Does South Carolina Tax Retirement Income? What Retirees 65+ Pay in 2026

Does South Carolina tax retirement income? Yes, but not all of it, and not much for most retirees 65 and older.

The state leaves your Social Security benefits alone.

It does tax pensions, along with withdrawals from an individual retirement account (IRA) or a 401(k), as regular income.

But South Carolina then hands retirees a set of deductions that can erase most or all of that tax by age 65.

Here’s what South Carolina taxes, what it skips, and what retirees 65 and older owe in 2026.

Note: This is general information, not financial or tax advice. Confirm the details with a professional before acting.

Does South Carolina Tax Social Security?

No.

South Carolina doesn’t tax your Social Security benefits.

State law exempts Social Security from South Carolina income tax, no matter how large your check.

That holds whether you settled in Greenville, retired to Myrtle Beach, or bought a place in one of South Carolina’s coastal towns.

The catch sits at the federal level, not the state one.

The Internal Revenue Service (IRS) may still tax part of your Social Security depending on your total income.

South Carolina won’t take a cent of it, though.

How South Carolina Taxes Retirement Income

South Carolina taxes retirement income other than Social Security as ordinary income.

Taxable retirement income means the money you draw from pensions and retirement accounts that the state counts toward your tax bill.

That covers a private pension, a government pension, and withdrawals from a traditional IRA or 401(k).

It also covers money from a 403(b), a 457 plan, and most annuities.

Roth IRA withdrawals are a different story, since you already paid tax on that money going in.

So a retiree living on a state pension and 401(k) withdrawals starts with taxable income in South Carolina.

The deductions are what shrink it.

How Much Is the Retirement Deduction?

South Carolina gives every retiree a deduction aimed straight at retirement income.

Before you turn 65, you can deduct up to $3,000 of qualified retirement income each year.

Once you reach 65, that retirement deduction jumps to $10,000 a year, according to the South Carolina Department of Revenue.

The $10,000 applies per person, not per couple.

So in a household where both spouses are 65 and drawing retirement income, each one can deduct up to $10,000.

That deduction comes off pensions, IRA money, and 401(k) withdrawals, the same income the state would otherwise tax in full.

A retiree pulling exactly $10,000 a year from a 401(k) at 65 can wipe that piece off the South Carolina return.

How the Age 65 Deduction Works

South Carolina stacks a second, broader break on top for anyone 65 and older.

The state lets residents 65 and up deduct up to $15,000 of income of any kind, per the Department of Revenue.

That $15,000 can cover wages, interest, rental income, or retirement money, whatever you’ve got.

The catch?

You can’t claim the full $15,000 and the full $10,000 retirement deduction on the same dollars.

South Carolina reduces that $15,000 age-65 deduction by whatever you already took as the retirement deduction.

So a 65-year-old who claims the full $10,000 retirement deduction has $5,000 of the age-65 deduction left, for $15,000 total from the two.

You get the benefit once, not twice, on the same income.

For a couple where both spouses are 65, that’s up to $15,000 each, or $30,000 off their combined South Carolina income.

South Carolina’s 2026 Income Tax Rate

South Carolina taxes whatever retirement income is left after those deductions at its regular rates.

And those rates just dropped.

For the 2026 tax year, South Carolina uses two brackets: 1.99% on taxable income up to $30,000 and 5.21% on income above that.

That top rate of 5.21% is down from 6% the year before.

Gov. Henry McMaster signed the cut into law in spring 2026, and it took effect for the 2026 tax year.

State lawmakers built in more cuts down the road.

The law lowers the top rate further in years when state revenue grows enough, with a long-term target of 1.99% for everyone.

Those later cuts are phased and pending, so 5.21% is the top rate that applies to 2026 income.

The same law swapped the old federal standard deduction for a state one, the South Carolina Income Adjusted Deduction (SCIAD).

For 2026, that state standard deduction starts at $15,000 and rises with your filing status, shielding another slice of income before any tax applies.

Is Military Retirement Taxed?

No.

South Carolina fully exempts military retirement pay from state income tax.

A retired service member drawing a military pension owes South Carolina nothing on that pay.

Claiming that exemption does reduce the $15,000 age-65 deduction the same way the retirement deduction does, so the two don't stack on the same income.

Even so, an untaxed military pension is a big reason places near Charleston and Beaufort draw so many veterans.

What Retirees 65+ Pay

Add it up, and many South Carolina retirees 65 and older owe little or nothing on their retirement income.

Picture a 66-year-old widow living on $22,000 in Social Security and $18,000 from a 401(k).

South Carolina ignores the $22,000 in Social Security from the start.

Her $18,000 in 401(k) money is taxable retirement income, so the deductions go to work.

The $10,000 retirement deduction knocks that to $8,000.

Her leftover age-65 deduction, the $5,000 still available after the retirement deduction, drops it to $3,000.

Tax on that last $3,000 runs about $60 at the 1.99% rate.

South Carolina's standard deduction can wipe out even that, leaving her owing the state nothing.

A light tax bill is part of why a fixed income stretches at the grocery store and beyond in South Carolina.

One thing to plan for is your required minimum distribution (RMD).

Starting at age 73, the federal government makes you pull a set amount from a traditional IRA or 401(k) every year.

That RMD counts as taxable retirement income in South Carolina, and your deductions still apply against it.

FAQ

Does South Carolina tax retirement income?

Yes. South Carolina taxes pensions and IRA or 401(k) withdrawals as regular income, but it doesn't tax Social Security. Deductions cut the bill sharply at age 65, so many retirees owe little or nothing.

Does South Carolina tax 401(k) and IRA withdrawals?

Yes, as ordinary income. Retirees can deduct up to $3,000 of retirement income before 65 and up to $10,000 after, plus a separate age-65 deduction of up to $15,000.

At what age do you stop paying tax on retirement income in South Carolina?

There's no age that stops all tax. But at 65 the retirement and age-65 deductions grow large enough that many retirees owe little or nothing on their retirement income.

Does South Carolina tax pensions?

Yes, pensions are taxable in South Carolina, though the retirement and age-65 deductions apply. Military retirement pay is fully exempt from state income tax.

What is South Carolina's income tax rate in 2026?

For 2026, South Carolina has two brackets: 1.99% on income up to $30,000 and 5.21% above that. The 5.21% top rate is down from 6% the year before.