South Carolina taxes your income at rates between 0% and 7%
Yes, South Carolina has a state income tax. The state taxes wages, salaries, investment income, and retirement distributions. The tax rate depends on your total income for the year and ranges from 0% on the first portion of earnings to 7% on income above a certain threshold. Unlike federal income tax, which uses a progressive system with multiple brackets, South Carolina uses a simpler structure with fewer brackets.
South Carolina's Department of Revenue administers the tax. You file a state return separate from your federal return, usually at the same time. If you work in South Carolina or live there, you owe state income tax on money you earn, regardless of where the work happens.
Key Takeaways
- South Carolina's state income tax rate ranges from 0% to 7%, depending on your annual income level.
- You must file a South Carolina return if you earned income in the state or lived there during the tax year, even if you owe no tax.
- Retirement income, including Social Security and pension distributions, may be partially or fully exempt from state tax under certain conditions.
- The state offers a standard deduction that reduces your taxable income, similar to the federal deduction.
How South Carolina's tax brackets work
South Carolina uses a flat-bracket system rather than the multi-bracket approach used by the federal government. This means the state has set income thresholds, and your tax rate increases as your income crosses each threshold. For the 2024 tax year, the brackets are structured so that lower-income earners pay a smaller percentage, and the rate increases incrementally until it reaches 7% on income above a certain level.
The exact dollar amounts for each bracket change yearly based on inflation adjustments. You can find the current year's brackets on the South Carolina Department of Revenue website or on your state tax form. Because the brackets adjust annually, it is worth checking the current rates rather than relying on previous years' information.
Your filing status — single, married filing jointly, head of household, or married filing separately — affects which bracket applies to your income. A married couple filing jointly typically reaches higher brackets at higher income levels than a single filer with the same total income.
What income is subject to South Carolina tax
South Carolina taxes most forms of income: W-2 wages from an employer, self-employment income, interest and dividends, capital gains, rental income, and distributions from retirement accounts. If you received a 1099 form for any income, that income is generally taxable in South Carolina as well.
Some income is exempt or partially exempt. Social Security benefits are not taxed by South Carolina. Military retirement pay is exempt if you are a veteran or surviving spouse. Certain pension income may be excluded if you meet age and service requirements. If you receive distributions from a traditional IRA or 401(k), those distributions are taxable, but Roth IRA withdrawals of contributions (not earnings) are not.
If you work for a federal, state, or local government agency, your pension income may receive special treatment. Check the Department of Revenue website or speak with a tax preparer if you receive government pension income, because the rules vary based on when you retired and your age.
Standard deduction and filing requirements
South Carolina allows a standard deduction that reduces your taxable income before tax is calculated. The deduction amount depends on your age and filing status. For the 2024 tax year, the standard deduction ranges from around $3,000 for a single filer under 65 to higher amounts for those 65 and older or filing as head of household. These amounts increase each year.
You must file a South Carolina return if your income exceeds the standard deduction for your filing status, or if you had South Carolina income tax withheld from your pay. Even if you do not owe tax, filing may result in a refund if your employer withheld more than you owe. You can file on paper using Form SC 1040 or electronically through the Department of Revenue's online system.
If you lived in South Carolina for only part of the year, you still file a full-year return but may claim a part-year resident status if you moved in or out during the tax year. This affects which income is taxable and which deductions you can claim.
Tax withholding and estimated payments
If you work as an employee, your employer withholds South Carolina income tax from your paycheck based on the W-4 form you complete. The withholding is sent to the Department of Revenue on your behalf. If you are self-employed or have income not subject to withholding, you may need to make quarterly estimated tax payments to avoid penalties and interest.
You can adjust your withholding at any time by submitting a new W-4 to your employer. If you expect to owe more tax than will be withheld, increasing your withholding now reduces the amount you owe when you file. If you expect a refund, you can lower your withholding to receive more money in each paycheck.
Estimated payments are due on April 15, June 15, September 15, and January 15 of the following year. You can pay online through the Department of Revenue website or by mail. If you miss a payment, you may owe a penalty, but paying as soon as you realize the miss reduces the penalty amount.
Credits and deductions specific to South Carolina
Beyond the standard deduction, South Carolina offers several tax credits that reduce your tax liability dollar-for-dollar. The Earned Income Tax Credit (EITC) is available to low- and moderate-income workers and is claimed on your state return in addition to the federal EITC. The amount varies based on income and number of dependents.
South Carolina also offers a child and dependent care credit, a credit for property taxes paid, and credits for certain education expenses. Some credits are refundable, meaning you receive money back even if you owe no tax; others reduce your tax but do not result in a refund. Check the Department of Revenue website or your tax form instructions to see which credits apply to your situation.
If you are over 65 or permanently disabled, you may be able to claim an additional deduction or credit. Military service members and veterans may may have access to for exemptions or credits related to military income or service. These provisions change periodically, so verify current rules before filing.
Frequently Asked Questions
Do I have to file a South Carolina return if I only worked there part of the year?
Yes, if you earned income in South Carolina during any part of the tax year, you must file a state return. You can claim part-year resident status if you moved in or out of the state, which may affect which income is taxable and which deductions you can claim. Contact the Department of Revenue if you are unsure whether your income qualifies as South Carolina income.
Is Social Security taxed in South Carolina?
No, South Carolina does not tax Social Security benefits. However, if you have other income above certain thresholds, some of your Social Security may become taxable at the federal level. South Carolina only taxes the portion that is taxable federally, and even then, only if your total income exceeds the state threshold.
What happens if I do not file a South Carolina return?
If you owe tax and do not file, the Department of Revenue may assess penalties and interest on the unpaid amount. If you are owed a refund, you have a limited time to claim it — typically three years from the original due date. Filing late is better than not filing, because it stops penalties from continuing to accrue.
Can I file my South Carolina return electronically?
Yes, the Department of Revenue accepts electronic returns through its website and through approved tax software. E-filing is faster than paper filing and results in quicker refunds. You can also file on paper using Form SC 1040 if you prefer, though processing takes longer.
Do I owe South Carolina tax if I work remotely for an out-of-state company?
If you live in South Carolina and work remotely for a company based elsewhere, you owe South Carolina tax on your wages. The location of your employer does not matter — what matters is where you live and where the work is performed. If you live outside South Carolina but work remotely for a South Carolina company, you may owe tax depending on your residency status and the company's policies.