Retirement in South Carolina: Taxes and Cost of Living
South Carolina exempts Social Security entirely and cut its income tax rates for 2026. Retirement account withdrawals are still taxed, though two deductions soften the bill after 65. Here is how each income source is treated and what the state costs.
See how long your savings will last in South Carolina
State tax here depends on your age and how much you withdraw. Run your numbers and see what the yearly draw looks like.
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South Carolina retirement tax rules
Two brackets apply for the 2026 tax year: 1.99% on taxable income under $30,000, and 5.21% on income of $30,000 and above, less $966. That structure came from H. 4216, signed March 30, 2026, and it replaced a graduated schedule that topped out at 6.2%.
Social Security is fully exempt, whatever your income. Withdrawals from 401(k)s, IRAs, and pensions are taxable. The South Carolina Department of Revenue allows a retirement income deduction of $3,000 a year before age 65, and $10,000 a year from 65 on. Each spouse figures it separately on a joint return.
At 65 there is a second deduction of up to $15,000 against any kind of income. The two do not stack cleanly. Whatever you claim as a retirement deduction reduces the age-65 deduction, so the combined ceiling is $15,000 per taxpayer rather than $25,000. Military retirement pay is fully deductible at any age, and that deduction reduces the $15,000 as well.
Long-term capital gains get a 44% state deduction, which leaves 56% of the gain exposed to tax. At the 5.21% rate that works out to roughly 2.9% on a long-held position. South Carolina charges no estate tax and no inheritance tax.
Cost of living in South Carolina
The statewide cost of living index sits near 94, under the national average of 100 (MERIC). Housing does most of that work. Aiken, Florence, and much of the Midlands price well below the average, while Charleston and the Hilton Head and Bluffton corridor price above it.
Coastal property insurance deserves a line in your budget. Wind and hail exposure has pushed premiums up along the shore. The gap between a Greenville budget and a beachfront budget runs wider than the tax difference between most states.
Does South Carolina tax retirement income?
Some of it. Social Security escapes entirely, and the rest is taxable with deductions that grow at 65. Here is how the four most common sources are treated.
| Income type | Taxed in South Carolina? | Details |
|---|---|---|
| 401(k) / IRA withdrawals | Yes, with deductions | Retirement deduction of $3,000 under 65, $10,000 at 65 and older. |
| Pension income | Yes, with deductions | Same deduction as other retirement income. Military pensions are fully deductible. |
| Social Security benefits | No | Fully exempt at any income. May still be federally taxable. |
| Capital gains | Yes, reduced | 44% deduction on net long-term gains, leaving 56% taxable. |
Federal tax is usually the larger number. The retirement tax calculator estimates what you'll owe federally on withdrawals and benefits.
Best places to retire in South Carolina
Greenville
The Upstate hub pairs a walkable downtown along the Reedy River with housing costs below the state average and no coastal insurance premium. Prisma Health anchors the medical presence. Winters are cooler than the Lowcountry, which some retirees count as a feature.
Charleston
History, food, and water access come at the state's highest price point. MUSC gives the metro serious medical depth. Budget carefully for insurance and flood considerations, particularly on the peninsula and the barrier islands.
Myrtle Beach and the Grand Strand
Golf, beach, and a long-established retiree population, at prices under Charleston and Hilton Head. The area draws heavy summer tourism, so year-round residents tend to weigh traffic and seasonality against the coastal access.
Aiken
Horse country near the Georgia line, with some of the lowest housing costs in the state and a small-town pace. Augusta's hospitals are about 20 miles away, which is what makes the low cost workable for retirees.
Bluffton and Hilton Head
Purpose-built communities, mild winters, and Lowcountry scenery draw a steady retiree inflow from the Northeast and Midwest. Costs run above the state average, and Bluffton generally prices under the island itself.
South Carolina pension system
The South Carolina Retirement System covers state employees, public school teachers, and many local government workers. It is administered by the Public Employee Benefit Authority (PEBA), which also runs the Police Officers Retirement System and the state's optional defined contribution plan. Benefits are taxable in South Carolina, though the retirement and age-65 deductions apply.
If a pension is part of your plan, the pension calculator estimates the monthly benefit from your years of service and salary.
Calculators for your South Carolina retirement
Retirement Tax Calculator
Estimate the federal tax on your withdrawals and Social Security benefits.
Retirement Income Calculator
See how long your savings last with Social Security, pension, and tax-aware withdrawals.
Social Security Calculator
Estimate your benefit at 62, 67, and 70, and compare break-even claiming ages.
Retirement Calculator
Project whether your savings will support the retirement you want, at any age.
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