South Carolina — Personal Income Tax

South Carolina imposes an annual income tax on the South Carolina taxable income of individuals, estates, and trusts. For taxable years beginning after 2021, the tax is computed at graduated rates with income brackets indexed for inflation. A "resident individual" is defined as an individual domiciled in South Carolina. Resident individuals compute their South Carolina gross income, adjusted gross income, and taxable income as determined under the Internal Revenue Code, with modifications, subject to allocation and apportionment. Filing requirements depend on gross income thresholds that vary by filing status.

Source: S.C. Code § 12-6-510; S.C. Code § 12-6-560; S.C. Code § 12-6-30

For taxable years beginning after 2025, South Carolina imposes a two-bracket individual income tax structure. The tax rate is 1.99 percent on South Carolina taxable income up to $30,000. For taxable income of $30,000 and above, the rate is 5.21 percent, minus $966 (to account for the lower rate applied to the first $30,000). These brackets are indexed for inflation under § 12-6-520. Beginning with tax year 2027, the top marginal rate is subject to automatic reductions if individual income tax revenues are projected to increase by at least five percent, with reductions capped at $200 million or twenty-five percent of the recurring income tax revenue surplus, whichever is greater.

Source: S.C. Code § 12-6-510(C); S.C. Dep't of Revenue, Information about H. 4216

South Carolina individual income tax returns must be filed on or before the fifteenth day of the fourth month following the close of the taxable year. For calendar-year taxpayers, this means the return is due April 15. The Department of Revenue may grant extensions of time to file, and South Carolina accepts a properly filed federal extension.

Source: S.C. Code § 12-6-4970; S.C. Code § 12-6-4980

For taxable years beginning after 2025, South Carolina allows a South Carolina Income Adjusted Deduction (SCIAD) in place of the federal standard deduction. The base SCIAD amounts are $15,000 for single filers and married filing separately, $22,500 for head of household, and $30,000 for married filing jointly and surviving spouses. These amounts are reduced for higher-income taxpayers. For single and married-filing-separately filers, the deduction is reduced by multiplying $15,000 by the fraction [(federal AGI - $40,000) / $55,000]. For head-of-household filers, the reduction fraction is [(federal AGI - $60,000) / $82,500]. For married-filing-jointly and surviving-spouse filers, the reduction fraction is [(federal AGI - $60,000) / $110,000]. The deduction cannot go below zero.

Source: S.C. Code § 12-6-1140(15), enacted by H. 4216

South Carolina defines a "resident individual" as an individual domiciled in South Carolina. A "nonresident individual" is an individual who is neither a resident nor a part-year resident. A "part-year resident" is an individual who is a resident for only a portion of the tax year. The statute does not define the term "domicile" itself.

Common-law domicile standard

South Carolina courts and the Department of Revenue apply a common-law domicile test. Under the leading case Phillips v. South Carolina Tax Commission, 195 S.C. 472, 12 S.E.2d 13 (1940), domicile for South Carolina income tax purposes means "that place where a person has his true, fixed, and permanent or indefinite home and principal establishment and to which, whenever he is absent, the person intends to return." The South Carolina Supreme Court in Phillips held that "residing" in the income tax statute refers to legal residence, which is equivalent to domicile.

Intent as the central factor

The Department of Revenue's 2021 Domicile Guide emphasizes that determining domicile depends largely on a person's intent. Evidence of intent includes both express statements and conduct. When a person's stated intent and conduct are inconsistent, the person's actions may be more telling as to true intent. However, actions may be less meaningful when the circumstances suggest those actions are easily reversible.

Factors considered

While the statute at S.C. Code § 12-43-220(c)(2)(iv) lists factors to be considered for property-tax legal-residence classification—including South Carolina income tax returns and motor vehicle registrations—the Domicile Guide clarifies that this list is not exhaustive and these factors are not necessarily dispositive for income tax purposes. The true test of domicile is the intent of the putative domiciliary, not any particular set of documents. The lack of certain documents (such as an in-state driver's license) does not necessarily indicate a lack of domiciliary intent.

Administrative Law Court decisions

In Floyd v. S.C. Dep't of Revenue, Dkt. No. 15-ALJ-17-0458-CC (Admin. Law Ct., Feb. 11, 2016), the Administrative Law Court found that a taxpayer who moved to Wyoming after graduating college was domiciled in Wyoming for 2008, even though she listed a South Carolina address on her federal return and retained a South Carolina driver's license. The court credited the taxpayer's testimony about her intent to make the move permanent. In Hodson v. Kiawah Island Assessor, Dkt. No. 01-ALJ-17-0011-CC (Admin. Law Ct., Oct. 27, 2004), the court found that a taxpayer established South Carolina domicile in 1999 when he moved to his Kiawah home with the intent to make it his permanent residence, even though he did not secure certain documentation (such as a South Carolina driver's license) until 2001 due to separation and divorce proceedings.

No statutory 183-day test

Unlike some states, South Carolina does not impose a bright-line 183-day physical-presence test for individual income tax residency in its statute or regulations. Domicile turns on intent and the totality of the circumstances, not a day count.

Source: S.C. Code § 12-6-30; S.C. Dep't of Revenue, A Guide to Determining a Taxpayer's Domicile for Income Tax Purposes (2021)

South Carolina taxes nonresident individuals only on income derived from South Carolina sources. Nonresidents compute their South Carolina taxable income as a resident would, but include only amounts attributable to three categories of South Carolina-source income.

Three categories of South Carolina-source income

Under S.C. Code § 12-6-1720(1), a nonresident individual's South Carolina taxable income includes only amounts attributable to:

1. Real or tangible personal property located in South Carolina — ownership of any interest in real or tangible personal property located in the state. This includes rental income from South Carolina real estate, gains or losses from the sale of South Carolina real property, and income from tangible property situated in the state.

1. Business, trade, profession, or occupation carried on in South Carolina, or compensation for services performed in South Carolina — income from a business conducted in the state or personal services rendered in the state. If a business or services are performed partly within and partly outside South Carolina, the amount allocable or apportionable to South Carolina under Article 17 of Chapter 6 must be included.

1. Income from intangible personal property derived from property employed in a trade, business, profession, or occupation carried on in South Carolina — annuities, dividends, interest, and gains from intangibles that are connected with a South Carolina business activity. Intangible income not connected with a South Carolina trade or business is generally not taxable to nonresidents.

Personal service income allocation: physical presence rule

S.C. Code § 12-6-2220(6) provides that all income from personal services received by a nonresident individual for services rendered in South Carolina is allocated to South Carolina. The statute does not contain a de minimis threshold or a convenience-of-the-employer rule. Personal service income is sourced to the state where the services are physically performed.

The South Carolina Department of Revenue's Revenue Ruling #22-5 confirms that nonresident individuals receiving personal service income from South Carolina must allocate that income to South Carolina based on where services are rendered. A nonresident working remotely for a South Carolina employer from another state does not have South Carolina-source income for those services performed outside the state, because South Carolina follows the general rule that personal service income is sourced to the state in which the work is performed.

Investment income: intangibles not connected with a South Carolina business

Under § 12-6-2220(1), (2), and (5), interest, dividends, and gains from the sale of intangible personal property that are not connected with the taxpayer's business are allocated to the domicile of the individual taxpayer (or the principal place of business of a corporation). Therefore, a nonresident individual who receives portfolio investment income (interest, dividends, capital gains from stocks and bonds) with no connection to a South Carolina trade or business does not owe South Carolina income tax on that income, even if the payer is a South Carolina entity.

Rental and royalty income

Under § 12-6-2220(3), rents and royalties from real estate or tangible personal property are allocated to the state where the property is located at the time the income is derived, provided the property is not used in or connected with the taxpayer's trade or business during the taxable year. A nonresident individual who owns rental property in South Carolina must report the rental income to South Carolina.

Gains and losses from real property

Gains and losses from the sale of real property are allocated to the state in which the real property is located, under § 12-6-2220(4). A nonresident who sells South Carolina real estate must report the gain or loss to South Carolina. The amount of gain representing the return of amounts deducted as depreciation is allocated to South Carolina to the extent the depreciation was previously deducted in computing South Carolina taxable income.

Apportionment when income is partly within and partly outside South Carolina

When a business, trade, profession, or occupation is carried on partly within and partly outside South Carolina, or when services are performed partly within and partly outside the state, § 12-6-1720(1)(b) requires the nonresident to include in South Carolina income the amount "allocable or apportionable to this State under Article 17 of this chapter." Article 17 provides the apportionment formulas and allocation rules for multistate businesses. Personal service income is allocated under § 12-6-2220(6) based on where the services are rendered; non-personal-service business income is apportioned using the statutory formulas in §§ 12-6-2240 through 12-6-2310.

Filing requirement

Nonresidents who have South Carolina-source income are required to file Form SC1040 with Schedule NR attached. Schedule NR computes the ratio of South Carolina-source income to total federal income and prorates deductions accordingly. The Department of Revenue's frequently asked questions confirm that a nonresident individual receiving South Carolina income from wages, rental property, businesses, or other investments in South Carolina must file the SC1040 and Schedule NR.

Source: S.C. Code § 12-6-1720; S.C. Code § 12-6-2220; S.C. Dep't of Revenue, Revenue Ruling #22-5; S.C. Dep't of Revenue, Individual Income Tax FAQs