Updated October 5, 2026. Quick answer: Yes. South Carolina taxes trust income, and the 2025 return instructions define a resident trust this way: “A resident trust is any trust administered in South Carolina.” All other trusts are nonresident trusts.
How South Carolina treats trust income
| Item | What the documents say |
|---|---|
| Treatment | South Carolina imposes its income tax on trusts and estates as well as individuals, under S.C. Code 12-6-510. The source says: “South Carolina taxable income of individuals, estates, and trusts” at the rates the statute sets out. |
| Who counts as a resident trust | The test is where the trust is administered, not where the settlor or beneficiaries live, according to the 2025 instructions and the statute definition in 12-6-30. The source says: “A resident trust is any trust administered in South Carolina.” A resident estate is the estate of a person who was a South Carolina resident at death. |
| Rate on trust income | Trusts use the same rate schedule as individuals, which the 2025 instructions print as 0%, 3% and 6% brackets. The source says: “6% times the amount minus $642” applies to South Carolina taxable income of $17,830 or more. |
| Distribution deduction | The documents read start from federal taxable income and allocate South Carolina adjustments between the fiduciary and beneficiaries, and Part III of the SC1041, which resident trusts with nonresident beneficiaries and nonresident trusts complete, has a deduction line for “Distributions to beneficiaries” (line 18). The source says: “their relative shares of federal distributable net income” is the allocation ratio the instructions use for the fiduciary adjustment. |
| Nonresident trusts | A nonresident trust files only when it has South Carolina source income, and interest, dividends and gains on intangibles are generally not treated as South Carolina source. The source says: “income or gain that came from South Carolina sources” is what triggers a filing duty for a nonresident estate or trust. |
| Return to file | A resident fiduciary files Form SC1041 when any of three conditions applies, including a federal filing duty. The source says: “required to file a federal Fiduciary Income Tax return” for the taxable year, or the trust had South Carolina taxable income or a nonresident beneficiary. |
| Nonresident beneficiaries | Trusts must withhold on each nonresident beneficiary’s share of South Carolina source income. The source says: “marginal Individual Income Tax rate for the tax year” is the withholding rate, and an I-41 affidavit can remove the requirement. |
A $10,000 example
The tax on $10,000 of taxable income a trust keeps depends on the bracket it lands in. Taxed wholly at the lowest printed rate, 0%, the tax is computed as $10,000 x 0% = $0; taxed wholly at the highest, 6%, it is computed as $10,000 x 6% = $600. The state’s own schedule decides which applies. Federal tax on the trust’s income still applies.
Income the trust passes out to a beneficiary is handled as the distribution deduction row above describes.
What changes in 2026
The latest documents read print no 2026 change to how trust income is taxed.
Federal rules
The state’s treatment sits on top of the federal one. The federal brackets a trust faces are laid out in trust tax brackets versus individual brackets, and capital gains that a trust keeps are covered in capital gains stay in the trust. The IRS explains the federal return in the About Form 1041 page.
Related: how South Carolina taxes retirement income, whether South Carolina taxes pensions, what a living trust costs in South Carolina, and federal trust tax brackets.
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Answer againSources
- SC1041 Fiduciary Income Tax Return and Instructions, 2025 (South Carolina Department of Revenue): https://dor.sc.gov/sites/dor/files/forms/SC1041_2025.pdf
- S.C. Code Title 12, Chapter 6, Income Tax (South Carolina Legislature): https://www.scstatehouse.gov/code/t12c006.php
Sources: the primary documents linked above, read on October 5, 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.