South Carolina charges a state income tax on wages, investments, and other earnings

South Carolina has a state income tax that applies to residents and part-year residents who earn money within the state. The tax rate depends on how much you earn — the state uses a progressive system with seven tax brackets that range from 0% to 7%. You pay the lower rate on the first portion of your income, then a higher rate on each additional dollar you earn above certain thresholds.

Unlike some states, South Carolina does not have a flat tax or a single rate for everyone. Your actual tax bill depends on your filing status (single, married filing jointly, head of household, or married filing separately), the type of income you receive, and whether you claim deductions or credits that reduce what you owe.

Key Takeaways

  • South Carolina's income tax brackets range from 0% to 7%, with rates increasing as your income rises.
  • The state taxes wages, interest, dividends, capital gains, and retirement income, though some retirement income has special rules.
  • You must file a South Carolina return if you earned income in the state and meet the filing threshold for your situation.
  • South Carolina allows a standard deduction that reduces your taxable income, and the amount varies by age and filing status.
  • Military retirement pay and certain federal pensions receive preferential tax treatment in South Carolina.

The seven tax brackets and how they work

South Carolina's income tax brackets change each year because they are adjusted for inflation. For the 2024 tax year, the brackets for a single filer start at 0% on the first portion of income, then step up through 3%, 4%, 5%, 6%, and 6.5%, reaching the top rate of 7% on income above a certain threshold. The exact dollar amounts where each bracket begins depend on your filing status — married couples filing jointly have higher thresholds than single filers, so they stay in lower brackets longer.

The brackets mean you do not pay 7% on all your income if you fall into the top bracket. Instead, you pay the lower rates on the income that falls within each bracket, then 7% only on the portion above the highest threshold. For example, if you are single and your taxable income is $50,000, you would pay 0% on the first portion, then 3% on the next portion, and so on, only reaching the 7% rate on income above the top threshold for your bracket.

The South Carolina Department of Revenue publishes updated bracket amounts each January, so the thresholds you use depend on the year you are filing for. You can find the current brackets on the department's website or on your tax forms.

What types of income South Carolina taxes

South Carolina taxes most forms of income, including wages from employment, self-employment income, interest earned on savings accounts and bonds, dividends from stocks, capital gains from selling investments, and rental income. If you received a W-2 from an employer or a 1099 from a client or investment account, that income is subject to South Carolina tax.

Some types of income receive special treatment. Military retirement pay is exempt from South Carolina income tax, which means military retirees do not owe state tax on their pension. Federal pensions and certain other government pensions also have exemptions or preferential rates. Social Security benefits are not taxed by South Carolina, even though they may be taxed at the federal level.

Unemployment benefits are taxable in South Carolina, as are distributions from retirement accounts like IRAs and 401(k)s. If you withdraw money from a traditional IRA before age 59½, you owe both state and federal income tax on the withdrawal, plus a 10% federal penalty. Roth IRA withdrawals follow different rules — may have access to distributions are tax-free, but non-may have access to withdrawals may be taxable.

Standard deduction and filing requirements

Before you calculate your tax, you subtract the standard deduction from your total income. This reduces the amount of income that is actually taxed. For 2024, the standard deduction in South Carolina varies by age and filing status. A single person under age 65 has one standard deduction amount, while a single person age 65 or older has a higher amount. Married couples filing jointly also have different amounts depending on whether either spouse is 65 or older.

You must file a South Carolina return if your income exceeds the standard deduction for your situation. If you earned less than the standard deduction, you generally do not owe state tax and do not have to file, though filing may still benefit you if you are due a refund from taxes withheld by your employer.

South Carolina requires you to file by the same important date as the federal return — typically April 15 of the year following the tax year. If you file a federal extension, your South Carolina return is also extended to the same date.

Tax withholding and estimated payments

If you work as an employee, your employer withholds South Carolina income tax from your paycheck based on the W-4 form you complete. The amount withheld depends on how many allowances you claim and your expected annual income. If too much is withheld, you receive a refund when you file your return. If too little is withheld, you owe additional tax.

If you are self-employed or receive income that does not have withholding, you may need to make estimated tax payments to South Carolina four times per year. These payments are due on April 15, June 15, September 15, and January 15. If you expect to owe $400 or more in state tax for the year, you should make estimated payments to avoid penalties and interest.

You can adjust your withholding at any time by submitting a new W-4 to your employer. If you are self-employed, you calculate your estimated payment based on your expected income and tax rate, then pay the South Carolina Department of Revenue directly.

Credits and deductions that reduce your tax bill

South Carolina offers several credits and deductions that can lower the amount of tax you owe. A tax credit directly reduces your tax bill dollar-for-dollar, while a deduction reduces the income that is taxed. Credits are generally more valuable because they reduce your final tax amount rather than just your taxable income.

The state offers credits for child and dependent care expenses, education-related costs, and property taxes paid. Some credits are refundable, meaning you can receive money back even if you owe no tax. Others are non-refundable, so they can only reduce your tax bill to zero but cannot result in a refund. The South Carolina Department of Revenue publishes a complete list of available credits on its website, and your tax software or preparer can help you determine which ones explore to your situation.

You can also deduct charitable contributions, medical expenses above a certain threshold, and mortgage interest if you itemize deductions instead of taking the standard deduction. Most people benefit from the standard deduction because it is simpler and results in a lower tax bill, but if you have significant deductible expenses, itemizing may save you money.

How to file your South Carolina return

You can file your South Carolina return on paper using Form SC 1040, or you can file electronically through the South Carolina Department of Revenue's website or through tax software. Electronic filing is faster and reduces errors because the software checks your math and flags missing information before you submit.

If you use tax software, it will guide you through entering your income, deductions, and credits, then calculate your tax and prepare both your federal and state returns. Many software providers offer free filing for people below certain income thresholds. If you prefer to file on paper, you can read the forms from the Department of Revenue website or request them by mail.

You can file your return yourself or work with a tax preparer or certified public accountant. If you have a straightforward return with only W-2 income and the standard deduction, filing yourself is straightforward. If you have self-employment income, investments, rental property, or multiple income sources, a preparer can help may support you claim all available deductions and credits.

Frequently Asked Questions

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, even if you live elsewhere. However, you may also owe tax in your home state. Most states have reciprocal agreements or credits to prevent double taxation, so you typically pay tax in the state where you work and claim a credit in your home state. Check with both states' tax departments to understand your specific situation.

Is South Carolina retirement income taxed differently than other income?

Military retirement pay is completely exempt from South Carolina income tax. Federal pensions and some government pensions have exemptions or preferential treatment. Social Security is not taxed. However, distributions from IRAs, 401(k)s, and other retirement accounts are taxed as ordinary income. Some states offer retirement income exemptions, but South Carolina's rules are limited to military and certain government pensions.

What happens if I do not file a South Carolina return when I owe tax?

The South Carolina Department of Revenue can assess penalties and interest on unpaid tax. Penalties start at 5% of the unpaid tax and can increase to 25% if the department determines you intentionally underpaid. Interest accrues daily on the unpaid balance. If you owe tax, filing as soon as possible reduces the amount of interest that accumulates.

Can I file my South Carolina return before I file my federal return?

Yes, you can file your state return before your federal return. However, if you need to amend your federal return later, you will also need to file an amended South Carolina return because your state tax is calculated based on your federal taxable income. Filing both at the same time is simpler and reduces the chance of having to amend.

What is the important date to file if I owe money versus if I am due a refund?

The filing important date is the same for everyone — typically April 15 of the year following the tax year. However, if you owe money, you should file and pay by the important date to avoid penalties and interest. If you are due a refund, filing earlier means you receive your money sooner, though there is no penalty for filing late if you are owed a refund.