Updated October 4, 2026. Quick answer: No. The 2025 SC1040 instructions say that “individuals may deduct all military retirement income included in their” South Carolina taxable income, with no dollar cap or age limit printed. The deduction was limited in earlier years and is unlimited from tax year 2022.
How South Carolina treats military retired pay
| Item | What the documents say |
|---|---|
| Treatment | Deduction of all military retirement income included in South Carolina taxable income (line p-4 for the taxpayer, p-5 for the spouse) |
| Cap or age | None printed; Example 4 in the instructions deducts $36,000 in full |
| Surviving spouse | Military retirement income of a surviving spouse qualifies, in addition to any retirement deduction |
| Interaction | The deduction reduces the other retirement and age 65 deductions on lines p-1, p-2, q-1 and q-2 |
A $30,000 example
A retiree with $30,000 of military retired pay deducts the whole $30,000 on line p-4, so none of that pay is left to tax.
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What changes in 2026
No 2026 change is printed in the documents read.
Federal rules
The state’s treatment sits on top of the federal one. The IRS explains the federal side in Publication 3, Armed Forces’ Tax Guide.
Related: whether South Carolina taxes pensions, how South Carolina taxes retirement income, military retirement pay by state, and the military retirement calculator.
Sources
- 2025 SC1040 Individual Income Tax Instructions: https://dor.sc.gov/sites/dor/files/forms/SC1040Instr_2025.pdf
Sources: the primary documents linked above, read on October 4, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the plan administrator or the agency itself is the right place to confirm anything consequential.