A Breakdown of South Carolina Tax Laws

South Carolina’s tax system relies on a blend of taxes levied on income, sales, and property to fund public services. The revenue collected supports government functions, from education and infrastructure to public safety and health services. Understanding the fundamentals of each major tax category is important for residents and business owners to ensure compliance with state law.

South Carolina Personal Income Tax

South Carolina employs a progressive income tax system, where the tax rate increases as taxable income rises. The state’s top marginal income tax rate is 6.0%. The tax brackets are adjusted annually to account for inflation, which can affect the income thresholds for each rate.

Filers begin with their federal adjusted gross income and make certain state-specific adjustments. South Carolina conforms its tax code to the Internal Revenue Code, which aligns state and federal definitions of income and deductions. From this starting point, taxpayers can subtract the larger of their itemized deductions or the state’s standard deduction.

The state offers several subtractions from income that can lower a filer’s tax bill.

• Taxpayers under age 65 can deduct up to $3,000 of qualifying retirement income.
• Those 65 and older can deduct up to $10,000 of qualifying retirement income.
• Resident taxpayers age 65 and older are eligible for a separate $15,000 deduction against any South Carolina income, though this is reduced by any retirement income deduction claimed.
• A separate, more generous deduction is available for military retirement pay.
• The two-wage earner credit allows married couples who both have earned income to reduce their taxable income, mitigating the “marriage penalty.”

Beyond deductions, South Carolina provides various tax credits that directly reduce the amount of tax owed. A common credit is for taxes paid to another state, which prevents double taxation for residents who earn income elsewhere. To claim this, a taxpayer must file a copy of the other state’s tax return with their South Carolina return. The state also offers a tuition tax credit for a portion of the costs of attending an independent school and a credit for classroom teachers who purchase their own supplies.

State and Local Sales and Use Tax

The primary consumption tax in South Carolina is the statewide sales tax, set at a rate of 6%. This tax is applied to the gross proceeds of sales for most tangible personal property and certain services.

Many counties and some municipalities levy additional local option sales taxes, which are stacked on top of the statewide rate. These local taxes are approved by voters in a specific jurisdiction to fund local projects, such as road improvements or school construction. The combined state and local sales tax rate can vary depending on the location of the purchase, though the total rate is often capped around 8% or 9%.

South Carolina’s sales tax system exempts certain necessities. Unprepared food, or groceries, is exempt from the statewide 6% sales tax but may be subject to local sales taxes. Prescription medications and prosthetic devices are fully exempt from both state and local sales tax.

Residents may also be responsible for a use tax, which complements the sales tax. Use tax is owed when a person buys tangible goods from an out-of-state seller for use in South Carolina and does not pay state sales tax at the time of purchase. The use tax rate is the same as the sales tax rate in the purchaser’s location, and the resident must report and pay this tax to the South Carolina Department of Revenue.

Understanding Property Taxes

Property taxes in South Carolina are a local tax used to fund county and municipal services. The amount of tax owed is based on the property’s assessed value, which is determined by the county assessor. This value is then multiplied by an assessment ratio that differs based on the type of property.

For an owner-occupied primary residence, the assessment ratio is 4%. For all other real property, including second homes, rental properties, and commercial buildings, the assessment ratio is 6%.

Once the assessed value is calculated, it is multiplied by the local millage rate to determine the final tax bill. A mill is equal to one-tenth of one cent, so a millage rate of 200 mills translates to a tax of $200 for every $1,000 of assessed value. Millage rates are set annually by local governing bodies, such as county councils and school boards, based on their budget needs.

Homestead Exemption

South Carolina offers a Homestead Exemption for certain homeowners. To qualify, a resident must be age 65 or older, totally and permanently disabled, or legally blind. The exemption removes the first $50,000 of the fair market value of a qualifying primary residence from the property tax roll. This benefit applies to all property taxes levied by the state, counties, and school districts.

Vehicle Property Tax

In addition to real estate, South Carolina levies an annual property tax on motor vehicles and recreational vehicles. This tax must be paid to the county government before a vehicle’s registration can be renewed with the Department of Motor Vehicles. The amount of tax is based on the vehicle’s assessed value, determined by the county using standardized guides, and the millage rate of the owner’s residential location.

Key Taxes for Businesses

Businesses operating in South Carolina are subject to a corporate income tax. The state levies this tax at a flat rate of 5% on a corporation’s net income that is attributable to its in-state operations. For multi-state corporations, South Carolina requires the business to apportion its income based on a single sales factor, which can be advantageous for companies with significant property and payroll in the state but lower in-state sales.

Another responsibility for businesses with employees is the withholding of income tax from employee wages. Employers must collect these taxes and remit them to the South Carolina Department of Revenue on a regular basis. The amount to be withheld is determined by the employee’s W-4 form and the state’s withholding tables.

Businesses that sell taxable goods or services must obtain a retail license and collect the applicable state and local sales taxes from customers. These collected funds must be reported and remitted to the Department of Revenue, typically on a monthly or quarterly basis depending on the volume of sales. Failure to properly collect and remit sales tax can result in penalties and interest.

Filing and Paying South Carolina Taxes

The deadline for filing personal income tax returns in South Carolina aligns with the federal tax deadline of April 15th. If this date falls on a weekend or holiday, the deadline moves to the next business day. Taxpayers who need more time to file can request an extension, which grants additional time to submit the return but not to pay any tax owed.

There are several methods available for filing a state tax return. The South Carolina Department of Revenue (SCDOR) encourages electronic filing through its online portal, MyDORWAY, or through approved third-party tax preparation software. Taxpayers can also download and print forms from the SCDOR website to file by mail.

If a taxpayer owes money, there are multiple ways to make a payment.

• Electronic payments can be made directly from a bank account via an electronic funds withdrawal when e-filing or through the MyDORWAY portal.
• Payments can be made by credit or debit card, though a third-party processing fee may apply.
• A check or money order can be mailed with a payment voucher, Form SC1040-V.