What Tax Breaks Do You Get for South Carolina Income Tax Over 65?

As individuals reach the age of 65, understanding tax obligations becomes an essential part of financial planning. In South Carolina, specific tax breaks aim to reduce the burden on senior residents. Familiarity with these benefits can help seniors maximize exemptions and deductions.

Income Tax Exemptions for Residents Over 65

South Carolina offers income tax exemptions specifically for residents aged 65 and older. A notable benefit is the age-based deduction, which reduces taxable income by $15,000 starting in 2024. This allows seniors to retain more of their income for essential expenses.

Additionally, the state provides a homestead exemption for property taxes. Residents over 65 can exclude the first $50,000 of their home’s fair market value from taxation, resulting in significant savings on annual property tax bills. Once eligibility is confirmed, this exemption is applied automatically.

South Carolina also excludes Social Security benefits from state income tax. Since Social Security often constitutes a large portion of retirement income, this exclusion helps seniors maintain financial stability.

Deductions on Retirement Income

Residents over 65 can deduct up to $10,000 of qualified retirement income in 2024, which includes pensions, annuities, and distributions from retirement plans like 401(k)s or IRAs. Accurate record-keeping of distributions is essential to fully utilize this deduction.

While required minimum distributions (RMDs) are taxable at the federal level, South Carolina’s retirement income deduction can offset some of this tax burden. Managing the timing of income withdrawals can help minimize taxable income in high-income years, potentially lowering tax liability. Consulting a tax professional can provide tailored strategies to optimize retirement income within state and federal tax frameworks.

Social Security Taxability

In South Carolina, Social Security benefits are not subject to state income tax, offering additional relief for retirees. However, at the federal level, up to 85% of these benefits may be taxable, depending on combined income. Individuals with a combined income exceeding $34,000, or couples above $44,000, may face this taxation.

Retirees should monitor how other income sources, such as retirement account withdrawals or investment income, impact their federal tax obligations. Strategically managing these sources can help reduce the portion of Social Security benefits subject to federal taxation.