State guide
Does South Carolina tax retirement income? IRAs, Roth conversions and Social Security (2026)
By Secure Retirement PlannerUpdated
If you retire in South Carolina, Social Security is not taxed, and at 65 or older you can each deduct up to $15,000 of income. Your pensions, IRA withdrawals and Roth conversion are taxed above that. For 2026 the rate is 1.99% on taxable income under $30,000, and 5.21% (minus $966) at $30,000 and above. A 2026 state law set these rates.
If you are 65 or older, you get some relief. You can deduct up to $15,000 each. But a conversion also raises your federal AGI, and that can shrink your new 2026 state standard deduction, the SCIAD. For a married couple that starts once AGI passes $80,000.
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The short version
- Starting in 2026, South Carolina begins with your federal AGI and uses its own deduction, the SCIAD, in place of the federal standard deduction.
- The 2026 top rate is 5.21%. Once your taxable income reaches $30,000, you pay 5.21% of all of it minus $966.
- At 65 and older, you can each deduct up to $15,000, combining the $10,000 retirement deduction and the age 65 deduction.
- In the SCIAD phase-out range, each extra $1,000 of AGI cuts your deduction by about $273. So a conversion can cost you about 6.6% at the margin.
- South Carolina does not tax your Social Security.
Does South Carolina tax retirement income?
Partly. South Carolina does not tax your Social Security. Your pensions, IRA and 401(k) withdrawals and Roth conversions are taxed at up to 5.21% for 2026. But retirement deductions can cover up to $15,000 each once you are 65.
| Income type | Taxed by South Carolina in 2026? | Notes |
|---|---|---|
| Social Security | No | Railroad retirement is not taxed either |
| Public pensions | Yes, after deductions | Up to $3,000 deducted under 65, up to $15,000 in total at 65 or older. Military retirement is fully deductible |
| Private pensions | Yes, after deductions | Same deductions for plans under sections 401, 403 and 457 |
| IRA and 401(k) withdrawals | Yes, after deductions | IRAs count as retirement income. Payouts with the federal early withdrawal penalty don't qualify |
| Roth conversions | Yes | Likely counts as IRA income for the deductions, but the state doesn't name conversions. Check with a state tax preparer |
Does South Carolina tax a Roth conversion?
Yes. The taxable part of your conversion is in your federal adjusted gross income (AGI). For 2026, South Carolina's math starts with federal AGI, so your conversion is included.
Your retirement deductions can cover part of it. The state counts income from plans under tax code sections 401, 403, 408 and 457 as qualified retirement income. That includes IRAs. A taxable conversion is reported as an IRA payout, so it appears to fit. But the state's instructions and Revenue Ruling 22-11 don't name Roth conversions. So confirm with a South Carolina-licensed preparer.
One clear limit: if part of a payout triggers the federal 10% early withdrawal penalty, that part does not qualify for the retirement deduction. A conversion itself isn't penalized. But if you are under 59½ and have tax withheld from the conversion, the withheld part generally is.
What changed in South Carolina's income tax for 2026?
A new state law rewrote the tax for years starting after December 31, 2025. Act 110 of 2026 was signed March 30, 2026. The state revenue department explains it in Information Letter 26-20 (August 31, 2026).
There are now two brackets. The bracket amounts will be indexed for inflation each year. Starting with 2027, the top rate can drop further if state revenue grows enough.
South Carolina also dropped the federal standard deduction, itemized deductions and the new federal senior deduction. In their place is the South Carolina Income Adjusted Deduction (SCIAD). It is $15,000 if you are single, $22,500 for head of household and $30,000 if you are married filing jointly. It phases out as your federal AGI rises.
| Item | Single | Married filing jointly |
|---|---|---|
| Tax on taxable income under $30,000 | 1.99% | 1.99% |
| Tax on taxable income of $30,000 or more | 5.21% of the total, minus $966 | 5.21% of the total, minus $966 |
| Full SCIAD | $15,000 (AGI up to $40,000) | $30,000 (AGI up to $80,000) |
| SCIAD phases out | AGI $40,001 to $94,999 | AGI $80,001 to $189,999 |
| SCIAD is zero | AGI $95,000 or more | AGI $190,000 or more |
Why can a conversion cost more than 5.21% in South Carolina?
Because your conversion raises your federal AGI, and the SCIAD shrinks as AGI rises. If you are married, your $30,000 SCIAD falls by the fraction (AGI minus $80,000) divided by $110,000. That works out to about $273 of lost deduction for every $1,000 of added AGI.
In that range, each $1,000 you convert is taxed at 5.21%. It also costs you about $273 of deduction, taxed at 5.21%. Together that's about $66 per $1,000, or roughly 6.6%. If you are single, you face the same effect between $40,000 and $95,000 of AGI.
If your joint AGI is below $80,000 or above $190,000, the SCIAD effect doesn't apply to your next dollar. So it pays to plan the size of each year's conversion. Our guide on How much to convert each year covers how to size conversions by bracket.
How do the retirement and age 65 deductions work?
There are two separate deductions, and at 65 they work together. Under 65, you can deduct up to $3,000 of qualified retirement income from your own plan. You must be the original owner of the account. From the year you turn 65, that rises to $10,000.
The age 65 and older deduction is $15,000, and you can use it against any South Carolina income. But it is reduced by any retirement deduction you take. So the most you can deduct between the two at 65 or older is $15,000. If you and your spouse are both 65 or older, you can deduct up to $30,000.
Here's what that means for your conversion. Say you are 65 or older and already have at least $15,000 of other income. Your $15,000 is already used, and a conversion doesn't add any new deduction. Your conversion is taxed at your full rate.
- Military retirement income is fully deductible, but it reduces your retirement and age 65 deductions.
- If you are a surviving spouse, you can also deduct retirement income from your late spouse's plan, on top of your own.
- Information Letter 26-20 doesn't list any change to these deductions for 2026.
Does South Carolina tax Social Security, and what if I move?
South Carolina does not tax your Social Security or railroad retirement. If part of your benefit is federally taxable, you subtract it on your South Carolina return.
If you live in the state for only part of the year, you file Schedule NR. Its instructions say South Carolina taxes retirement income you get while you live there. If you are moving in from a state such as North Carolina, the timing of your conversion decides which state taxes it.
If you skip withholding on a conversion, watch the estimated tax rules so a penalty doesn't surprise you. The 2025 instructions say you can owe one unless you paid enough in four equal payments. Enough means the lesser of 90% of this year's tax or 100% of last year's (110% if your AGI is $150,000 or more).
Example: a Greenville couple, both 66, converting $50,000
Ann and Joe, both 66, file jointly and are delaying Social Security. In 2026 they have $70,000 of income: Joe's $50,000 pension and $20,000 from Joe's IRA. Ann converts $50,000 from her own traditional IRA.
Their federal taxable income goes from $22,500 to $72,500. That adds about $5,954 of federal tax, all in the 10% and 12% brackets.
In South Carolina, they deduct $30,000 either way: $15,000 each from the retirement and age 65 deductions. Without the conversion, Ann's $15,000 already applies against their other income. The conversion pushes their AGI to $120,000, which cuts the SCIAD from $30,000 to $19,100. Their South Carolina tax goes from about $199 to about $2,728.
What this means for you: if your other income already uses your 65+ deduction, plan on your full state rate plus the SCIAD squeeze.
| Without conversion | With $50,000 conversion | |
|---|---|---|
| Federal AGI | $70,000 | $120,000 |
| Federal tax | about $2,250 | about $8,204 |
| SC retirement and age 65 deductions | $30,000 | $30,000 |
| SCIAD | $30,000 | $19,100 |
| SC taxable income | $10,000 | $70,900 |
| SC tax | about $199 | about $2,728 |
| Total added by conversion | about $8,483 |
Hypothetical example. Assumes married filing jointly, both 65 or older, no Social Security, all income from qualified plans, the 2026 federal standard deduction ($32,200 plus $1,650 each for 65+), the $6,000 federal senior deduction each, 2026 federal brackets (IRS Rev. Proc. 2025-32), and the 2026 South Carolina rates and SCIAD in Information Letter 26-20. It assumes the conversion counts as qualified retirement income, ignores other South Carolina adjustments and Medicare IRMAA. Your numbers will differ.
Common questions
Does South Carolina tax Roth conversions?
Yes. Your conversion is part of federal AGI, where the 2026 South Carolina return starts. Your retirement and age 65 deductions may offset part of it.
What is South Carolina's income tax rate for 2026?
1.99% on taxable income under $30,000. At $30,000 and above, your tax is 5.21% of taxable income minus $966.
How much retirement income is tax-free in South Carolina at 65?
Up to $15,000 per person, combining the $10,000 retirement deduction and the age 65 deduction. Your Social Security is fully exempt on top of that.
Does a Roth conversion count as retirement income in South Carolina?
The state's guidance covers IRA payouts under IRC section 408 but doesn't name conversions. Yours likely qualifies, but confirm with a South Carolina-licensed preparer.
What is the SCIAD?
The South Carolina Income Adjusted Deduction replaced the federal standard deduction starting in 2026. It is $30,000 if you file jointly and phases out between $80,000 and $190,000 of federal AGI.
Does South Carolina tax Social Security?
No. You subtract your federally taxable Social Security on the South Carolina return.
Sources
Facts on this page were last checked on November 9, 2026.
- SC Department of Revenue, Information Letter #26-20, Individual Income Tax Reform (Aug. 31, 2026) · Act 110 of 2026: 2026 brackets and rates, federal AGI starting point, SCIAD amounts and phase-out, future rate cuts. Read Nov 9, 2026.
- SC Department of Revenue, 2025 SC1040 Individual Income Tax Instructions · Retirement deduction, age 65 and older deduction, qualified retirement income definition, premature withdrawal rule, Social Security, estimated tax penalty. Read Nov 9, 2026.
- SC Department of Revenue, Revenue Ruling #22-11 · How the retirement, age 65 and military deductions interact. Read Nov 9, 2026.
- SC Department of Revenue, 2025 Schedule NR Instructions · Part-year residents: retirement income taxed while a resident. Read Nov 9, 2026.
- IRS Rev. Proc. 2025-32 (2026 inflation adjustments) · 2026 federal brackets and standard deduction. Read Nov 9, 2026.
Who wrote this
This guide was written and fact-checked by the Secure Retirement Planner editorial team using IRS, CMS and Social Security sources listed above. We update guides when the law or yearly limits change. How we research.