SOUTH CAROLINA TAXES
South Carolina has one of the lowest per capita tax rates in the country, according to the U.S. Bureau of the Census. South Carolina’s lawmakers, state political leaders and local officials are committed 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:
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. For the current tax year, South Carolina does not tax the first $2,910 of federal taxable income. For amounts over $2,910, South Carolina’s graduated tax rate is 3-7 percent of taxable income. 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 deductions for retirees and senior adults. Beginning the first year you receive qualified retirement income and until you reach age 65, you can take an annual deduction from your qualified retirement income of up to $3,000. You can claim this deduction for income received from any qualified retirement plan, including IRAs, government pension plans, Keogh plans and private sector pensions. At age 65, the deduction increases to a maximum of $15,000 on any source of income. Each spouse receiving income from a qualified retirement plan may claim the retirement deduction.
National Guard and Reserve annual training and weekend drill pay is not taxed in South Carolina. Retirement income attributable to your inactive National Guard and Reserve duty is also deductible. South Carolina does not recognize federal phase-outs of itemized deductions and personal exemptions.
In addition, the state allows the following deductions and exemptions (not inclusive):
• 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 child and dependent 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 ($4,000 for 2015 for each child under the age of six).
• Parents, guardians or students may qualify for a 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 3 percent for tax year 2015.
For more information on these and other deductions, see the SC1040 instructions at www.dor.sc.gov.
South Carolina counties, cities and school districts impose ad valorem (property) taxes on real and personal property.
Local governments assess and collect most 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 323.5 mills. 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 are exempt from all property taxes levied for school operating purposes on a legal residence.
Personal property tax is collected annually on cars, trucks, motorcycles, recreational vehicles, boats and airplanes. Personal cars, light trucks and motorcycles are assessed at 6 percent of market value. If you own a $10,000 car today, for example, based on an average millage rate, your annual property tax would be about $190.80. 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.
SALES & USE, MOTOR FUELS TAXES
South Carolina’s state sales and use tax rate is 6 percent. Five percent of the statewide rate is used for education initiatives, while one percent is used to offset reductions in local property taxes. Some counties may also have voter-approved local sales and use taxes as well. Local sales and use taxes may be used for property tax relief, construction or repair of roads, bridges and schools, or other specific projects. The types of local sales and use taxes currently being collected are: Capital Projects Tax; School District Tax; Education Capital Projects Tax; Transportation Tax; Local Option Tax; Tourism Tax and Catawba Indian Tribal Tax. There are two types of exemptions provided under South Carolina’s sales and use tax laws: (1) partial exemptions and (2) full exemptions.
Partial exemptions limit or have a “cap” to the amount of tax that can be charged. The following items have a sales and use tax that is “capped” at $300 when purchased: Motor vehicles; Recreational vehicles; Boats; Motorcycles and Airplanes.
Full Exemptions may be determined in the1 statute (law) to be exempt from sales and use tax. Examples of items that are exempt from sales and use tax are: Prescription drugs sold to individuals and insulin sold to diabetics. Dental prosthetics and hearing aids are exempt from sales tax.
Purchases of unprepared food are exempt from the state sales and use tax, but are subject to many local sales taxes.
Individuals who are 85 years of age and older are exempted from 1% of the state sales tax, paying a state sales tax of 5% instead of 6%. Qualified individuals must meet the following guidelines to obtain the exclusion: (1) the individual purchases the tangible personal property himself or herself; (2) the tangible personal property is purchased for his or her own personal use; (3) the purchaser requests the exclusion at the time of the sale, and (4) the purchaser provides the retailer with proof of age.
A 6 percent state use tax is applied to purchases made out of state where no tax equal to South Carolina’s sale tax has been paid. All counties that impose a local sales tax also impose a local use tax.
The use tax is applied to out-of-state, Internet, catalog and TV shopping network sales where South Carolina residents have shipped into, 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. Or, you can use the Online Filing for Individual taxpayers on our website. www.dor.sc.gov
ESTATE TAX, GIFT TAX
South Carolina does not impose an estate or gift tax.
For more information, contact the Department of Revenue Publications Line at 803.898.5201 and ask for a free copy of the "Moving to South Carolina" brochure. You can also find a copy as well as other helpful information on the Department of Revenue’s website. www.dor.sc.gov
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