Updated October 5, 2026. Quick answer: Yes, with a retirement deduction. South Carolina’s code says “the taxpayer may deduct not more than ten thousand dollars” of retirement income from the year the taxpayer reaches 65 ($3,000 before that), and the Department says the deduction is for the original owner of a qualified retirement account.
State retirement-income forms, line by line: South Carolina retirement deduction.
How South Carolina treats annuity income
| Item | What the documents say |
|---|---|
| Treatment | Taxed on the schedule; retirement income deduction for qualified-plan income |
| 2025 schedule | 0% below $3,560; 3% times the amount minus $107 from $3,560 to under $17,830; 6.0% times the amount minus $642 at $17,830 or more |
| Retirement deduction | Up to $3,000 under 65; up to $10,000 from the year the taxpayer reaches 65, on income from plans under IRC 401, 403, 408 and 457 |
| 2024 instructions | “may claim a retirement deduction up to $10,000 on qualified retirement income” |
| Age deduction | A separate deduction of up to $15,000 at 65 or older, reduced by the retirement deduction claimed |
| Annuities (2024 instructions) | “taxable IRA distributions, pensions, and annuities” |
A $24,000 example
A taxpayer 65 or older with $24,000 of qualified-plan annuity payments deducts up to $10,000, leaving $24,000 minus $10,000 = $14,000 in South Carolina income.
If $14,000 were the whole taxable income, the printed schedule is computed as $14,000 x 3% minus $107 = $313 before any other deduction or credit.
What changes in 2026
The latest documents read print no 2026 change to the way annuity income is taxed.
Federal rules
The state’s treatment sits on top of the federal one. The IRS explains the federal side in Topic no. 410, Pensions and Annuities and Publication 575, Pension and Annuity Income.
Related: whether South Carolina taxes pensions, how South Carolina taxes retirement income, state tax on 401(k) and IRA withdrawals, how a surrendered annuity is taxed, and pension and annuity decisions.
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Answer againSources
- South Carolina Code of Laws Title 12 Chapter 6 (Income Tax), incl. 12-6-510 and 12-6-1170: https://www.scstatehouse.gov/code/t12c006.php
- 2024 Individual Income Tax Instructions, SC1040 (SC Department of Revenue): https://dor.sc.gov/forms-site/Forms/SC1040Instr_2024.pdf
- SC1040 Individual Income Tax Return, Rev. 4/21/25 (SC Department of Revenue): https://dor.sc.gov/forms-site/Forms/SC1040_2025.pdf
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.