South Carolina does not tax Social Security income

South Carolina has no state income tax on Social Security benefits, regardless of how much you receive or your total household income. This applies to retirement benefits, survivor benefits, and disability benefits paid by the Social Security Administration.

If you live in South Carolina and receive Social Security, you will not owe state tax on those payments. This is true even if you also receive other income like wages, pensions, or investment earnings that South Carolina does tax.

However, the federal government may tax your Social Security benefits depending on your combined income. South Carolina's exemption covers only state tax, not federal tax.

Key Takeaways

  • South Carolina does not tax Social Security retirement, survivor, or disability benefits at the state level.
  • Federal tax on Social Security depends on your combined income, not on where you live.
  • If you receive other income like wages or pensions, South Carolina taxes those separately from your Social Security.
  • You do not need to report Social Security income on your South Carolina state tax return.

How federal tax on Social Security works

The federal government uses a formula based on your combined income to decide whether to tax your Social Security benefits. Combined income means your adjusted gross income plus nontaxable interest plus half of your Social Security benefits.

If your combined income falls below a certain threshold, no federal tax is owed on your Social Security. The thresholds are $25,000 for single filers and $32,000 for married couples filing jointly. These thresholds have not changed since 1984.

If your combined income exceeds the threshold, up to 50 percent or 85 percent of your benefits may be subject to federal tax, depending on how far above the threshold you are. This calculation is complex, and many people find it helpful to work with a tax preparer or use IRS worksheets.

Other income that South Carolina does tax

While Social Security is exempt, South Carolina taxes most other forms of retirement and investment income. This includes pension payments, 401(k) withdrawals, IRA distributions, wages, and interest or dividend income.

South Carolina's income tax rate ranges from 3 percent to 7 percent depending on your total income. If you receive a pension or retirement account withdrawal along with Social Security, you will owe South Carolina tax on the pension or withdrawal but not on the Social Security portion.

Military pensions and certain federal employee pensions have their own exemptions under South Carolina law, separate from the Social Security exemption. If you receive a military or federal pension, check the current rules or contact the South Carolina Department of Revenue to confirm your situation.

What to do on your South Carolina tax return

When you file your South Carolina state income tax return, you do not report Social Security benefits as income. You report only the income that South Carolina taxes: wages, pensions, retirement account distributions, interest, dividends, and other taxable sources.

If you use tax software or work with a tax preparer, they will typically ask whether you received Social Security. The software or preparer will exclude it from your South Carolina taxable income automatically. You may still need to report Social Security on your federal return if your combined income is above the federal threshold.

Keep your Social Security benefit statement (Form SSA-1099) for your records, but do not include the amount on your South Carolina return.

Federal tax filing requirements for Social Security recipients

Even though South Carolina does not tax Social Security, you may still need to file a federal return. The IRS has separate income thresholds for filing requirements, and they differ from the thresholds for taxing benefits.

For 2023, a single person with only Social Security income must file if benefits exceeded $12,550. If you have other income like wages or a pension, the threshold is lower. The IRS publishes updated thresholds each year, and a tax preparer or the IRS website can help you determine whether you must file.

Filing a federal return is often worth doing even if you are not required to, because you may be may have access to to refundable tax credits like the Earned Income Tax Credit or the Child Tax Credit.

Frequently Asked Questions

Do I have to pay South Carolina tax if I moved there after I started receiving Social Security?

No. South Carolina does not tax Social Security benefits for anyone who lives in the state, regardless of when they moved there or when they started receiving benefits. Your residency status does not affect the exemption.

What if I receive both a pension and Social Security?

South Carolina taxes the pension but not the Social Security. You will owe state tax on the pension income based on South Carolina's tax brackets. The Social Security portion is excluded from your state taxable income.

Does South Carolina tax my spouse's Social Security if we file jointly?

No. South Carolina does not tax Social Security benefits for either spouse, whether you file jointly or separately. The exemption applies to all Social Security recipients who live in South Carolina.

Will I owe federal tax on my Social Security even though South Carolina does not tax it?

Possibly. Federal tax depends on your combined income, not on state tax rules. If your combined income exceeds the federal threshold ($25,000 for single filers, $32,000 for married filing jointly), up to 85 percent of your benefits may be subject to federal tax.

Where do I report Social Security on my South Carolina return?

You do not report it. Social Security is excluded from South Carolina taxable income. Report only the income that South Carolina taxes: wages, pensions, retirement distributions, and other taxable sources.