South Carolina does have a state income tax

South Carolina taxes wages, salaries, and other earned income. The state uses a progressive tax system, meaning the rate increases as your income rises. Tax rates range from 0% to 7%, depending on your income bracket. Unlike some states, South Carolina does not exempt retirement income or Social Security from taxation — both are subject to state income tax.

If you work in South Carolina or live there, you will owe state income tax on most forms of income. The state collects this through payroll withholding if you are employed, or through estimated tax payments and tax returns if you are self-employed or have other income sources.

Key Takeaways

  • South Carolina has a state income tax with rates ranging from 0% to 7%, applied progressively based on your income level.
  • Retirement income, including pensions and Social Security, is taxable in South Carolina, unlike in some neighboring states.
  • Your employer withholds state income tax from your paycheck if you work in South Carolina; you report and pay any remaining balance when you file your state return.
  • Self-employed individuals and those with investment income must make quarterly estimated tax payments to avoid penalties.

South Carolina income tax brackets and rates

South Carolina's tax brackets change each year based on inflation adjustments. The state applies seven tax brackets, starting at 0% for the lowest income tier and reaching 7% at the highest. The exact dollar amounts for each bracket shift annually, so the income threshold that puts you in the 7% bracket this year may differ slightly next year.

To find the current year's brackets, check the South Carolina Department of Revenue website or your tax forms. Your employer's payroll system uses the current brackets to calculate withholding, so you do not need to calculate them yourself unless you are self-employed or have multiple income sources.

What income is taxable in South Carolina

South Carolina taxes W-2 wages, self-employment income, interest, dividends, capital gains, rental income, and retirement distributions. Social Security benefits are taxable if your total income exceeds certain thresholds — this differs from the federal rule and from the rules in some neighboring states. Pension income and distributions from IRAs and 401(k)s are also taxable.

Some income sources are not taxed. These include certain military pay, workers' compensation benefits, and some disability payments. If you receive income you are unsure about, the South Carolina Department of Revenue publishes guidance on what counts as taxable income for state purposes.

How payroll withholding works in South Carolina

When you start a job in South Carolina, you complete a state withholding form (similar to the federal W-4). Your employer uses this form and the current tax brackets to calculate how much state income tax to withhold from each paycheck. The withheld amount is sent to the state on your behalf.

If too much is withheld, you receive a refund when you file your state return. If too little is withheld, you owe the difference. You can adjust your withholding during the year by submitting a new form to your employer if your circumstances change — for example, if you take a second job or have a major life event.

Self-employment and estimated tax payments

If you are self-employed or have significant income not subject to withholding, you must make quarterly estimated tax payments to South Carolina. These payments are due on April 15, June 15, September 15, and January 15 of the following year. Missing these payments can result in penalties and interest, even if you ultimately owe nothing when you file your annual return.

To calculate your estimated payment, you project your annual income and apply the appropriate tax rate. The South Carolina Department of Revenue provides a worksheet to help with this calculation. If your income is unpredictable, you can adjust your payments each quarter based on what you have actually earned so far.

Filing your South Carolina state return

You file your South Carolina state return using Form SC 1040 (or a variation depending on your situation). The filing deadline is the same as the federal deadline — typically April 15. You can file electronically through the state's approved e-file providers or by mail.

You must file a return if your income exceeds the filing threshold for your filing status. Even if you do not owe tax, filing may be worth doing if you had taxes withheld, because you could receive a refund. The state processes returns and issues refunds, though timing varies depending on the method you use to file.

Frequently Asked Questions

Is Social Security taxed in South Carolina?

Yes. South Carolina taxes Social Security benefits if your total income exceeds certain thresholds. This is different from the federal rule and from some neighboring states. The threshold depends on your filing status and other income you receive.

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

Yes, you owe South Carolina income tax on wages earned in the state. You may also owe tax in your home state, depending on that state's rules. Some states have reciprocal agreements that prevent double taxation, but you should check both states' requirements or consult a tax professional.

What happens if I do not pay my South Carolina income tax?

The state can assess penalties and interest on unpaid tax. If the amount is large enough, the Department of Revenue can place a lien on your property, garnish your wages, or intercept your state or federal refund. Paying as soon as possible, even if you cannot pay the full amount, reduces the penalties that accrue.

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

No. South Carolina does not allow a deduction for federal income tax paid. You report your income and calculate state tax based on South Carolina's rules and brackets only.