Federal and state
The taxable portion of the monthly benefit and death benefits is subject to federal and state income tax. SCRS Handbook FY2027, p. 22, Taxes
S.C. Code 9-1-1680 exempts SCRS allowances from state or municipal tax 'except the taxes imposed pursuant to Chapters 6 and 16 of Title 12' (Chapter 6 is the income tax), so they are taxed under the income tax with the deductions below. S.C. Code 9-1-1680 Social Security is a different story: South Carolina doesn't tax it (see SCRS and Social Security).
South Carolina's deductions (2026)
Original owner of a qualified retirement plan (includes all public employee retirement plans of federal, state and local governments): deduct up to $3,000 of qualified retirement income a year if under 65, up to $10,000 if 65 or older during the tax year. Surviving spouses get a separate deduction based on the deceased spouse's age. SC1040 Instructions 2026 (Nov. 2026), pp. 27-28, Line h-1 through line h-3: Retirement Deduction
Beginning in the tax year a resident reaches 65: a $15,000 deduction against any South Carolina income, reduced by the individual retirement deduction (and military retirement deduction) claimed. SC1040 Instructions 2026 (Nov. 2026), pp. 28-29, Line i: Age 65 and older deduction
Both are subtractions on Schedule ADJ (lines h and i), carried to SC1040 line 5. SCDOR Schedule ADJ (Rev. 6/24/26), Part 2, lines h-i
| $24,000 pension, 2026 | Under 65 | 65 or older |
|---|---|---|
| Retirement deduction | $3,000 | $10,000 |
| Age-65 deduction | $0 | $5,000 |
| Total off SC income | $3,000 | $15,000 |
Our illustration for one person with no military retirement deduction. SC1040 Instructions 2026 (Nov. 2026), pp. 27-28, Line h-1 through line h-3: Retirement Deduction; SC1040 Instructions 2026 (Nov. 2026), pp. 28-29, Line i: Age 65 and older deduction
Act 110 of 2026 (tax years after 2025): two brackets, top marginal rate 5.21% for 2026, new South Carolina Income Adjusted Deduction (SCIAD) replacing the federal standard deduction. SCDOR Information Letter #26-20 (Aug. 31, 2026), PDF p. 1; SC1040 Instructions 2026, pp. 1-2, New for 2026
Retirees can change state and federal tax withholding in Member Access. SCRS Handbook FY2027, p. 7, Online access to your account A refund when leaving teaching has its own federal withholding.
General information, not tax advice.
From the sources
- Your SCRS benefit is subject to federal and South Carolina income tax.SCRS Handbook FY2027, p. 22, Taxes
- South Carolina lets you deduct up to $3,000 of retirement income a year before 65 and up to $10,000 from the year you turn 65 (tax year 2026).SC1040 Instructions 2026, pp. 27-28, Retirement Deduction
- From the year you turn 65 there's also a $15,000 deduction against any income, reduced by the retirement deduction you take. With $10,000 or more of pension, the two together come to $15,000.SC1040 Instructions 2026, pp. 28-29, Age 65 and older deduction
- Both deductions go on Schedule ADJ. Starting in 2026, South Carolina tax starts from federal AGI, there are two brackets, and the top rate is 5.21%.SCDOR Schedule ADJ (Rev. 6/24/26), lines h-i; SC1040 Instructions 2026, pp. 1-2
Questions
Does South Carolina tax my SCRS pension?
Yes, but with deductions. For 2026: up to $3,000 under 65, up to $10,000 at 65 or older, plus the age-65 deduction.
Can the age-65 deduction cover more of my pension?
Yes. It's $15,000 against any South Carolina income, minus the retirement deduction you take, so together they can reach $15,000.
How do I change my withholding?
In Member Access, PEBA's online account.
Related: the taxable part of a death benefit is taxed too; see survivor benefits.
Source: South Carolina Retirement System Member Handbook, Fiscal year 2027 (SCPEBA 082026, expires June 30, 2027), pp. 7, 22. Also: SC1040 Instructions 2026 (Nov. 2026); SCDOR Schedule ADJ (Rev. 6/24/26); SCDOR Information Letter #26-20 (Aug. 31, 2026); SC1040 Instructions 2026; S.C. Code 9-1-1680. Last reviewed .