Tax & Residency Guide in South Carolina

Tax Guide for South Carolina Residents

If you are a resident of South Carolina or planning to move there, understanding the state's tax system is crucial. Here is a comprehensive guide to help you navigate South Carolina's tax laws:

Residency Triggers: In South Carolina, residency for tax purposes is determined based on the number of days you spend in the state. You are considered a resident if you are present in the state for more than 183 days in a calendar year. This includes both days of arrival and departure.

Tax System Type: South Carolina has a progressive income tax system, which means that the tax rates increase as your income rises. The state income tax rates range from 0% to 7%, depending on your income level.

Treaties: South Carolina does not have individual tax treaties with other countries. However, the United States has tax treaties with several countries to prevent double taxation. If you have income from foreign sources, you may be able to claim a foreign tax credit or deduction on your South Carolina tax return.

Entity Options: If you are a business owner in South Carolina, you have several entity options to choose from, including sole proprietorship, partnership, corporation, and limited liability company (LLC). Each type of entity has different tax implications, so it is essential to consult with a tax advisor or accountant to determine the best option for your business.

Filing Requirements: Residents of South Carolina are required to file a state income tax return if their gross income exceeds certain thresholds. For the 2021 tax year, single filers under 65 years old must file if their income is over $12,650, while married couples filing jointly must file if their income is over $25,300.

Rates: As mentioned earlier, South Carolina's income tax rates are progressive and range from 0% to 7%. Here are the tax rates for the 2021 tax year:

- 0% for the first $3,070 of taxable income - 3% for taxable income between $3,071 and $6,140 - 4% for taxable income between $6,141 and $9,210 - 5% for taxable income between $9,211 and $12,280 - 6% for taxable income between $12,281 and $15,350 - 7% for taxable income over $15,350

Deductions: South Carolina allows residents to deduct certain expenses from their taxable income, including mortgage interest, property taxes, charitable contributions, and student loan interest. Additionally, residents aged 65 and older may qualify for a retirement income deduction of up to $10,000.

When to Hire an Advisor: If you have complex tax situations, such as owning a business, multiple sources of income, or international investments, it is advisable to hire a tax advisor or accountant to ensure compliance with South Carolina tax laws. A professional can help you maximise deductions, minimise tax liabilities, and avoid potential audits or penalties.

Country-Specific Strategies: If you have income from foreign sources, there are specific strategies you can employ to optimise your tax situation in South Carolina. For example, you can claim a foreign tax credit or deduction for taxes paid to a foreign country on your South Carolina tax return. Additionally, consider structuring your investments or business operations to minimise tax liabilities in both the US and abroad.

In conclusion, understanding South Carolina's tax laws is essential for residents to fulfil their tax obligations and maximise tax savings. By familiarising yourself with residency triggers, tax rates, deductions, and filing requirements, you can navigate the state's tax system with confidence. For complex tax situations or international considerations, seeking advice from a tax professional is recommended to ensure compliance and optimise your tax strategy.