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How Is Retirement Income Taxed in South Carolina? A Guide for Charleston and Mount Pleasant Retirees
Oceanside Advisors | Fee-only fiduciary planning in the Lowcountry
Quick answer: South Carolina does not tax Social Security benefits at all. It does tax pensions and withdrawals from IRAs and 401(k) accounts as ordinary income, but retirees get generous deductions that erase much of that bill. At 65 and older you can deduct up to $10,000 of retirement income plus a separate $15,000 deduction against any income, and military retirement pay is fully exempt. Whatever remains is taxed at graduated rates that top out near 6 percent, dropping to 5.21 percent for the 2026 tax year under recent reform.
Does South Carolina tax Social Security?
No. South Carolina fully exempts Social Security and Railroad Retirement benefits from state income tax, regardless of your age or income level. If your benefits were taxed on your federal return, you simply subtract them on your South Carolina return. For many Lowcountry retirees, this alone removes a meaningful share of income from state tax.
Does South Carolina tax pensions, 401(k)s, and IRAs?
Yes, but only partially, and the deductions do a lot of work. Pensions and withdrawals from traditional IRAs, 401(k)s, 403(b)s, 457 plans, and most annuities count as ordinary income in South Carolina. Qualified Roth withdrawals are not taxed, since that money was already taxed going in. The state then layers on retirement specific deductions that shrink the taxable portion considerably.
What retirement deductions can South Carolina retirees claim?
There are two deductions, and the key detail is how they interact:
- Retirement income deduction. Under 65, you can deduct up to $3,000 of qualified retirement income each year. At 65 and older, that rises to up to $10,000 per person.
- Age 65 and older deduction. Once you reach 65, you can deduct up to $15,000 per person against any type of income, not just retirement income.
The two do not simply stack. Any amount you claim under the retirement income deduction reduces the $15,000 age based deduction, so the practical ceiling for a person 65 or older is $15,000 against income of any kind. For a married couple where both spouses are 65 or older, that can mean up to $30,000 excluded before the state taxes a dollar.
How are military pensions taxed in South Carolina?
They are not. South Carolina fully exempts military retirement pay from state income tax, with no dollar cap and regardless of age. For retired service members settling in the Charleston area, this is one of the more valuable features of the state’s tax code.
What tax rate will I actually pay in retirement?
Income that remains after these deductions is taxed at South Carolina’s graduated rates. The top rate has been coming down: it was 6.2 percent in 2025 and dropped to 5.21 percent beginning with the 2026 tax year under a reform signed in March 2026. Because most retirees do not sit in the top bracket and because the deductions remove a large slice of income first, the effective rate many retirees actually pay lands in the neighborhood of 4 to 5 percent. Your result depends on your income mix, so it is worth running your own numbers rather than assuming.
What about property taxes in the Lowcountry?
South Carolina has some of the lowest effective property tax rates in the country. Homeowners 65 and older also qualify for the Homestead Exemption, which shields the first $50,000 of a primary residence’s fair market value from property tax. Between the low base rate and the exemption, housing costs in retirement carry a lighter tax load here than in much of the country.
South Carolina tax treatment at a glance
| Income type | South Carolina treatment |
|---|---|
| Social Security / Railroad Retirement | Not taxed |
| Pension, 401(k), IRA, 403(b), 457, annuities | Taxable as ordinary income, reduced by the retirement and age 65 deductions |
| Qualified Roth IRA withdrawals | Not taxed |
| Military retirement pay | Fully exempt, no cap |
| Wages or part-time work | Taxable, though the age 65 deduction can offset it |
| Long-term capital gains | Partially excluded, lowering the effective rate |
A simple example for a Mount Pleasant couple
Consider a married couple, both 65 or older, living in Mount Pleasant with $30,000 of Social Security and $60,000 of combined pension and IRA withdrawals. The Social Security is exempt. Each spouse can exclude up to $15,000 against income, removing roughly $30,000 more. That leaves about $30,000 subject to tax at a low effective rate, on the order of a few percent. Many couples in this range owe little, and some owe nothing at all. This is illustrative only, and your own figures will differ based on your income sources and deductions.
Frequently asked questions
At what age do you stop paying tax on retirement income in South Carolina? There is no age where retirement income becomes automatically tax free, but the deductions grow substantially at 65, which is enough to eliminate the state bill for many retirees.
Does South Carolina have an estate or inheritance tax? No. The state has neither, which is another reason it ranks well for retirees.
Are Roth withdrawals taxed? Qualified Roth IRA withdrawals are not taxed by South Carolina, because the contributions were taxed before they went in.
Do I still have to file a South Carolina return? Often yes, if your taxable income exceeds the filing threshold, even when your deductions reduce the tax owed to zero. Confirm your situation with a tax professional.
Turn these rules into a plan for your money
Knowing how South Carolina treats each type of income is the starting point. The bigger opportunity is coordinating your withdrawals, Social Security timing, and account types so you keep more of what you have saved. Oceanside Advisors is a fee-only fiduciary firm serving Mount Pleasant, Charleston, and the surrounding Lowcountry. If you would like a clear look at your retirement tax picture and a plan tailored to it, reach out to start a conversation.
This article is provided by Oceanside Advisors for educational and informational purposes only. It is not tax, legal, or investment advice, and it should not be relied upon as a recommendation for your specific situation. Tax laws change frequently, and the figures above reflect information available as of August 2026. Individual circumstances vary. Please consult a qualified tax, legal, or financial professional before acting. Advisory services are offered only under a written agreement, and no content here is a guarantee of any particular result or outcome.