Navigating Retirement Taxes in Charleston: Local Strategies for Maximizing Your Savings

More and more, people are opting for a “halfback” retirement. Rather than head down to the Sunshine State, they’re choosing the Carolinas as a more mid-way destination that still boasts four beautiful seasons, sunny weather, and coastline tranquility.  

Another important consideration for retirees is the tax friendliness of their retirement destination. The good news is that Charleston (and South Carolina as a whole) is an especially tax-friendly retirement destination thanks to relatively low tax levels and senior-only deductions.

In this article, we’ve rounded up all the most important facts and figures pertaining to your tax situation in Charleston. Let’s take a look at what you need to know. 

Consideration #1: Income Tax

South Carolina uses a progressive income tax system, similar to the federal model. Currently, the highest earners are taxed at a top rate of 6.2%. That being said, some major income tax changes could be on the horizon. In March 2025, legislators introduced a bill proposing the state replace the current system with a flat income tax rate instead. To start, the flat tax rate would be set at 3.99%. While this would initially raise the income tax rate for around 60% of residents, the goal would be to drop it down to 2.49% in the following years—though this decrease would be contingent upon statewide economic growth.²  

Keep in mind, this is a bill that’s just been recently introduced, and nothing’s set in stone. But, if you’re considering moving to Charleston in the coming years, it may be worth keeping an eye on potential legislative changes (like this one) that could impact your tax liability throughout retirement.

Income Tax Deductions for Charleston Retirees

Good news! South Carolina offers qualified retirees some pretty significant income tax deductions. 

If you’re 65 or older, you can deduct up to $10,000 of retirement income from your annual tax return. Eligible retirement income includes pension plan payments as well as distributions from your 401(k) or IRA. If you’re under 65 and receive retirement income, your deduction drops to $3,000. This will most likely apply to retirees who are able to take penalty-free withdrawals from their retirement accounts, usually between the ages of 59.5 and 64.³  

Additionally, retirees can deduct up to $15,000 from their total taxable income, which includes any type of taxable income—not just retirement accounts or pension plans. However, if you’re applying the $10,000 retirement income deduction, it must be subtracted from the $15,000 total deduction cap. In other words, you can’t claim two separate deductions on the same income.³ 

Special considerations exist for military retirees as well. If you receive military retirement pay (or you’re a surviving spouse of a military member), 100% of it is exempt from South Carolina individual income tax, no matter your age. This full income tax exemption applies to those receiving retirement income from the government for service in the reserves or National Guard as well.³ 

Consideration #2: Social Security Tax

Social Security provides retirees with a lifelong, inflation-adjusted secure income—and South Carolina helps retirees keep more of it. Social Security benefits are not taxed at the state level, no matter how much you collect per year.³  

For those who rely heavily on Social Security as part of their retirement income plan, this provision can provide some welcomed relief. 

Consideration #3: Property Tax

South Carolina boasts relatively low property tax rates. Even better, the state offers an attractive homestead exemption for qualifying residents. 

If you’re 65 or older, legally blind, or permanently disabled, and you have lived in South Carolina for at least one year, you can claim an exemption for the first $50,000 of your home’s fair market value.³ Reducing your property’s value will help reduce your annual property tax bill—and any opportunity to preserve more of your income in retirement should be considered a notable benefit.

Consideration #4: Sales Tax

While statewide sales tax in South Carolina is 6%, those living in Charleston are subject to a combined sales tax rate of 9%.¹ If you’re considering relocating to Charleston from another state—or even a different area of South Carolina—this higher sales tax rate could come as a bit of a surprise.

A potentially higher-than-average sales tax is worth noting as you start establishing your retirement budget and income strategy. Sales tax makes everyday purchases more expensive, meaning that 9% could have a real impact on your monthly cash flow. Paying more for groceries and other goods can add up over time, especially when considered alongside inflation. 

As you continue to build out a realistic retirement budget, understanding the true cost of everyday expenses will be critical to maintaining your desired lifestyle in Charleston.

Consideration #5: Estate and Inheritance Tax

Some states impose either an estate tax or an inheritance tax—or in rare cases, both. An estate tax applies to the estate of the deceased, meaning taxes are owed by the estate. An inheritance tax is, instead, owed by the person inheriting a portion of the estate (the beneficiary or heir). 

South Carolina does not impose a state-level estate or inheritance tax, which is good news for those considering Charleston as their retirement destination. No estate tax means more of your legacy can pass directly to your heirs, without losing value along the way.

That said, it’s important to remember that federal estate taxes may still apply. As of 2025, the federal estate tax exemption sits at $13.61 million per individual ($27.22 million for married couples). The historically high exemption limit is set to resume pre-2017 rates (adjusted for inflation), however, starting in 2026—unless further legislative action is taken. 

If you own a significant estate and are concerned it may be subject to federal estate tax in the future, speak to an advisor or tax professional about your options for transferring wealth in a tax-advantaged way.

The Importance of Tax Diversification

While Charleston offers a relatively friendly tax environment for retirees, it’s still important to think strategically about how your income is structured. Paying taxes throughout retirement is an inevitability, but there are strategies you can use to keep your tax bill in check—both annually and throughout your lifetime. 

Aside from moving to a tax-friendly retirement destination (you can check that one off your list!), find opportunities to diversify your retirement income sources.

If you’re unfamiliar with the term, tax diversification means balancing your sources of retirement income across the three most common tax buckets: taxable, tax-deferred, and tax-free accounts. For example, you might combine distributions from a traditional IRA (tax-deferred), a Roth IRA (tax-free), and a taxable brokerage account in retirement. Doing so would give you flexibility in controlling your taxable income year-to-year.

Why is tax diversification important? If all your retirement income comes from taxable sources, you may find yourself paying more in income taxes than necessary—even with South Carolina’s deductions. If you incorporate some sources of tax-free or tax-advantaged income, you can more easily lower your income tax liability without decreasing your withdrawals. 

On the other hand, opportunities to create tax-free income in retirement are limited, and only relying on these sources may not produce enough to cover your full needs in retirement. Adopting a balanced, diversified approach better enables you to withdraw strategically—so you can minimize your tax bill and preserve more of your savings for longer.

Tax diversification also gives you the ability to adapt to changes in future tax-related legislation or your own financial circumstances.

Thinking About Making Charleston Your Retirement Destination?

We think Charleston is one of the most beautiful, vibrant, and rewarding retirement destinations out there. And it certainly helps that South Carolina is one of the country’s more tax-friendly states for retirees as well. From tax-free Social Security payments to sizable deductions and exemptions, the tax landscape in Charleston adds to its charm and appeal.

At Partners in Financial Planning, we empower Charleston residents and those preparing to make the move to our gorgeous city through proactive retirement planning. Together, our team of advisors can help you navigate Charleston’s tax landscape while preserving more of your portfolio. If you’re thinking about retiring to Charleston, feel free to schedule a conversation with our team today. 

^Sources:

^{1https://taxhero.net/sales-tax/city/sc-charleston/}

^{2https://apnews.com/article/income-tax-flat-cut-south-carolina-0875a10e67b8698d329c8f52e860a803}

^{3https://dor.sc.gov/resources-site/media-site/Pages/Retirees-%E2%80%93-Lower-your-Individual-Income-Tax-bill-with-these-5-tips.aspx}