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Tool | August 2013

State-by-State Guide to Taxes on Retirees

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South Carolina

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The Bottom Line
Map of South Carolina

TAX-FRIENDLY

One of Kiplinger's top ten most tax-friendly states for retirees, the Palmetto State extends its Southern hospitality to retirees. The state does not tax Social Security benefits and provides a generous retirement-income deduction when calculating state income tax. State income tax rates are reasonable, and property taxes are very low. Taxes are based on 4% of the market value of the home, and senior homeowners qualify for a homestead exemption.

State Sales Tax

6% (groceries and some cold prepared foods, prescription drugs, dental prosthetics and hearing aids are exempt). Seniors 85 and older pay 5%. Localities can add up to 3% in sales taxes. (Several counties also have a local sales tax exemption for groceries and some cold prepared foods. Hot prepared foods, vitamins and pet food are subject to state and local taxes.)

Income Tax Range

Low: 3% (on taxable income over $2,850 to $5,700)

High: 7% (on taxable income over $14,250)

Social Security

Social Security benefits are not taxed.

Exemptions for Other Retirement Income

Other retirement income is taxed, with limits. If you're younger than 65, up to $3,000 in retirement income is exempt. Older seniors are eligible for two deductions. If you are 65 or older, you may deduct up to $10,000 in qualifying retirement income. Qualified income includes public employee retirement plans, Keogh plans, IRA distributions and military retirement benefits. In addition, if you are 65 or older, you can take a senior deduction of $15,000 (single filers) or $30,000 (married couples filing jointly) -- but the $15,000 deduction must be offset by the amount taken with the retirement-income deduction. So if a single taxpayer takes a $10,000 retirement-income deduction, he can only take a senior deduction of $5,000—for a total deduction of $15,000. A surviving spouse may continue to take a retirement deduction on behalf of the deceased spouse. Some taxpayers 65 and older may not have to file a tax return if they meet certain conditions. Retired military personnel 65 and older can deduct up to $10,000 of military retirement benefits.

Property Taxes

Property tax is assessed and collected by local governments. The market value of a legal residence and up to five acres of surrounding land is assessed at 4%. Owner-occupiers of primary residences do not pay taxes imposed for school operating purposes. Median property tax on the state's median home value of $137,500 is $689, according to the Tax Foundation.

Tax breaks for seniors: For homeowners 65 and older, the state's homestead exemption allows the first $50,000 of a property's fair market value to be exempt from local property taxes. To qualify, you must have been at least 65 years old and a legal resident of South Carolina for one year, as of December 31 of the preceding year.

Inheritance and
Estate Taxes

There is no inheritance tax or estate tax.

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