South Carolina has a flat 5% income tax rate (reduced from a graduated system with a 7% top rate). Social Security is fully exempt. Residents over 65 can deduct up to $15,000 of retirement income. Property taxes average just 0.57% — one of the lowest in the USA, with a $50,000 homestead exemption for those 65+. No estate tax, no inheritance tax.
At a glance
Key Facts
State Income Tax
5% flat rate (reduced from graduated system with 7% top rate, phase-down complete as of 2026)
Social Security
Fully exempt from South Carolina income tax at all income levels
Retirement Income Deduction
Up to $15,000 total retirement income deduction for taxpayers age 65+; $3,000 for under 65; military retirement fully exempt
Property Tax
Effective average ~0.57% — one of the lowest in the USA; homestead exemption: $50,000 off assessed value for 65+
Sales Tax
6% state rate; counties may add 0–3%; most areas 7–9%; maximum combined rate 9%
Estate and Inheritance Tax
None — South Carolina has no estate tax and no inheritance tax
Introduction
South Carolina has been quietly making itself one of the most tax-friendly states in the Southeast, particularly for retirees. The state transitioned from a six-bracket graduated income tax system (with a top rate of 7%) to a simplified flat rate structure, now at 5% after completing its legislated phase-down. This rate reduction has been years in the making and reflects South Carolina’s deliberate effort to compete with Florida and Tennessee for retirees and high-income migrants.
Property taxes are where South Carolina truly stands out: at an average effective rate of just 0.57%, South Carolina has among the lowest property taxes in the country. For homeowners aged 65 and older, the homestead exemption removes the first $50,000 of assessed value from all property taxes — effectively reducing the tax bill to zero for many lower-value primary residences. This combination of low property taxes and a strong homestead exemption makes South Carolina an exceptionally affordable state for homeowners.
For retirees specifically, South Carolina offers a compelling package: Social Security fully exempt, up to $15,000 in retirement income deduction for those 65+, military retirement exemption, low property taxes, warm climate, and lower cost of living than Northeast or Mid-Atlantic states. South Carolina consistently ranks among the top five states for retirement tax friendliness in national surveys. With the income tax now at 5% (down from 7%), SC's competitiveness has improved significantly for working-age residents as well.
Section 01
South Carolina’s Income Tax Simplification: From 7% to 5%
South Carolina’s income tax reform has been one of the more significant state tax changes in the Southeast over the past several years. The state moved from a six-bracket graduated system with a top rate of 7% to a simplified single flat rate of 5% as of 2026, completing the phase-down established by the South Carolina General Assembly.
The Rate Reduction Timeline
Prior system: six brackets, top rate 7%
Reformed flat rate: 6.4% (2024), then 6.2% (2025)
Current rate (2026): 5% flat
This simplification means South Carolina income tax calculations are straightforward: apply the flat rate to taxable income after deductions and exemptions. There are no marginal bracket complications for higher earners.
South Carolina’s 5% rate is now very competitive with neighboring states, sitting above North Carolina (3.99%) and Georgia (5.19%), but far below its former 7% top rate. South Carolina’s retirement income exemptions, low property taxes, and homestead exemption create a total package that is highly competitive for retirees.
Who Pays South Carolina Income Tax
South Carolina does not have local income taxes. The flat 5% state rate is the only income tax applied to South Carolina residents, regardless of whether they live in Charleston, Greenville, Columbia, Myrtle Beach, or a rural county. Non-residents earning income from South Carolina sources (rental income, business income) are also subject to the rate on SC-sourced income.
Section 02
Why South Carolina Is One of America’s Best Retirement Tax States
The Retirement Income Deduction
South Carolina’s retirement income tax treatment is among the most generous in the country for older residents:
Age 65 and older: Up to $15,000 of retirement income may be deducted from South Carolina taxable income each year. This applies to pension income, IRA distributions, 401(k) withdrawals, and other qualifying retirement income.
Under age 65: A $3,000 retirement income deduction is available for qualifying retirement income.
Social Security income: Fully exempt at all ages and all income levels — no South Carolina income tax on SS benefits.
Military retirement pay: Fully exempt from South Carolina income tax regardless of age.
For a married couple both aged 65+, each can claim the $15,000 deduction separately, meaning up to $30,000 in combined retirement income can be deducted per couple (plus any Social Security, which is separately exempt).
Practical Example: A Retired Couple in South Carolina
Income Source
Amount
South Carolina Tax?
Social Security (combined)
$48,000
Exempt — $0 SC tax
Military retirement pension
$30,000
Exempt — $0 SC tax
IRA distributions (each $15,000)
$30,000
Exempt via deduction — $0 SC tax
Additional IRA distribution
$20,000
Taxable at 5% = $1,000 SC tax
This couple with $128,000 in annual retirement income pays only $1,000 in South Carolina income tax — an effective rate of under 1%. This is the primary reason South Carolina consistently ranks as a top retirement destination despite having a higher nominal income tax rate than states like North Carolina or Georgia.
South Carolina vs Florida for Retirees
Factor
South Carolina
Florida
Income tax on SS
Exempt
Exempt (no income tax)
Income tax on pensions
$15,000 deduction (65+)
Exempt (no income tax)
Property tax (avg)
0.57%
0.86%
Homestead exemption
$50,000 off assessed value (65+)
$50,000 off assessed value
State sales tax
6%
6%
Cost of living
Lower (outside coastal areas)
Higher (especially coastal)
Section 03
South Carolina Property Tax, Sales Tax, and No Estate Tax
Property Tax: Among the Lowest in the USA
South Carolina’s average effective property tax rate of approximately 0.57% is one of the lowest in the country. Only Hawaii, Alabama, Louisiana, Wyoming, and a handful of others have lower effective rates. The low rate results from a combination of lower assessed values, assessment limits, and state policies designed to keep the tax burden on primary residences modest.
South Carolina assesses owner-occupied residential property at 4% of fair market value (not 100%), and then applies the local millage rate to that 4% assessed value. This assessment ratio is one of the lowest in the country and is the primary mechanism that keeps property tax bills low despite local millage rates that might appear high on paper.
The Homestead Exemption for 65+
South Carolina’s Homestead Exemption removes the first $50,000 of fair market value from all property taxes for:
Homeowners aged 65 or older
Disabled homeowners (permanently disabled)
Legally blind homeowners
The exemption applies to the primary residence only. For a $200,000 home, the first $50,000 of value is completely exempt, and the remaining $150,000 is assessed at 4% ($6,000 assessed value) and taxed at local rates. At a typical millage rate, the annual tax bill on a modest South Carolina home for a senior could be under $500/year.
Property Tax by County
County/Area
Approximate Effective Rate
Annual Tax on $400,000 Home
Horry (Myrtle Beach)
~0.37%
~$1,480
Beaufort (Hilton Head area)
~0.44%
~$1,760
Charleston
~0.53%
~$2,120
Greenville
~0.53%
~$2,120
Richland (Columbia)
~0.60%
~$2,400
Sales Tax
South Carolina’s state sales tax rate is 6%. Counties may add local rates of 0–3%, bringing combined rates to between 6% and a maximum of 9%. Most South Carolina counties have a combined rate of 7–8%. Prescription drugs are exempt. Groceries are taxable (unlike neighboring North Carolina which exempts most groceries), though South Carolina has periodically discussed grocery tax relief. Restaurant meals are taxed at the full combined rate.
No Estate Tax, No Inheritance Tax
South Carolina has no state estate tax and no inheritance tax. All assets pass free of state transfer tax regardless of estate size, with only the federal estate tax potentially applying for very large estates (over $13.61M per individual in 2024). This is consistent with the trend among Southeastern states — most of South Carolina’s neighbors have also eliminated estate and inheritance taxes. The absence of these taxes makes South Carolina favorable for estate planning, particularly for large property holdings like coastal real estate, which can appreciate substantially over time.
Whether you’re retiring to South Carolina and want to maximize your retirement income deductions, planning around the homestead exemption, or need help with income tax planning as you relocate from a higher-tax state, TaxHub connects you with licensed CPAs who understand South Carolina’s tax advantages.
⚠ Not for simple single-state returns. Free filing is fine for straightforward W-2 situations.
South Carolina has a flat income tax rate of 5% for 2026, reduced from a prior graduated system with a top rate of 7%. The phase-down is now complete. The flat rate simplifies calculation — all South Carolina taxable income is taxed at the same 5% regardless of income level. There are no local income taxes in South Carolina. The generous retirement income deductions (especially for those 65+) can further reduce effective tax rates for retirees well below 5%.
Q
Does South Carolina tax Social Security income?
No — Social Security benefits are fully exempt from South Carolina income tax at all income levels. Unlike some states that only partially exempt Social Security or phase out exemptions at higher incomes, South Carolina provides a complete exemption regardless of total income. This is one of South Carolina’s key advantages for retirees. Federal income tax on Social Security still applies (at the federal level, 0–85% of benefits may be included in taxable income depending on your combined income), but South Carolina adds zero state tax on top.
Q
What is South Carolina’s retirement income deduction?
South Carolina allows taxpayers aged 65 and older to deduct up to $15,000 of retirement income from their South Carolina taxable income each year. This applies to pension income, IRA distributions, 401(k) withdrawals, and other qualifying retirement income. Each qualifying taxpayer on a joint return can claim the $15,000 deduction separately, so a married couple both aged 65+ can deduct up to $30,000 combined. Taxpayers under 65 can deduct up to $3,000. Military retirement pay is fully exempt regardless of age or amount.
Q
How low are property taxes in South Carolina?
South Carolina’s average effective property tax rate of approximately 0.57% is among the lowest in the United States. The low rate results primarily from South Carolina’s 4% assessment ratio on owner-occupied primary residences (only 4% of fair market value is used as the assessed value for tax purposes). For residents aged 65+, the homestead exemption removes the first $50,000 of market value from all property taxes. A $300,000 home owned by a 65+ resident might generate a property tax bill of only $400–$700 per year in most South Carolina counties.
Q
What is the South Carolina homestead exemption?
South Carolina’s homestead exemption exempts the first $50,000 of fair market value of a primary residence from all property taxes for homeowners who are age 65 or older, permanently and totally disabled, or legally blind. The exemption applies to the primary residence only. It is automatic once you qualify — you apply once and it continues as long as you maintain eligibility. At South Carolina’s typical property tax rates, the homestead exemption reduces annual property tax bills by several hundred dollars for modest homes and can eliminate the tax bill entirely on lower-value properties.
Q
Does South Carolina have an estate tax or inheritance tax?
No — South Carolina has no state estate tax and no state inheritance tax. Any South Carolina resident who dies leaves all assets free of state transfer tax, regardless of the total estate value. Only the federal estate tax potentially applies, and only for estates exceeding $13.61M per individual (2024 exemption, indexed for inflation). South Carolina is an excellent state for estate planning, particularly for those with significant real estate holdings in coastal areas like Charleston, Hilton Head, or Myrtle Beach where property values have appreciated dramatically.
Q
Is South Carolina a good state for retirement?
Yes — South Carolina is consistently ranked as one of the top 5 states for retirement tax efficiency nationally. Key advantages: Social Security fully exempt, up to $15,000 retirement income deduction per person aged 65+ (up to $30,000 per couple), military retirement fully exempt, one of the lowest property tax rates in the USA at 0.57%, a $50,000 homestead exemption for seniors, no estate tax, moderate sales taxes, warm climate, and lower cost of living than Northeast or Mid-Atlantic states. The nominal income tax rate is 5% on income beyond the exemptions, which is higher than Florida (0%) or Tennessee (0%), but the effective rate for most retirees is very low given the exemptions.
Q
How does South Carolina compare to North Carolina for taxes?
North Carolina has a lower flat income tax rate at 3.99% compared to South Carolina’s 5%. However, South Carolina has lower property taxes (0.57% vs North Carolina’s approximately 0.78%) and more generous retirement income deductions for those 65+. South Carolina’s $15,000 retirement income deduction per person (versus North Carolina’s more limited retirement deductions) can make South Carolina the better choice for retirees even at the higher nominal rate. For working-age earners without retirement income, North Carolina’s lower 3.99% rate is a clearer advantage. The choice depends significantly on age, retirement income sources, and property values.
Disclaimer:This guide provides general tax information for educational purposes only. South Carolina tax rates and rules change regularly. The flat income tax rate reduction schedule is subject to revenue triggers. Retirement income deduction amounts and homestead exemption rules may be modified by the South Carolina General Assembly. Always consult a qualified tax professional before making significant tax decisions.