All military retirement pay is exempt from South Carolina Individual Income Tax beginning in tax year 2022, one of many tax breaks offered to veterans and military in South Carolina.
According to the South Carolina Department of Veteran's Affairs (SCDVA), almost 400,000 military veterans live in South Carolina, and the state has the 8th highest total of military retirees in the nation. As we pause to honor the service and sacrifice of veterans, the South Carolina Department of Revenue (SCDOR) reminds military personnel, both active and retired, of their available tax benefits.
Income Tax deductions and exclusions:
- Earlier this year, the governor signed the Workforce Enhancement and Military Recognition Act, which exempts all military retirement pay that is included in South Carolina taxable income from the state's Income Tax, no matter the taxpayer's age. The new exemption is effective for tax year 2022, meaning retirees can claim it next year when they fill out their Income Tax return for this year. This deduction also can be claimed by a surviving spouse receiving military retirement income from their deceased spouse.
According to the SCDVA, military retirees can start, stop or change State Income Tax Withholding (SITW) by using myPay, filling out a DD Form 2866 Retiree Change of Address/State Tax Withholding Request, or sending a written request that includes all of the necessary information. If you choose to send a DD Form 2866 or a written request, mail it to: Defense Finance and Accounting Service, U.S. Military Retirement Pay, 8899 E 56th Street, Indianapolis, IN 46249-1200. Do not send either document to the SCDOR.
- Other Income Tax exclusions:
- Any federal tax-exempt pension or compensation provided by the U.S. Department of Veterans Affairs
- Combat pay and certain benefits not included in federal taxable income
- Retirement income paid by the U.S. government for service in the Reserves or National Guard
- Income received for service in the National Guard or the Reserves for customary annual training, weekend drills, and other inactive duty training is generally exempt
- Service pay for non-resident military personnel on active duty in South Carolina who are legal residents of other states
Additional details and examples related to these deductions and other general retirement and age-65 Income Tax deductions are found in Revenue Ruling 21-13. The SCDOR will be issuing more guidance soon.
Property Tax exemptions:
- Veterans deemed totally and permanently service-connected disabled qualify for:
- A tax exemption on a home and land on the same parcel, up to five acres, that is classified as owner occupied and either titled solely to the veteran or jointly with a spouse
- A tax exemption on up to two private passenger vehicles owned or leased by a veteran or jointly with a spouse
- Medal of Honor recipients qualify for:
- A tax exemption on a home and land up to one acre that is either titled solely to the recipient or jointly with a spouse
- A tax exemption on up to two vehicles owned or leased by the recipient
- Former prisoners of war (POW) from WWI, WWII, the Korean War or Vietnam War qualify for:
- The same tax exemptions granted to Medal of Honor recipients for home and land up to one acre that is classified as owner occupied and either titled solely to the former POW or jointly with a spouse
- A tax exemption on up to two private passenger vehicles owned or leased by the former POW or jointly with a spouse
- Surviving spouses for all three types of veterans listed above qualify for tax exemptions on the home if they inherit sole ownership from the deceased spouse. The surviving spouses of POWs and disabled veterans can qualify for exemptions on up to one vehicle solely owned by them.
Visit dor.sc.gov/exempt-property to learn more about Property Tax exemptions, and for detailed information on other exemptions for veterans. To apply for a Property Tax exemption, visit MyDORWAY and click Exempt Property Application.
- Check with your local government to learn more about specific tax benefits for veterans in your area.
- Military personnel in a combat zone have 180 days after leaving the combat zone to file their state and federal Income Tax returns. They also can wait until they are out of the combat zone to pay.
- When filing by paper or online, military members should indicate that they served in a military combat zone and name the zone.
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