With your house paid off and your kids no longer living under that same roof, you are limited in the deductions you can take from your income in retirement. It’s important to understand how your retirement income is taxed in the state you live in so you can make your retirement savings go farther.
In South Carolina, retirement income is taxed and you do not get a federal income tax deduction. However, Social Security income is exempt from taxes. If you are under the age of 65 and you have pension income, you are exempt from paying taxes on $3000 of that annual income. Also, you can exempt $15,000 in annual retirement income if you are older than 65. And you can even take this deduction for income that you receive from any qualified plan.
Every individual that receives retirement income in South Carolina is entitled to a deduction if you qualify. So if you are married, both spouses can take the deduction. Keep in mind that the $15,000 deduction has to be offset by any other retirement deduction that you might claim.
If you are a surviving spouse in South Carolina, you may continue to take a retirement deduction on behalf of your deceased spouse. There is also a possibility that if you are 65 and older that you may not have to file a tax return.
For all retired military personnel with 20 year or more of active duty have the opportunity to deduct up to $3000 a year until the age of 65 and up to $10,000 a year after 65. This also applies to the surviving spouse. If you served time in the National Guard or Reserve and you get a pension or retirement income, then that income is not taxable. However, survivor benefits are taxed according to federal tax rules.
We recommend you consult your financial advisor or tax professional with any specific questions on how your retirement income is taxed. If you don’t have one, we would be happy to recommend one in your local area. Give us a call at Retirement Think Tank at (888) 282-3653 or email us at firstname.lastname@example.org. We would welcome the opportunity to speak with you!