Updated October 29, 2026. Quick answer: Partly. South Carolina counts “all public employee retirement plans of the federal, state, and local governments” as qualified retirement income, which draws a deduction of up to $3,000 under age 65 or $10,000 from age 65, per the 2024 instructions.
What South Carolina does with a FERS or CSRS annuity
| Question | What the South Carolina documents say |
|---|---|
| What the source says | South Carolina counts all public employee retirement plans of the federal, state, and local governments as qualified retirement income, so a federal civil service pension gets the same capped retirement deduction as other qualified plans, not a full exemption. |
| Amount or limit | Up to $3,000 of qualified retirement income from the taxpayer’s own plan for someone under 65, or up to $10,000 once the taxpayer reaches 65; separately, a resident who reaches 65 gets a $15,000 deduction against any South Carolina income, reduced by amounts taken under the retirement deduction. Military retirement income is deducted in full on separate lines. |
| Age or other test | The $3,000 limit applies under age 65; the $10,000 limit and the $15,000 age deduction start in the tax year the taxpayer reaches 65. |
| Change for 2026 | No 2026 change is printed in the state documents cited here. |
In the South Carolina documents’ own words
- “Beginning in the year in which the taxpayer reaches age sixty-five” (South Carolina Code of Laws Title 12 Chapter 6, Section 12-6-1170)
- “may claim a retirement deduction up to $3,000 on qualified” (SC1040 Instructions (2024 tax year))
- “may claim a retirement deduction up to $10,000 on qualified” (SC1040 Instructions (2024 tax year))
- “entitled to a deduction of $15,000 against any South Carolina income” (SC1040 Instructions (2024 tax year))
How this differs from other pensions in South Carolina
The federal pension rule equals the rule for private plans under IRC 401, 403, 408, and 457: one shared cap of $3,000 or $10,000. Military retirement income is treated more favorably because the instructions let a filer deduct all of it on separate lines. See also Does South Carolina tax pensions? and military retirement pay.
FERS, CSRS and your TSP
The state documents cited here do not name TSP, but the instructions list IRC 401, 403, 408, and 457 plans, and taxable IRA distributions, as qualified retirement income under the same cap. For the Thrift Savings Plan itself, see state tax on TSP withdrawals and the TSP calculator.
What the South Carolina documents leave open
The $3,000 and $10,000 limits come from the 2024 instructions because the 2025 instructions booklet was not available when this page was prepared, and the 2025 return form shows the lines but not the limits. Neither document names CSRS, FERS or the TSP, the statute page prints no revision year, and the rate schedule was not read.
Common mistakes
- Expecting a full exemption. The instructions deduct military retirement income in full, but a federal civil service pension gets the capped retirement deduction.
- Stacking the $15,000 age 65 deduction on top of the full retirement deduction. The age deduction is reduced by amounts taken under the retirement deduction.
Related: Does South Carolina tax pensions?, South Carolina military retirement pay, South Carolina retirement deduction line by line, and FERS, TSP and Social Security sequencing.
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Answer againSources
- South Carolina Code of Laws Title 12 Chapter 6, Section 12-6-1170: https://www.scstatehouse.gov/code/t12c006.php
- SC1040 Instructions (2024 tax year): https://dor.sc.gov/forms-site/Forms/SC1040Instr_2024.pdf
- SC1040 Individual Income Tax Return (2025 form): https://dor.sc.gov/forms-site/Forms/SC1040_2025.pdf
Read from the state documents linked above on October 29, 2026. General information, not tax advice.