Do You Pay State Taxes in South Carolina?

South Carolina’s tax system has several components that residents should understand. The state imposes a personal income tax, which is the primary tax individuals encounter, alongside a statewide sales tax and local property taxes. Understanding the requirements for each is part of managing your financial obligations. This guide provides a look at these main taxes, who is required to pay them, and how the process works.

Determining Your Filing Requirement

Your requirement to file a South Carolina income tax return is based on your residency status and gross income. A full-year resident is someone who is domiciled in South Carolina for the entire year. Domicile is your true, fixed, permanent home, and the place where you intend to return after any absence.

A part-year resident is an individual who moves into or out of South Carolina during the tax year, and is taxed on all income from all sources while a resident. A nonresident is someone not domiciled in the state but who earns income from South Carolina sources, such as wages from a job or income from rental property located there.

You must file a South Carolina return if you are required to file a federal income tax return. Nonresidents and part-year residents must file if they have gross income from South Carolina sources. Part-year residents have an option to be treated as full-year residents, which allows them to claim a credit for taxes paid to another state on the same income.

Calculating South Carolina Income Tax

Your South Carolina income tax calculation begins with your federal taxable income, as the state conforms to most federal tax laws. The figure from your federal Form 1040 is the starting point for your state return, the SC-1040. From there, specific state-level adjustments are made to determine your South Carolina taxable income.

South Carolina uses a graduated income tax system. For the 2024 tax year, rates range from 0% to a top marginal rate of 6.2%, with brackets adjusted annually for inflation. The state is in the process of lowering its top rate further in the coming years based on revenue performance.

A significant state-specific adjustment is the deduction for retirement income. Taxpayers under age 65 can deduct up to $3,000 of qualified retirement income, which increases to $10,000 at age 65. Those 65 and older also have a general income deduction of up to $15,000, which is reduced by any retirement deduction claimed.

Another subtraction is for certain military pay, including income for National Guard and Reserve members for inactive duty training. South Carolina also does not tax Social Security benefits or railroad retirement income that may be taxed federally. A deduction is also available for 44% of net long-term capital gains, which effectively lowers the tax rate on those investments.

Understanding Other State and Local Taxes

Beyond income tax, South Carolina has a statewide sales and use tax rate of 6% that applies to most goods and some services. Many counties impose additional local sales taxes on top of the state rate. These can result in a combined sales tax rate of up to 9% in some areas, so the rate you pay often varies depending on the county of purchase.

Property tax is a local tax administered at the county level on real estate and personal property like vehicles. Owner-occupied primary residences receive a 4% assessment ratio applied to the property’s fair market value. This is lower than the 6% ratio for second homes, investment properties, and personal vehicles, providing tax relief to homeowners.

The assessed value of your property is multiplied by the local millage rate to determine the tax owed. Millage rates are set by local governments to fund public services like schools and vary widely across the state. Because of this, property tax amounts can differ significantly between counties.

Filing and Paying Your State Taxes

After calculating your tax liability, you must submit your return and any payment to the South Carolina Department of Revenue. Taxpayers have several options for filing, including electronically through tax preparation software or with a tax professional. You can also download forms from the Department of Revenue’s website and mail a paper return.

The deadline for filing your state income tax return is April 15th. If you file and pay electronically, the state provides an automatic extension to May 1st. This extension applies only to your state return and does not change the federal filing deadline.

If you owe taxes, you can pay online through the Department of Revenue’s portal or include a check or money order with a mailed return. For income not subject to withholding, such as from self-employment, the state requires quarterly estimated tax payments.