South Carolina retired pay

Is military retirement taxed in South Carolina?

Not taxed

Fully Deductible Since 2022.

No, for a retiree from the armed forces. Since tax year 2022, S.C. Code § 12-6-1171 lets you deduct all military retirement income included in your South Carolina taxable income, at any age and with no dollar cap. The condition that matters is the source: SCDOR Revenue Ruling #22-11 limits it to retirement from active duty or active Guard and Reserve service, so a NOAA or Public Health Service pension does not qualify.

The law: S.C. Code Ann. § 12-6-1171(A)
Current rule since: tax year 2022 (2022 Act No. 156 and Act No. 228); through 2021, up to $17,500 at any age with earned income, or up to $30,000 at age 65 and older
Where you claim it: 2025 SC1040, Military Retirement Deduction: line p-4 (taxpayer), line p-5 (spouse), line p-6 (surviving spouse)

Read on South Carolina’s own sources October 9, 2026

What South Carolina’s rule is worth on your retired pay

Enter your annual taxable retired pay (box 2a of your DFAS or Coast Guard 1099-R). The rate starts at South Carolina’s top 5.21% rate (on taxable income of $30,000 or more) for tax year 2026; change it to your own bracket if you know it.

One rate applied to the whole amount, not South Carolina’s full return: brackets, other income, deductions and credits change the real figure. Use it to compare, then check the state’s own form instructions.

How it works in South Carolina

Take the taxable amount from the 1099-R that DFAS or the Coast Guard Pay and Personnel Center sends you. On the 2025 SC1040, enter the retired pay earned by your own service on line p-4 and your spouse's on line p-5. There is no cap and no age test: Example 4 in the 2025 instructions shows a retiree with $36,000 of military retirement deducting all $36,000 on line p-4.

A Guard or Reserve retiree splits the check first. The share tied to part-time Guard or Reserve service is subtracted on line v, using the worksheet ratio of inactive Reserve time plus inactive Guard time over total military time, multiplied by the taxable retired pay. Only the remainder goes on line p-4. Revenue Ruling #22-11 says Guard and Reserve retirement qualifies for the full deduction when it is attributable to active military service.

A surviving spouse uses line p-6 for military retirement received because of the deceased spouse's service, applied the same way it applied to the retiree. It is separate from the survivor's own deductions. Revenue Ruling #22-11 says a survivor 65 or older keeps his or her own general retirement and age 65 deductions, can take a separate general deduction as a survivor (up to $10,000 when the deceased spouse would have been 65 or older), and still deducts all of the military retirement attributable to the deceased spouse.

If you paid South Carolina tax on retired pay for 2023, 2024 or 2025, file a new SC1040 with the Amended Return box checked, complete it as it should have been filed, and attach the SCH AMD. The 2022 year is closed for most filers: the 2022 instructions set its refund deadline at April 18, 2026, unless you had a valid extension. The 2023 deadline is April 15, 2027. If you have not filed for 2025 yet, SCDOR announced on March 26, 2026 that every 2025 South Carolina return is automatically due October 15, 2026, though any tax owed was still due April 15, 2026.

On an assumed $36,000 pension taxed at the 6% top rate in the 2025 tax tables, the deduction is worth up to $2,160 for 2025. H. 4216, signed March 30, 2026, cuts the top rate to 5.21% on taxable income of $30,000 or more starting with tax year 2026 (SCDOR Information Letter #26-20), so the same deduction is worth up to about $1,876 for 2026. Taxable income under $30,000 is taxed at 1.99% in 2026, so retirees in that range save less per dollar.

Survivor Benefit Plan annuities

Deductible. § 12-6-1171(B) covers income a surviving spouse receives from a qualified military retirement plan, and for a surviving spouse it "also includes a retirement benefit plan and dependent indemnity compensation" tied to the deceased spouse's service. The 2025 SC1040 instructions put it on line p-6, in addition to the survivor's own retirement deductions (read October 9, 2026).

Active-duty pay in South Carolina

Taxed for a South Carolina domiciliary: the 2025 SC1040 instructions list no subtraction for regular active-duty pay. Guard and Reserve members deduct weekend drill and inactive duty pay plus up to 15 days of annual training (14 days plus up to two travel days for inactive Reserve members) on line n.

Missed it in an earlier year?

In general, a refund claim must be filed within three years from the date the return was filed or originally due, or two years from the date the tax was paid (SCDOR IIT FAQs, read October 9, 2026). The 2025 SC1040 instructions, printed before SCDOR extended the filing date for every 2025 return to October 15, 2026, set the 2025 refund deadline at April 15, 2029.

What trips South Carolina retirees up

The military deduction eats your other South Carolina retirement breaks. It reduces your own general retirement deduction on line p-1 ($3,000 under 65, $10,000 at 65 and older) and the $15,000 age 65 deduction on line q-1. In Example 5 of the 2025 instructions, a retiree 65 or older with $16,000 of military retirement and $8,000 of other retirement deducts $16,000 on line p-4 and nothing on line p-1 or line q-1, so none of the $8,000 is deducted as retirement income.
Not every uniformed pension counts. Revenue Ruling #22-11 names NOAA and Public Health Service retirement as ineligible, along with the South Carolina State Guard, civilian Defense Department or Coast Guard employment, and the Merchant Marine. Those retirees are left with the general retirement deduction on line p-1, which the instructions extend to public employee retirement plans of the federal government.
Income hit with a federal premature distribution penalty is not military retirement income under § 12-6-1171(B), and it does not qualify for the general deduction either.
The year you retire is split. A South Carolina domiciliary's last months of active-duty pay stay taxable on that return, and only the retired pay that starts afterward goes on line p-4.

Federal side: DFAS reports retired pay on Form 1099-R, and the IRS taxes it as a pension. VA disability compensation is not taxable income under federal law (IRS Publication 525). The SCRA’s tax-home rule (50 U.S.C. § 4001) protects servicemembers on orders, not retirees, so where a retiree lives decides which state taxes the pension. Compare every state on the 51-state ledger. South Carolina’s other servicemember protections are on the South Carolina SCRA page.

Frequently asked questions

Does South Carolina tax military retirement pay?

Not for a retiree from the armed forces, starting with tax year 2022. S.C. Code § 12-6-1171(A) lets an individual deduct all military retirement income included in South Carolina taxable income, at any age and with no cap. You claim it on the SC1040: line p-4 for your own retired pay, line p-5 for a spouse's. Before 2022 the deduction was limited to $17,500 at any age with earned income or $30,000 at 65 and older, according to SCDOR Revenue Ruling #22-11 (read October 9, 2026). The full deduction lowers your general retirement deduction and the age 65 deduction, so other pension income can become taxable.

Is SBP taxed in South Carolina?

A surviving spouse can deduct it. S.C. Code § 12-6-1171(B) defines military retirement income to include income the taxpayer's surviving spouse receives from a qualified military retirement plan, and for a survivor it also includes a retirement benefit plan and dependent indemnity compensation related to the deceased spouse's military service. The 2025 SC1040 instructions put this on line p-6 and say it is in addition to any retirement deduction on the survivor's own income. Unlike lines p-4 and p-5, the line p-6 amount does not reduce the survivor's age 65 deduction (instructions read October 9, 2026).

Can I get back South Carolina tax I paid on military retirement?

Yes, for years still open. The SCDOR says a refund claim must be filed within three years from the date the return was filed or originally due, or two years from the date the tax was paid. The 2022 instructions put the 2022 refund deadline at April 18, 2026, so that year is closed unless you had a valid extension. The 2023 deadline is April 15, 2027. File a new SC1040 with the Amended Return box checked, show the deduction on line p-4 or p-5, and attach the SCH AMD, Amended Return Schedule (2025 instructions, read October 9, 2026).

Do NOAA and Public Health Service retirees get South Carolina's military deduction?

No. SCDOR Revenue Ruling #22-11 limits the full military retirement deduction to residents who served on active duty in the Army, Navy, Air Force, Marine Corps, Space Force or Coast Guard, or in active Guard or Reserve service. It lists the National Oceanic and Atmospheric Administration and the Public Health Service as examples of service that does not qualify, citing the 10 U.S.C. § 101 definition of uniformed services. Those retirees can still use the general retirement deduction of $3,000 under 65 or $10,000 at 65 and older on line p-1 (read October 9, 2026).

Sources, read October 9, 2026

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