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I am a stereotypical nerdy, sweater vest-wearing tax accountant, so when I sat reading the posts of all of my friends and family on social media on Veteran’s Day this year, my thoughts turned to all the tax benefits and deductions given to Veterans in South Carolina. I realize that most people don’t think tax law is entertaining and even fewer people find learning about or understanding the tax return that they are signing each year rewarding. I would like to pause here and thank all the veterans that are reading this post for their service! That being said, if you are a veteran or plan to be one in the future and live in South Carolina the next few minutes of reading could save you real money on your tax returns.
South Carolina ranks fairly high on the scale for places to retire from the military with low tax rates. That is accomplished in multiple ways including low personal and real property tax rates, reasonable sales tax rates and low-income tax rates that fall even further with the many deductions given to retired military taxpayers.
One of the most missed items on the returns that I review and see from other tax preparers are the multiple different benefits afforded to Veterans in South Carolina. South Carolina lawmakers made the decision starting in 2016 to give a deduction to military retirement income. For the 2020 income tax year, the deduction amount is $17,500 if you are under 65 years old and have at least that amount of earned income elsewhere. If you don’t have any earned income, or if it is less than $17,500, the deduction is the higher of the earned income or $3,000. Once you are 65 or older, that deduction goes up to $30,000 and loses the earned income stipulation. If your spouse served in the military but has passed away and you receive military benefits as a surviving spouse, you qualify for the same deduction. If you are a veteran who is still active in the National Guard or the Military Reserves, any income you have from those sources is deducted on the South Carolina return. You also can deduct a portion of any military retirement that is from service in the National Guard or the Military Reserves.
South Carolina has taken an active stance on making living in the state attractive for our Military Veterans. Many of my retired military clients pay a very small percentage in tax to South Carolina for their total income each year. Make sure that you are taking complete advantage of these favorable benefits! Another item to watch for the future, is the inclusion of police and first responders’ retirement income into the same category as military retirement. This change in law has not happened as of November of 2020; but it is currently working its way through the South Carolina legislature. If that does pass, retirement income for police and first responders will be eligible for the same $30,000 deduction.
If you have any questions on these issues or any other entertaining tax law, please give me a call anytime and I will be happy to help answer your inquiries. I have been practicing in Aiken, SC for close to 15 years and am on the tax staff at SME CPAs, the largest locally-owned CPA firm in the area.
Joel Stewart
803.648.6047