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The Palmetto State
BOTTOM LINE: TAX-FRIENDLY
South Carolina 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% (prescription drugs, dental prosthetics and hearing aids are exempt). Localities can add up to 3% in sales taxes. Seniors 85 and older pay 5%.
Low: 3% (on taxable income over $2,800 to $5,600)
High: 7% (on taxable income over $14,000)
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. 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 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%.
Tax breaks for seniors: For homeowners 65 and older, the state's homestead exemption allows the first $50,000 of their 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. Senior homeowners are also exempt from school taxes on their properties.
INHERITANCE AND ESTATE TAXES
There is no inheritance tax. South Carolina has no estate tax in 2012, but the repeal is set to expire on January 1, 2013.
Visit RetirementLiving.com for a complete rundown of taxes in South Carolina.