South Carolina has one of the lowest per capita tax rates in the country, according to the U.S. Bureau of Census. South Carolina’s lawmakers, political leaders and local officials are dedicated to ensuring that the Palmetto State’s tax structure remains competitive and attractive to individuals, manufacturers and small businesses considering our state as their new home.
Income Tax: South Carolina’s income tax structure follows federal income tax laws, allowing many of the same adjustments, exemptions and deductions with only a few modifications. In fact, the starting point for calculating your state tax liability is your federal taxable income. South Carolina’s individual income tax rate starts at 2.5 percent of taxable income, graduating to a maximum of 7 percent on taxable income exceeding $12,650. The individual income tax brackets are adjusted annually to help offset inflation.
Comparison: South Carolina’s overall tax rates are lower than most other states. To really understand how favorable the tax structure is, look at each state’s total tax package, not just the tax rates. For example, some states may have a lower individual income tax rate but tax Social Security benefits. South Carolina does not. South Carolina also allows special exemptions for retirees and senior adults. Beginning the first year you receive retirement income and until you reach age 65, you can take an annual deduction from your taxable income of up to $3,000. You can claim this deduction for income received from any qualified retirement plan, including IRAs, government pension plans, Keough plans and private sector pensions. At age 65, the deduction increases to a maximum of $15,000 on any source of income.
South Carolina provides for the following tax benefits to its residents:
- Disability retirement income for a permanently and totally disabled person is deductible.
- There is no intangibles tax in South Carolina. An intangibles tax is collected in many states that do not have a general personal income tax and is imposed on bank accounts, interest, dividends, stocks, bonds and other assets.
- You do not pay a tax in South Carolina on property you sell in another state. South Carolina has adopted the federal provision allowing up to $500,000 (if married filing jointly, otherwise the provision is $250,000) of the financial gain from the sale of your home to be excluded from tax.
- A two-wage earner credit allows married couples to take up to a maximum tax credit of $210 annually if both work.
- Social Security income that is taxed on your federal income tax return is deductible for South Carolina purposes.
- A credit is allowed for income taxes paid to another state on income taxable in both states.
- An additional state income tax credit for childcare or elderly care expenses.
- A credit of up to $300 annually for nursing care in-home or in a licensed institution.
- Parents may claim an additional deduction equal to the amount of the federal personal exemption ($3,200 for 2005, but adjusted annually) for each child under the age of six.
- Parents, guardians or students can receive partial credit on tuition fees paid to a South Carolina college or university. The credit cannot exceed $850. (Contact a local Department of Revenue office for details.)
- Active Duty Armed Forces members that are separating from active duty but wish to continue their military career at the local level. National Guard and Reserve annual training and weekend drill pay (up to a total of 39 days)is not taxed in South Carolina. Retirement income from National Guard and Reserve service also is not taxed.
South Carolina counties, cities and school districts impose ad valorem (property) taxes on real and personal property. Local governments assess and collect property taxes. The market value of a legal residence and up to five acres of surrounding land is assessed at 4 percent. The assessment ratio is applied to the market value of the property to determine the assessed value of the property. The tax liability on the property is determined when local government applies its millage rate to the assessed value. The millage rate is equivalent to the tax per $1,000 of assessed value. Millage rates vary, but the state average is 289 mills (.289). South Carolina also allows a $50,000 homestead exemption on the fair market value of a home for residents who are age 65 or older, totally and permanently disabled, or legally blind.
South Carolina amended the Property Tax Relief law in 2006 addressing school taxes. South Carolina’s “property tax relief” law means the homeowner (Owner Occupied) will be exempt from paying school operations taxes. The state in Act 388 increased sales tax by one-cent to fund the school operating exemption. The amount of the exemption is based on individual county budgets.
Personal property tax is collected annually on cars, trucks, motorcycles, recreational vehicles, boats and airplanes. Personal cars and light trucks are assessed at 6 percent of market value. Other personal property such as boats and motorcycles will be assessed at 10.5 percent.
The registration fee for passenger cars is $24 every two years ($20 for residents age 65 or older; $22 for 64-year-olds) and can be paid when you pay your county property tax. Many states, rather than collect personal property taxes on cars, boats, etc., impose a higher registration fee that is comparable to South Carolina’s property tax.
In summary, South Carolina’s balanced tax policy and lower cost of living are refreshing changes from many other states. Review the chart below and you will see the difference. This chart includes best estimates of South Carolina county, city and school portions of taxes. Remember, the first $100,000 in home value is exempt from school operating costs millage. Property tax relief is reflected in the amounts shown above. The homestead exemption is not reflected in this table. (In some areas local option sales tax offsets property taxes.)
SALES & USE, MOTOR FUELS TAXES
South Carolina’s state sales and use tax rate is 5 percent, but county voters may approve local sales taxes as well. Local sales taxes are used for property tax relief, construction or repair of roads, bridges and schools, or other specific projects. Prescription drugs, insulin, dental prosthetics and hearing aids are exempt from sales tax. The sales tax on the purchase of motor vehicles, including recreational vehicles, boats, motorcycles and airplanes, is capped at $300 regardless of value.
A 5 percent use tax is applied to purchases made out of state – including Internet, catalog and TV shopping network sales – by South Carolina residents who have shipped, or bring back to South Carolina, tangible goods for “use or storage.” A use tax credit is given to the purchaser if a sales tax is paid to the state in which the purchase is made and the buyer can produce a sales receipt showing the tax was paid. The use tax can be conveniently reported on South Carolina’s individual income tax return each year. Every state that has a sales tax also imposes the use tax.
ESTATE TAX, GIFT TAX
South Carolina Has No Estate Tax for Decedents Dying on or after January 1, 2005.
There is no South Carolina gift tax.
FOR MORE INFORMATION
Contact the Department of Revenue Publications Line at (803) 898-5464 and ask for a free copy of the “Moving to South Carolina” brochure. Information also is available at the Department of Revenue Web site.