Live in SC, Work in NC Taxes: What You Need to Know
Understand how living in South Carolina and working in North Carolina affects your state taxes, including residency, income allocation, and tax credits.
Living in South Carolina and working in North Carolina creates a unique tax situation that requires careful attention. Each state has its own tax laws, meaning you may need to file returns in both states and ensure you’re not overpaying or underpaying. Proper income allocation and available tax credits can help prevent unnecessary financial burdens.
Managing taxes across state lines requires knowing where to file, how to report earnings, and whether adjustments to withholdings are necessary. Proper planning ensures compliance while avoiding double taxation.
Determining Your Residency Status
Residency determines which state taxes all your income, not just what you earn from employment. South Carolina considers you a resident if your permanent home, or domicile, is there. Domicile is where you intend to return after temporary absences. Factors such as home ownership, vehicle registration, voter registration, and mailing address influence residency classification.
North Carolina taxes nonresidents only on income earned within the state. If you work in North Carolina but maintain a permanent home in South Carolina, you remain a South Carolina resident for tax purposes. However, if you establish a permanent home in North Carolina, you may be considered a resident there. If you rent an apartment in North Carolina for convenience but own a home in South Carolina, tax authorities will likely classify you as a South Carolina resident.
Filing State Income Tax Returns
South Carolina residents earning wages in North Carolina must file tax returns in both states. South Carolina taxes all income earned by its residents, while North Carolina taxes only income sourced within its borders. This typically requires filing a South Carolina resident return (SC1040) and a North Carolina nonresident return (D-400 with Schedule PN).
Each state has different income thresholds for filing. In 2024, North Carolina requires nonresidents to file if they earn more than $12,750 (single filers) or $25,500 (married filing jointly). South Carolina requires filing if total gross income meets or exceeds the federal filing requirement.
Both states follow the federal tax deadline of April 15. South Carolina grants a six-month automatic extension if a federal extension is filed, while North Carolina requires Form D-410 to extend the deadline. Extensions delay the filing date but not the payment due date, meaning interest may accrue on unpaid taxes.
Allocating Income Earned in Another State
Income must be properly divided between the two states. North Carolina taxes only wages earned within its borders, meaning income from work physically performed in the state is subject to its tax laws.
For hybrid work arrangements, taxable income in North Carolina depends on the number of days worked in the state. If an employee spends 60% of their workdays in North Carolina and 40% working remotely from South Carolina, only the portion earned while physically present in North Carolina is taxable there. Employers typically track this through payroll systems, but employees should maintain personal records, such as work schedules or time-tracking logs, to ensure accurate reporting.
Self-employed individuals must also consider income sourcing rules. North Carolina taxes business income if services are performed within the state, even if the client is located elsewhere. A consultant based in South Carolina who regularly conducts in-person meetings in North Carolina may need to allocate income based on where services are rendered. South Carolina, however, taxes all income earned by its residents, regardless of location.
Credits for Taxes Paid to Other States
South Carolina offers a credit to residents who pay income tax to another state, preventing double taxation. This credit is claimed on the SC1040 return using the SC1040TC form and applies only to income that is both earned in another state and also taxed by South Carolina. The credit is limited to the lesser of the tax actually paid to the other state or the amount South Carolina would have imposed on that income.
For example, if a South Carolina resident earns $50,000 in North Carolina and pays $2,500 in North Carolina income tax, they may apply for a credit. However, if South Carolina would have taxed that same $50,000 at $2,400, only $2,400 can be credited, leaving the taxpayer responsible for the remaining $100 difference.
A copy of the North Carolina tax return, along with proof of tax payment such as a W-2 or state tax transcript, must be submitted. South Carolina may disallow the credit if sufficient documentation is not provided.
Adjusting Withholdings When Working Across State Lines
North Carolina requires employers to withhold state income tax from wages earned within its borders. However, because South Carolina also taxes all income earned by its residents, adjustments may be necessary to avoid owing taxes when filing a return.
Employees can modify their withholdings by submitting a North Carolina Form NC-4 NRA (Nonresident Employee Withholding Allowance Certificate) to their employer, specifying the correct withholding amount. This form allows nonresidents to adjust their North Carolina tax withholding based on expected tax credits in South Carolina.
South Carolina residents may also need to make estimated tax payments to their home state if their employer does not withhold enough. The South Carolina Department of Revenue provides SC1040ES vouchers for estimated tax payments, which are due quarterly.
In some cases, taxpayers may choose to have additional South Carolina tax withheld from another source of income, such as a spouse’s paycheck, to offset any shortfall. Reviewing withholdings annually or after major life changes, such as a salary increase or job transition, helps ensure accurate tax payments. Taxpayers can use the IRS withholding calculator along with state-specific tools to determine the appropriate adjustments.