Updated October 7, 2026. Quick answer: Only if you live there. South Carolina’s 2025 booklet says that “Residents of SC are taxed on their entire income, regardless of where it was earned, unless specifically exempted by law” while a nonresident filing Schedule NR is taxed on income earned in South Carolina, and residents may deduct up to $10,000 of qualified retirement income at age 65 or older.
Federal civil service pensions in South Carolina: does South Carolina tax federal pensions.
How South Carolina treats a pension earned elsewhere
| Item | What the state documents say |
|---|---|
| Nonresidents | The 2025 booklet tells a nonresident who works in South Carolina to file the SC1040 with Schedule NR and says the nonresident is taxed only on income earned in South Carolina, with deductions prorated. The booklet does not single out a pension paid to a nonresident. The source says: “You will be taxed only on income earned in South Carolina”. This rests on the nonresident questions in the 2025 SC1040 booklet. |
| Residents with a pension earned elsewhere | A resident reports income from all sources, so a pension earned in another state is part of the starting figure. The retirement deduction on lines p-1 to p-3 allows up to $3,000 for a taxpayer under age 65 and up to $10,000 at age 65 or older, for qualified retirement income from the taxpayer’s own plan. The source says: “up to $10,000 on qualified retirement income from their own plan”. This rests on the resident filing questions and the line p instructions in the 2025 SC1040 booklet. |
| Part-year residents (year of a move) | A part-year resident may file as a full-year resident, reporting all income as though a resident for the whole year with credit for tax paid to another state, or as a nonresident on the SC1040 with Schedule NR. The nonresident method taxes income earned while a resident plus South Carolina source income and prorates deductions. The choice is open only for the year of the move. The source says: “income earned while a resident in South Carolina”. This rests on the residency questions in the 2025 SC1040 booklet. |
| Rate | South Carolina’s 2025 booklet prints a top marginal rate of 6% and sends filers under $100,000 of taxable income to the SC1040TT tax tables. The source says: “the top marginal Individual Income Tax rate changed to 6%”. The booklet does not print the lower bracket rate as a percent. |
| Return to file | Residents file the SC1040. A part-year resident or nonresident who files as a nonresident also attaches Schedule NR to the SC1040. The source says: “file the SC1040 with the Schedule NR”. |
A $40,000 move-year example
A retiree receives $40,000 of pension in the year of a move: $20,000 before the move date, as a South Carolina resident, and $20,000 after leaving.
The first $20,000 can be taxed by South Carolina; the rest is outside its reach under the federal rule below. The state prints a top marginal rate of 6% for 2025, and the tax on it at that rate is computed as $20,000 x 0.06 = $1,200. That is the upper bound before any exclusion or credit, because lower income is taxed at lower steps. Federal tax still applies.
What changes in 2026
South Carolina’s Department of Revenue states that H. 4216, signed March 30, 2026, sets a rate of 1.99% on income under $30,000 and 5.21% minus $966 on income of $30,000 and above.
The federal rule that protects a nonresident
4 U.S.C. 114(a) bars a state income tax on retirement income of an individual “who is not a resident or domiciliary of such State”. Retirement income means any income from a qualified retirement plan, a simplified employee pension, a 403(a) or 403(b) plan, an individual retirement plan, an eligible 457 plan or a governmental plan. Income from a nonqualified deferred compensation plan counts only if it is part of a “series of substantially equal periodic payments” made for life or for a period of at least 10 years, or is a payment after termination of employment from a plan that exists only to provide benefits above the Internal Revenue Code limits, so not every payment is covered. Retired pay of a member of a uniform service is also covered.
Related: how South Carolina taxes retirement income, whether South Carolina taxes pensions, California to South Carolina retirement taxes, Colorado to South Carolina retirement taxes, out-of-state pension tax by state, and deferred compensation lump sums after a move.
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Answer againSources
- 2025 SC1040 Individual Income Tax Form and Instructions Booklet (South Carolina Department of Revenue): https://dor.sc.gov/sites/dor/files/forms/IITPacket_2025.pdf
- Information about H. 4216 (South Carolina Department of Revenue): https://dor.sc.gov/news/information-about-h-4216
- 4 U.S.C. 114, Limitation on State income taxation of certain pension income (U.S. Government Publishing Office, 2023 edition): https://www.govinfo.gov/content/pkg/USCODE-2023-title4/html/USCODE-2023-title4-chap4-sec114.htm
Sources: the primary documents linked above, read on October 7, 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.