Updated October 19, 2026. Quick answer: Lines p-1, p-2 and p-3 of the South Carolina SC1040 are where a retiree takes the state retirement deduction: one line for the taxpayer, one for the spouse and one for a surviving spouse. Each line has a worksheet in the instructions that compares a maximum with the retirement income actually included in federal income. The result goes into the subtractions on the SC1040 and lowers South Carolina income subject to tax.
What this form does
The retirement deduction sits on the subtraction side of the SC1040, South Carolina’s individual income tax return. The form prints it as “Retirement Deduction (see instructions)”, and the instructions open the topic with the heading “Line p-1 through line p-3: Retirement deduction”. They give the basic rule: “The deduction is allowed for an individual taxpayer who is the original owner of a qualified retirement account.”
For the wider picture of how the state treats retirees, see South Carolina retirement taxes and whether South Carolina taxes pensions; this page only walks the lines of the return itself.
Who it applies to
The instructions tie the amount to age: “An individual who is under age 65 may claim a retirement deduction up to $3,000 on qualified retirement income from their own plan.” “An individual who is age 65 or older during the tax year may claim a retirement deduction up to $10,000 on qualified retirement income from their own plan.”
They also define the income that counts: “Qualified retirement income is income from plans defined in IRC 401, 403, 408, and 457, and all public employee retirement plans of the federal, state, and local governments, including individual retirement plans, Keogh plans”. Income from a 401(k) or IRA is the kind of distribution reported on Form 1040 lines 4a and 4b and Form 1040 lines 5a and 5b, and South Carolina treatment of 401(k) and IRA withdrawals covers it in more detail.
One exclusion applies to the amount received in a year with a federal penalty: “Any portion of qualified retirement income received this tax year that resulted in a federal premature withdrawal penalty does not qualify for a retirement deduction.”
The instructions also say how the line connects to the disability line g. “If you deduct total and permanent disability retirement income on this line, do not include that income in your qualified retirement income in the worksheets for line p-1 or line p-2.”
The lines, one by one
| Line | What the form says |
|---|---|
| Line p heading | “Retirement Deduction (see instructions)” |
| Line p-1 | “Taxpayer (date of birth:” “Include only qualified withdrawals from the taxpayer’s own qualified retirement plan.” |
| Line p-2 | “Spouse (date of birth:” “Include only qualified withdrawals from the spouse’s own qualified retirement plan.” |
| Line p-3 | “Surviving spouse (date of birth of deceased spouse:” “A surviving spouse receiving qualified retirement income on behalf of a deceased spouse may deduct up to $3,000 or $10,000 of the qualified retirement income, based on the age of the deceased spouse if they were alive.” |
| Line p-3, more than one deceased spouse | “If you are claiming the surviving spouse retirement deduction for more than one deceased spouse, calculate the deduction separately for each deceased spouse.” |
| Worksheet line 1 (p-1) | “Maximum deduction allowed for taxpayer based on age ($3,000 or $10,000)” |
| Worksheet line 2 (p-1) | “Taxpayer’s military retirement deduction (line p-4)” |
| Worksheet line 3 (p-1) | “Taxpayer’s retirement deduction available (subtract line 2 from line 1; if less than zero, enter zero.)” |
| Worksheet line 4 (p-1) | “Taxpayer’s individual qualified retirement income included in federal form (taxable IRA distributions, pensions, and annuities)” |
| Worksheet line 5 (p-1) | “Retirement deduction (lesser of line 3 and line 4). Enter on line p-1.” |
| Worksheet for line p-2 | “Retirement deduction (lesser of line 3 and line 4). Enter on line p-2.” |
| Worksheet for line p-3 | “Retirement deduction (lesser of line 1 and line 2). Enter on line p-3.” |
The next line down the form is the military retirement deduction (lines p-4 to p-6), which has its own instructions and is not covered on this page. The instructions connect the two: “Reduce the taxpayer and spouse retirement deductions by any military retirement deductions taken.” “Do not reduce the surviving spouse retirement deduction by any surviving spouse military retirement deduction taken.”
The figures the form prints
The dollar limits for lines p-1 to p-3 are stated in two running sentences of the instructions. For a taxpayer under age 65: “An individual who is under age 65 may claim a retirement deduction up to $3,000 on qualified retirement income from their own plan.” For a taxpayer 65 or older: “An individual who is age 65 or older during the tax year may claim a retirement deduction up to $10,000 on qualified retirement income from their own plan.”
For a surviving spouse the same two amounts apply, but the age that decides is the deceased spouse’s: “based on the age of the deceased spouse if they were alive”. The instructions add that “The surviving spouse retirement deduction is in addition to the individual retirement deduction claimed from the taxpayer’s own retirement plan”.
Where the result goes next
Each worksheet ends with the instruction to enter its result on its own line, for example “Retirement deduction (lesser of line 3 and line 4). Enter on line p-1.” Those entries are part of the subtractions total on the return: “Total subtractions (add line f through line w)”. The form then says “Residents: subtract line 4 from line 3 and enter the difference.”
The retirement deduction also feeds the age 65 and older deduction on line q. The instructions say to “Reduce the age 65 and older deduction claimed on line q-1 and line q-2 by:” “any individual retirement deduction claimed on line p-1 and line p-2”.
Edition and line numbers
This page reads the 2025 SC1040 Individual Income Tax Instructions and the 2025 Individual Income Tax Return SC1040 (Rev. 4/21/25) for tax year 2025, the current files the South Carolina Department of Revenue served on 2026-10-19. Check the edition printed on your own form and use that edition’s line numbers.
Common mistakes
- Putting a spouse’s withdrawals on the taxpayer’s line. The instructions say “Include only qualified withdrawals from the taxpayer’s own qualified retirement plan.” Line p-2 has the matching rule for the spouse.
- Counting a distribution that triggered a federal early-withdrawal penalty. The instructions say “Any portion of qualified retirement income received this tax year that resulted in a federal premature withdrawal penalty does not qualify for a retirement deduction.”
- Entering the same disability retirement income on both line g and the retirement worksheet. The instructions say “do not include that income in your qualified retirement income in the worksheets for line p-1 or line p-2” when it is deducted on the disability line.
Related: South Carolina retirement taxes, whether South Carolina taxes pensions, South Carolina treatment of 401(k) and IRA withdrawals, Form 1040 lines 4a and 4b, and Form 1040 lines 5a and 5b.
Find the right next step for your situation
About how much do you have invested? Pick the range that fits; your next step appears immediately below.
Talk to an advisor about retirement tax planning
For U.S. investors with $250,000 or more in investable assets. WiserAdvisor is an independent service matching you with 2 to 3 vetted advisers. Its form asks for your ZIP code and answers to a few questions; a match is not guaranteed.
Free to request, with no obligation to hire. By submitting, you consent to calls, texts and emails from WiserAdvisor and up to three advisers. Advisers pay for introductions.
Clear Money Guide may earn a referral payment for a qualifying completed form. An introduction is not a Clear Money Guide recommendation.
Opens on WiserAdvisor’s site in a new tab.
Explore advisor help with retirement income taxes
Price the destination before you decide. The matching service below introduces you to advisers who pay to meet you.
Before you start, what actually happens. The form is run by Kapitalwise, our advisor-matching partner. Kapitalwise sends your details to advisers who pay for the introduction, so expect calls and texts. Clear Money Guide may earn a referral payment for a qualifying submitted form, whether or not you ever hire anyone. This is free to you and there is no obligation to hire anyone.
The Kapitalwise form opens here; you stay on this page.
What happens when you press the button
It asks about nine questions: age, investable assets, location; then your name, email and phone number, and verifies the phone by text. Nothing loads and nothing reaches Kapitalwise until you press the button.
Prefer flat-fee or hourly pricing instead? Compare ranges here.
Answer againSources
- 2025 SC1040 Individual Income Tax Instructions, South Carolina Department of Revenue: dor.sc.gov
- 2025 Individual Income Tax Return SC1040 (Rev. 4/21/25), South Carolina Department of Revenue: dor.sc.gov
Read from the state revenue documents linked above on October 19, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer or the state revenue department is the right place to confirm anything consequential.