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| South Carolina Tax Summary |
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outh Carolina has one of the lowest per capita tax rates in the country, according to the U.S. Bureau of the Census. And South Carolina’s lawmakers, state 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 business owners who may be considering our state as their new home. The following state and local taxes generally affect our residents:
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 $12,850. The individual income tax brackets are adjusted annually for inflation.
To compare South Carolina’s tax rates with other states,
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 tax Social Security benefits or railroad retirement income. 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.
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If you are separating from active duty
with the Armed Forces but wish to continue your 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.
In addition, the state allows the following benefits:
$ 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 this state 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.
$ A credit is allowed for income taxes paid to another state on income taxable in both states.
$ An additional state income tax credit is allowed for childcare or elderly care expenses.
$ A credit of up to $300 annually is allowed 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 ($3,300 for 2006, 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.)
$ South Carolina offers an owner of a pass-through business the option of having active trade or
business income taxed at a flat rate rather than the normal tax rate for state individual income. The flat rate
is 6.5 percent for tax years beginning in 2006, 6 percent for tax years beginning in 2007, 5.5 percent for
tax years beginning in 2008 and 5 percent for tax years beginning after 2008.
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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 tax liability on the property is determined when a local government applies its millage rate to the assessed value. Millage rates vary from county to county, 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’s “property tax relief” law means homeowners may exempt from school property taxes the first $100,000 of the value of their home. The maximum benefit of this exemption ranges from $200 to more than $800 depending on the tax district where the home is located.
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 for tax year 2007. If you own a $10,000 car today, for example, based on an average millage rate, your annual property tax would be about $173.40. Other personal property is 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.
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Sales & Use, Motor Fuels Taxes
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South Carolina’s state sales and use tax rate increases to 6 percent effective June 1, 2007, to help offset some reduction in local property taxes. Some counties may have a voter-approved local sales tax 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. The state sales tax rate on unprepared food is 3 percent.
Seniors 85 years old and older are entitled to a 1 percent exemption in the state sales and use tax rate. (The exemption does not apply to the
3 percent tax rate on unprepared food, however.)
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.
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South Carolina does not impose an estate or gift tax.
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Compiled by Danny Brazwell, S.C. Dept. of Revenue, 803.898.5464.
For more information, contact the Department of Revenue Publications Line at
803.898.5405
and ask for a free copy of the "Moving to South Carolina" brochure.
Information also is available at the Department
of Revenue Web site.
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