South Carolina Does Collect State Income Tax

Yes, South Carolina has a state income tax. Unlike a handful of states that do not tax wages at all, South Carolina taxes the income you earn from work, investments, and other sources. The state uses a progressive tax system, meaning the tax rate increases as your income increases.

If you live in South Carolina or work there and earn income, you will owe state income tax on that money. The amount you owe depends on your total income for the year and which tax bracket you fall into. South Carolina's Department of Revenue handles the collection and administration of state income taxes.

Key Takeaways

  • South Carolina taxes wage income, investment income, and most other types of income at rates that range from 0% to 7% depending on your total earnings.
  • The state uses tax brackets that change each year, so the income threshold for each rate is different from year to year.
  • You must file a South Carolina state tax return if you earn income in the state, even if you also file a federal return.
  • South Carolina offers certain deductions and credits that can lower the amount of state tax you owe, including a standard deduction.

How South Carolina's Tax Brackets Work

South Carolina divides income into tax brackets, and each bracket has its own tax rate. For example, if you are single, your first portion of income might be taxed at 0%, the next portion at 3%, then 4%, and so on, up to a maximum rate of 7%. The exact dollar amounts where each bracket begins and ends change every year because they are adjusted for inflation.

The brackets are different depending on your filing status — single, married filing jointly, married filing separately, or head of household. A married couple filing together will have higher income thresholds for each bracket than a single person, which means more of their income is taxed at lower rates. You can find the current year's brackets on the South Carolina Department of Revenue website.

What Types of Income Are Taxed

South Carolina taxes most types of income. This includes wages and salaries from your job, self-employment income if you run a business, interest earned on savings accounts or bonds, and dividends from stocks. Capital gains — the profit you make when you sell an investment for more than you paid for it — are also taxed as income in South Carolina.

Some types of income are not taxed or are taxed differently. For instance, certain retirement distributions may be excluded from taxation under specific circumstances, and some types of military pay have special treatment. Social Security benefits are generally not taxed by South Carolina, though federal rules about Social Security taxation still explore.

Deductions and Credits That Lower Your Tax Bill

South Carolina allows you to reduce your taxable income through deductions. The most common is the standard deduction, which is a set dollar amount you can subtract from your income before calculating tax. The standard deduction amount varies by filing status and age. If you are over 65, you may be able to claim a larger standard deduction.

The state also offers tax credits, which directly reduce the amount of tax you owe rather than reducing your income. Examples include credits for child and dependent care expenses, education-related credits, and property tax relief for certain homeowners. Credits are generally more valuable than deductions because they reduce your tax dollar-for-dollar, whereas deductions only reduce the income that gets taxed.

Filing Your South Carolina State Tax Return

You file your South Carolina state tax return using Form SC 1040, which is the state's individual income tax return form. You must file this form if you earned income in South Carolina during the tax year, even if you do not owe any tax. The filing important date is typically April 15, the same day as your federal return, though you can request an extension.

You can file your state return on paper by mailing it to the South Carolina Department of Revenue, or you can file electronically through the state's online system or through tax software that supports South Carolina returns. Many people file their state and federal returns at the same time using the same tax software, which can make the process simpler.

How Your State Tax Differs From Federal Tax

Your federal income tax and South Carolina state income tax are separate calculations. You will file two different returns — one federal return with the IRS and one state return with South Carolina. The tax rates are different, the brackets are different, and some deductions or credits available at the federal level may not be available at the state level, or vice versa.

Your federal return does not automatically determine your state return. You may owe federal tax but not state tax, or state tax but not federal tax, depending on your income level and the deductions you claim. However, many of the numbers from your federal return — such as your total income — carry over to your state return, so the two are related even though they are separate.

What Happens If You Move to or From South Carolina

If you move to South Carolina during the year, you owe state income tax only on the income you earned while you were a resident. When you file, you will report your income for the full year but indicate the date you became a South Carolina resident. The state will calculate your tax based on the portion of the year you lived there.

If you move out of South Carolina, you owe state income tax only on income earned while you were a resident. You may also owe income tax to the state you moved to, depending on that state's rules. Some states have reciprocal agreements that prevent you from being taxed by both states on the same income, but you will need to check the specific rules for your situation.

Frequently Asked Questions

Do I have to file a South Carolina tax return if I did not earn much income?

You must file if your income exceeds the threshold for your filing status, which changes each year. Even if you earned less than the threshold, filing may be worth doing if you had taxes withheld from your paychecks, because you could receive a refund. Contact the South Carolina Department of Revenue or use their website to find the current year's filing threshold for your situation.

What is the highest tax rate in South Carolina?

The highest state income tax rate in South Carolina is 7%, which applies to the highest portion of income for all filing statuses. This is the top marginal rate, meaning only the income that falls into the highest bracket is taxed at 7%; the rest of your income is taxed at lower rates according to the brackets.

Can I deduct federal income tax from my South Carolina return?

No, South Carolina does not allow you to deduct federal income tax paid. You use the standard deduction or itemized deductions to reduce your taxable income, but federal tax payments are not deductible on the state return. This is different from some other states that do allow this deduction.

Do I owe South Carolina tax if I work in the state but live elsewhere?

Yes, you owe South Carolina income tax on income you earn while working in the state, even if you live in another state. You will file a part-year or nonresident return with South Carolina reporting only the income earned there. You will also file a return in your home state, which may or may not tax that same income depending on that state's rules.

Where do I send my South Carolina tax return?

If you file on paper, mail your return to the address listed on the Form SC 1040 instructions, which you can find on the South Carolina Department of Revenue website. If you file electronically, the return is submitted directly through the online system or tax software. Electronic filing is generally faster and reduces the chance of errors.