The interest rate is set quarterly and is based on the federal rate plus a margin. If you cannot pay the full amount by April 15, you can request a payment plan from the South Carolina Department of Revenue. The department may allow you to pay in installments, though interest and penalties continue to accrue.

If you believe you will owe tax when you file, you can request an extension to file. An extension gives you until October 15 to file your return, but it does not extend the time to pay. You must still pay any tax owed by April 15 to avoid penalties and interest. You can make an estimated payment with your extension request to reduce the amount owed on the original due date.

Self-employed people and quarterly estimated tax payments

If you are self-employed or have income that is not subject to withholding, you must make quarterly estimated tax payments to South Carolina. Estimated payments are due on April 15, June 15, September 15, and January 15 of the following year. Each payment covers one quarter of the year's expected tax liability.

To calculate your estimated payment, you estimate your total income for the year, subtract deductions, and calculate the tax using the current year's tax brackets and rates. You then divide that amount by four to determine each quarterly payment. If your income varies throughout the year, you can adjust your payments each quarter based on actual income received so far.

You submit estimated tax payments to the South Carolina Department of Revenue using Form SC 1040-ES, the Estimated Tax Worksheet. You can pay online through the department's website, by mail with a check, or by phone. If you do not make quarterly payments and owe a large amount at tax time, the state may charge an underpayment penalty in addition to interest on the unpaid tax.

Frequently Asked Questions

Do I have to pay South Carolina state income tax if I work in another state?

If you live in South Carolina and work in another state, you generally owe tax to both states on the income you earned out of state. However, South Carolina allows a credit for taxes paid to other states to prevent double taxation. You report the out-of-state income on your South Carolina return and claim a credit for the tax you paid to the other state. The credit is limited to the South Carolina tax on that income.

Can I deduct federal income tax from my South Carolina taxable income?

No. South Carolina does not allow a deduction for federal income tax paid. You calculate your South Carolina taxable income starting from your federal adjusted gross income, but you do not subtract federal taxes. You do deduct the standard deduction or itemized deductions, just as you do on your federal return.

What is the difference between the standard deduction and itemized deductions for South Carolina?

South Carolina allows you to claim either the standard deduction or itemized deductions, whichever is larger. The standard deduction for 2024 is $3,510 for single filers and $7,020 for married couples filing jointly. Itemized deductions include mortgage interest, property taxes, charitable contributions, and medical expenses. Most people use the standard deduction because it is simpler and often results in a larger deduction.

When do I receive my South Carolina tax refund?

If you file electronically and choose direct deposit, you typically receive your refund within 21 days of the South Carolina Department of Revenue accepting your return. If you file by mail or request a paper check, the refund takes four to six weeks. You can check the status of your refund on the department's website by entering your Social Security number and refund amount.

Do I owe South Carolina tax on money I inherited?

No. Inherited money is not taxable income in South Carolina. However, if the inherited assets generate income after you receive them—such as interest, dividends, or rent—that income is taxable. An inherited retirement account may have special rules depending on the type of account and your relationship to the original owner.