What South Carolina retirement, age-65, and military-income deductions applied under the law addressed by RR 21-13?

Plain-English summary

South Carolina Revenue Ruling #21-13 is the Department's detailed guide to the retirement and age-based deductions that applied under §§ 12-6-1170 and 12-6-1171 before the 2022 military-retirement change. RR #22-11 superseded this ruling for tax years beginning in 2022. This page therefore describes RR #21-13 as historical guidance for earlier periods.

Under § 12-6-1170(A), the original owner of a qualified retirement account could deduct up to $3,000 of otherwise taxable qualified retirement income through age 64 and up to $10,000 beginning at age 65. Qualified plans included federal, state, and local public-employee plans, military retirement, and plans under I.R.C. §§ 401, 403, 408, and 457. Income already excluded from South Carolina taxable income, such as Social Security and qualifying total-and-permanent-disability retirement income, did not count toward this deduction.

Under § 12-6-1170(B), a South Carolina resident age 65 or older could deduct up to $15,000 of any type of South Carolina taxable income. A joint return received up to $15,000 when only one spouse was at least 65 and up to $30,000 when both were. The deduction could offset wages, investment income, business or farm income, capital gains, or retirement income, but was reduced by specified general and military retirement deductions.

The pre-2022 military rules in § 12-6-1171 provided two additional deductions. A military retiree of any age with both South Carolina earned income and taxable military retirement income could deduct the lesser of those amounts, capped at $17,500 for 2020 and later years under this ruling. Beginning at age 65, a military retiree could deduct up to $30,000 of taxable military retirement income. A qualifying person could claim both military deductions, for a stated combined maximum of $47,500, although the military deductions reduced the general deductions under the interaction rules.

What this means for you

Returns for tax years before 2022

Use the rules and phased-in military limits in this ruling for the relevant historical year. The fully phased-in limits were $17,500 and $30,000 for 2020 and later under the old law; lower statutory limits applied from 2016 through 2019.

Returns for 2022 and later

Do not use this ruling as current military-retirement guidance. RR #22-11 superseded it after Act No. 156 of 2022 changed the military deduction to allow 100% of military retirement income at any age. The general deductions in § 12-6-1170 continue to require their own calculation and interaction analysis.

Married couples

For the general age-65 deduction, a joint return did not trace ordinary income separately between spouses. If one spouse was 65, the $15,000 deduction could offset income belonging to the younger spouse; if both were 65, the joint maximum was $30,000 even when only one spouse earned income. Military-deduction reductions, however, were traced separately to the spouse claiming them.

Surviving spouses

The ruling contains special rules for retirement income attributable to a deceased spouse. A surviving spouse could claim a separate deduction in the manner that it would have applied to the deceased original account owner, using the deceased spouse's age as if that spouse had lived through December 31 of the current year. Amounts claimed in the capacity of surviving spouse received stated exceptions from reductions that otherwise applied.

Common questions

Q: Did a taxpayer under 65 qualify for the general retirement deduction?
A: Yes. An original account owner could deduct up to $3,000 of otherwise taxable qualified retirement income before age 65.

Q: Did the age-65 deduction require retirement income?
A: No. It could reduce any South Carolina taxable income, including wages, investments, business income, farm income, capital gains, or retirement income.

Q: Could an heir claim the general retirement deduction on any inherited account?
A: Generally no. The deduction was limited to the original owner, with a specific exception for a surviving spouse receiving income attributable to the deceased spouse.

Q: Could a military retiree claim both old military deductions?
A: Yes. Under the pre-2022 law, the earned-income deduction and age-65 military-retirement deduction did not reduce each other, although they reduced the retiree's general deductions.

Q: Is this still the controlling ruling?
A: No. RR #22-11 superseded it for the law changed effective with tax year 2022. RR #21-13 remains useful for the earlier rules and amounts.

Citations and references

• S.C. Code Ann. § 12-6-1170 — general retirement-income and age-65 deductions
• S.C. Code Ann. § 12-6-1171 — military deductions under the pre-2022 law addressed here
• S.C. Code Ann. § 12-6-3330 — South Carolina earned income
• I.R.C. §§ 401, 403, 408, and 457 — qualified retirement plans listed in the ruling
• SC Revenue Ruling #22-11 — superseding guidance for the 2022 military-retirement change

Source

• Landing page: SC Advisory Opinion Search
• Original PDF: RR21-13.pdf

Original ruling text

STATE OF SOUTH CAROLINA

DEPARTMENT OF REVENUE
300A Outlet Pointe Blvd., Columbia, South Carolina 29210
P.O. Box 125, Columbia, South Carolina 29214-0575

SC REVENUE RULING 21-13
SUBJECT:

Age 65 and Older Deduction for Any Type Income;
Retirement Income Deductions:
• General Retirement Income Deduction at Any Age;
• Military Retirement Income Deduction at Age 65 and Older; and
Earned Income Offset by Military Retirement at Any Age
(Income Tax)

EFFECTIVE DATE: Applies to all periods open under the statute.
SUPERSEDES:

SC Revenue Ruling #94-9, SC Information Letter #97-23 and any and all
previous advisory opinions and any oral directives in conflict herewith.

REFERENCES:

S.C. Code Ann. Section 12-6-1170 (2014) (Supp. 2020)
S.C. Code Ann. Section 12-6-1171 (Supp. 2020)

AUTHORITY:

S.C. Code Ann. Section 12-4-320 (2014)
S.C. Code Ann. Section 1-23-10(4) (2005)
SC Revenue Procedure #09-3

SCOPE:

The purpose of a Revenue Ruling is to provide guidance to the public and
Department personnel. It is an advisory opinion issued to apply principles
of tax law to a set of facts or general category of taxpayers. It is the
Department’s position until superseded or modified by a change in statute,
regulation, court decision, or another Department advisory opinion.

OVERVIEW
Code Sections 12-6-1170 and 12-6-1171 contain income tax deductions for:

1. Individuals of any age receiving retirement income to reduce taxable retirement income;
2. Individuals age 65 and older to reduce taxable income of any type;
3. Military retirees receiving both earned income and military retirement income to reduce
   earned income; and
4. Military retirees receiving military retirement income to reduce taxable military retirement
   income.

1

An individual may be eligible for more than one of these deductions in one tax year. In limited
situations, one deduction may reduce (partially or completely) the amount of another deduction
an individual may claim. In addition, each of these deductions is also available to a surviving
spouse receiving qualified retirement income attributable to a deceased spouse(s).
The purpose of this advisory opinion is to provide guidance and examples regarding eligibility
requirements for, and the calculation of, the income tax deductions in Code Sections 12-6-1170
and 12-6-1171. Guidance is also provided for military retirees and surviving spouses, and for
spouses who inherit a qualifying retirement account and receive retirement income that is
attributable to the deceased spouse.
This advisory opinion is divided into the following sections to assist individuals and tax
professionals with various deduction questions and computations.
Part I - South Carolina Law – Pages 4 - 6
A. Code Section 12-6-1170
B. Code Section 12-6-1171
Part II - Code Section 12-6-1170 Deductions – Pages 7 - 30
A. “General” Retirement Income Based Deduction for Any Age - Summary
B. Age Based “General” Deduction - Age 65 and Older Deduction for Any Type of Income
(e.g., earned income, retirement income) - Summary
C. Questions and Answers
D. Examples Calculating Each Deduction (With Important Rules and Explanations):
Example 1 – Taxpayer is under Age 65 - Filing Status “Single”
Example 2 – Both Spouses are under Age 65 – Filing Status “Married Filing Joint”
Example 3 – One Spouse is under Age 65 and One Spouse is Age 65 or Older
Example 4 – Both Spouses are Age 65 or Older. Only One Spouse has Income.
Example 5 – Both Spouses are Age 65 or Older. Only One Spouse has Retirement Income.
Example 6 – Both Spouses are Age 65 or Older. Year of Death of One Spouse. Filing
Status “Married Filing Joint.”
Example 7 – Year Following Death of Spouse. Surviving Spouse is Age 65 or Older.
Part III - Code Section 12-6-1171 Deductions – Pages 31 - 54
A. Earned Income Deduction for Military Retiree of Any Age Receiving Both Earned
Income and Retirement Income - Summary
B. “Military” Retirement Deduction for Military Retiree Age 65 and Over - Summary
C. Surviving Spouse Deduction
D. Questions and Answers
E. Examples Calculating Each Deduction:
Example 1 – Both Spouses are under Age 65
Example 2 – Single Military Retiree is Age 65 or Older
Example 3 – Both Spouses are Age 65 or Older. One has military retirement income.
Example 4 – Military Spouse Dies during the Year at Age 70. Surviving Spouse is Age 65.
Example 5 – Year Following Death of Military Spouse. Surviving Spouse is Age 65 or
Older.
2

Important Points to Remember and Assumptions Used in Examples:
• The examples assume all retirement income is qualified retirement income.
• The examples apply to any legal marriage. When necessary, to clearly illustrate a specific
person’s income or deduction amounts, the examples will refer to one spouse as the “husband”
and the other spouse as the “wife.”
• The examples use the term “general” retirement income deduction and “general” age 65 and
older deduction to refer to the deductions in Code Section 12-6-1170 that are available to both
non-military and military individuals. When appropriate, the term “military” retirement income
deduction in Code Section 12-6-1171(A)(2) is used to distinguish the “general” age 65 and
older deduction in Code Section 12-6-1170(B).
• The age of a deceased individual had he or she been living on December 31st of the current tax
year is used to calculate the deduction amounts (i.e., the deceased continues to age in the
current tax year and thereafter, without regard to the actual date and year of his or her death).
• The deductions in Code Section 12-6-1171 were both phased in from 2016 to 2020. This
advisory opinion uses the fully phased-in credit amounts - $17,500 for the deduction in Code
Section 12-6-1171(A)(1) and $30,000 for the deduction in Code Section 12-6-1171(A)(2).
• NOTE: For taxpayer’s filing original or amended returns for years prior to 2020, the phased-in
amounts below should be used to compute the applicable prior year deduction allowed in Code
Section 12-6-1171:
Code Section 12-6-1171(A)(1) – Earned Income Deduction: The deduction was phased in
from tax years 2016 – 2020. The maximum deduction for tax years 2020 and thereafter is
$17,500. The maximum deduction was $14,600 for tax year 2019; $11,700 for tax year
2018; $8,800 in tax year 2017; and $5,900 in tax year 2016.
Code Section 12-6-1171(A)(2) – “Military” Retirement Income Deduction: The maximum
deduction for tax years 2020 and thereafter is $30,000. The maximum deduction was
$27,000 for tax year 2019; $24,000 for tax year 2018; $21,000 for tax year 2017; and
$18,000 for tax year 2016.

3

PART I
SOUTH CAROLINA LAW
Code Section 12-6-1170
Code Section 12-6-1171

4

Code Section 12-6-1170 reads:
(A)(1) An individual taxpayer who is the original owner of a qualified retirement
account is allowed an annual deduction from South Carolina taxable income of not more
than three thousand dollars of retirement income received. Beginning in the year in which
the taxpayer reaches age sixty-five, the taxpayer may deduct not more than ten thousand
dollars of retirement income that is included in South Carolina taxable income.
(2) The term “retirement income”, as used in this subsection, means the total of
all otherwise taxable income not subject to a penalty for premature distribution received
by the taxpayer or the taxpayer’s surviving spouse in a taxable year from qualified
retirement plans which include those plans defined in Internal Revenue Code Sections
401, 403, 408, and 457, and all public employee retirement plans of the federal, state, and
local governments, including military retirement.
(3) A surviving spouse receiving retirement income that is attributable to the
deceased spouse shall apply this deduction in the same manner that the deduction applied
to the deceased spouse. If the surviving spouse also has another retirement income, an
additional retirement exclusion is allowed.
(4) The department may require the taxpayer to provide information necessary
for proper administration of this subsection.
(B) Beginning for the taxable year during which a resident individual taxpayer
attains the age of sixty-five years, the resident individual taxpayer is allowed a deduction
from South Carolina taxable income received in an amount not to exceed fifteen thousand
dollars reduced by any amount the taxpayer deducts pursuant to subsection (A) not
including amounts deducted as a surviving spouse. If married taxpayers eligible for this
deduction file a joint federal income tax return, then the maximum deduction allowed is
fifteen thousand dollars in the case when only one spouse has attained the age of sixty-five
years and thirty thousand dollars when both spouses have attained such age.
(C)(1) Notwithstanding any other provision of this section, if a taxpayer claims a
deduction pursuant to Section 12-6-1171, then the deduction allowed by this section must
be reduced by the amount the taxpayer deducts pursuant to Section 12-6-1171; however,
this subsection does not apply if the deduction claimed pursuant to Section 12-6-1171 is
claimed by a surviving spouse.
(2) In the case of married taxpayers who file a joint federal income tax return,
the reduction required by item (1) applies to each individual separately, so that the
reduction only applies to the amount the individual claiming the deduction pursuant to
Section 12-6-1171 otherwise could have claimed pursuant to this section if the individual
had not filed a joint return.

5

General
Retirement
Income Deduction
< Age 65, up to
$3,000
≥ Age 65, up to
$10,000
Definition of
Retirement Income

Surviving Spouse Special Rules

Age 65 & Older
General Deduction
For any type of
income
$15,000 – one
spouse is 65
$30,000 – married
and both spouses
are 65
Military Claiming
Section 12-6-1171
Deduction:
Reduction and
Tracing Required
by Military
Retiree
Surviving Spouse
Exception

Code Section 12-6-1171, providing for military retirement income deductions, reads:
(A)(1) An individual taxpayer who has military retirement income, each year may
deduct an amount of his South Carolina earned income from South Carolina taxable
income equal to the amount of military retirement income that is included in South
Carolina taxable income, not to exceed seventeen thousand five hundred dollars. In the
case of married taxpayers who file a joint federal income tax return, the deduction allowed
by this section shall be calculated separately as though they had not filed a joint return, so
that each individual's deduction is based on the same individual's retirement income and
earned income. For purposes of this item, “South Carolina earned income” has the same
meaning as provided in Section 12-6-3330.
(2) Notwithstanding item (1), beginning in the year in which an individual
taxpayer reaches age sixty-five, an individual taxpayer who has military retirement
income may deduct up to thirty thousand dollars of military retirement income that is
included in South Carolina taxable income.

Taxpayer with
Earned Income and
Military Retirement
(Any Age)
Separate Income
Tracing

Age 65 Deduction
Up to $30,000 for
Military Retirement

(B) The term “retirement income”, as used in this section, means the total of all
otherwise taxable income not subject to a penalty for premature distribution received by
the taxpayer or the taxpayer’s surviving spouse in a taxable year from a qualified military
retirement plan. For purposes of a surviving spouse, “retirement income” also includes a
retirement benefit plan and dependent indemnity compensation related to the deceased
spouse's military service.

Definition of
Retirement Income

(C) A surviving spouse receiving military retirement income that is attributable to
the deceased spouse shall apply this deduction in the same manner that the deduction
applied to the deceased spouse. If the surviving spouse also has another retirement income,
an additional retirement exclusion is allowed.

Surviving Spouse Special Rules

(D) The department may require the taxpayer to provide information necessary for
proper administration of this subsection.

6

PART II
GENERAL DEDUCTIONS
UNDER CODE SECTION 12-6-1170
“GENERAL” RETIREMENT INCOME DEDUCTION FOR ANY AGE
AGE BASED DEDUCTION – “GENERAL” AGE 65 OR OLDER DEDUCTION
AGAINST ANY TYPE OF INCOME

7

SUMMARY OF CODE SECTION 12-6-1170 DEDUCTIONS 1
DEDUCTION 1: “GENERAL” RETIREMENT INCOME DEDUCTION FOR ANY AGE
Maximum Amount: $3,000 or $10,000, depending on age of taxpayer receiving “qualified
retirement income”
Law: Code Section 12-6-1170(A)
General Provision. Code Section 12-6-1170(A) provides an annual income tax deduction from
South Carolina taxable income for retirement income to the original owner of a qualified
retirement account. The qualifying taxpayer receiving retirement income may deduct up to
$3,000 of such retirement income annually through age 64, and deduct up to $10,000 of such
retirement income annually at age 65 and thereafter.
Surviving Spouse Deduction Amounts. A surviving spouse is allowed this deduction for income
received from his or her retirement plan, if any. Also, a surviving spouse is allowed a separate,
additional deduction for retirement income that is attributable to the deceased spouse, if any, in
the same manner that the deduction would have been applied to the deceased if still living.
Surviving Spouse Reduction Exception. Amounts deducted as a surviving spouse under Code
Section 12-6-1170(A) do not reduce the $3,000 or $10,000 general retirement income deduction.
Note: Additional provisions for a surviving spouse of a military retiree are discussed on the
following page and in Part III.
DEDUCTION 2: AGE BASED “GENERAL” DEDUCTION - AGE 65 OR OLDER
DEDUCTION REDUCING ANY TYPE OF INCOME
Maximum Amount: $15,000 or $30,000, depending on age and filing status
Law: Code Section 12-6-1170(B)
General Provision. Code Section 12-6-1170(B) provides an annual income tax deduction of up to
$15,000 from any South Carolina taxable income of a resident individual who is 65 or older by
the end of the tax year. The deduction can reduce any taxable South Carolina income, including
wages, investment income, rental income, Schedules C or F income, or retirement income.
Married Taxpayers - Joint Return Deduction Amount. Taxpayers filing a joint return are allowed
a deduction of up to $15,000 when only one spouse is 65 or older, by the end of the tax year.
Taxpayers filing a joint return are allowed a deduction of up to $30,000 when both spouses are
65 or older, by the end of the tax year.
Reduction Required for “General” Retirement Income Deduction Claimed. Amounts deducted as
retirement income under Code Section 12-6-1170(A) (the general retirement income deduction
discussed above) reduce the $15,000 or $30,000 general age 65 and older deduction.

This summary is a brief overview of Code Section 12-6-1170 written in general terms. See the examples in this
Revenue Ruling for more detailed guidance.
1

8

Surviving Spouse Reduction Exception. Amounts deducted as a surviving spouse under Code
Section 12-6-1170(A) (the general retirement income deduction discussed above) do not reduce
the $15,000 age 65 and older deduction.
Note: Additional provisions for a surviving spouse of a military retiree are discussed below and
in Part III.
ADDITIONAL PROVISIONS FOR MILITARY RETIREES AND SURVIVING
SPOUSES OF MILITARY RETIREES (See Part III for additional guidance)
DEDUCTION 1: “GENERAL” RETIREMENT INCOME DEDUCTION FOR ANY AGE
Reduction Required for “Military” Retirement Income Deduction Claimed. Amounts deducted
by a taxpayer under Code Section 12-6-1171 (military deductions) reduce the “general”
retirement income deduction of up to $3,000 for a taxpayer under age 65 or $10,000 for a
taxpayer 65 or older allowed under Code Section 12-6-1170(A). However, for married taxpayers
who file a joint federal income tax return, this reduction applies to each individual separately. In
other words, the reduction only applies to the amount the individual claiming the “military”
deduction pursuant to Code Section 12-6-1171 otherwise could have claimed under Code Section
12-6-1170 if the individual had not filed a joint return. (See Part III for additional guidance.)
Surviving Spouse Reduction Exception. Amounts deducted as a surviving spouse under Code
Section 12-6-1171 (military deductions) do not reduce the $3,000 or $10,000 “general”
retirement income deduction under Code Section 12-6-1170(A).
DEDUCTION 2: AGE BASED DEDUCTION - AGE 65 OR OLDER DEDUCTION
REDUCING ANY TYPE OF INCOME
Reduction Required for “Military” Retirement Income Deduction Claimed. Amounts deducted
by a taxpayer under Code Section 12-6-1171 (military deductions) reduce the $15,000 “general”
age 65 and older deduction allowed under Code Section 12-6-1170. However, for married
taxpayers who file a joint federal income tax return, this reduction applies to each individual
separately. In other words, the reduction only applies to the amount the individual claiming the
military deduction pursuant to Code Section 12-6-1171 otherwise could have claimed under
Code Section 12-6-1170 if the individual had not filed a joint return. (See Part III for additional
guidance.)
Surviving Spouse Reduction Exception. Amounts deducted as a surviving spouse under Code
Section 12-6-1171 (military deductions) do not reduce the $15,000 “general” age 65 and older
deduction.

9

QUESTIONS AND ANSWERS - CODE SECTION 12-6-1170 DEDUCTIONS
“GENERAL” RETIREMENT INCOME DEDUCTION FOR ANY AGE (up to $3,000 or
$10,000)

1. Q. What is “retirement income” for purposes of the $3,000 or $10,000 general retirement
   income deduction allowed by Code Section 12-6-1170(A)?
   A. Code Section 12-6-1170(A)(2) defines the term “retirement income,” as used in this
   subsection, to mean the total of all otherwise taxable income not subject to a penalty for
   premature distribution 2 received by the taxpayer or the taxpayer’s surviving spouse in a
   taxable year from qualified retirement plans. These plans include:
   •

All public employee retirement plans of the federal, state, and local governments,
including military retirement.

•

Plans defined in Internal Revenue Code Sections:
401, “Qualified Pension, Profit-Sharing, and Stock Bonus Plan”
403, “Taxation of Employee Annuities”
408, “Individual Retirement Accounts” and
457, “Deferred Compensation Plans of State and Local Governments and TaxExempt Organizations.”

2. Q. Is retirement income that is not included in South Carolina taxable income eligible for the
   general retirement income deduction?
   A. Based on the definition of “retirement income” in Code Section 12-6-1170(A)(2),
   retirement income eligible for the deduction must otherwise be taxable income. Income
   not included in South Carolina taxable income, such as social security income 3 or total
   and permanent disability retirement income 4 is not “otherwise taxable income” and,
   therefore, not eligible for the general retirement income deduction.
3. Q. Is an individual under age 65 eligible to claim the general retirement income deduction
   allowed by Code Section 12-6-1170?
   A. Yes. An individual of any age is eligible to claim a deduction for retirement income
   allowed in Code Section 12-6-1170(A), providing the individual is the original owner of
   the retirement account (or a surviving spouse receiving qualified retirement income
   attributable to the deceased spouse who was the original owner of the retirement account,
   as discussed below). See Examples 1 and 2.

South Carolina does not impose a penalty for premature distribution. This penalty is imposed for federal income
tax purposes under Internal Revenue Code Section 72(t).
3
Code Section 12-6-1120(4) exempts social security from South Carolina tax.
4
See Code Section 12-6-1140(4).
2

10

For example, an individual begins receiving a monthly distribution from a government
pension at age 50 (e.g., $12,000 annually). The individual, as the original owner of the
account, may deduct up to $3,000 a year of the taxable pension income received from
South Carolina taxable income. At age 65 and thereafter, the individual may deduct up to
$10,000 a year of the taxable pension income received from South Carolina taxable
income. See Code Section 12-6-1170(A).

4. Q. Is an individual who is not the original owner of a qualified retirement account eligible to
   claim the general retirement income deduction under Code Section 12-6-1170(A)?
   A. The general retirement income deduction is limited to the “original owner” of the
   qualified retirement account, with one exception. For example, if a sister inherits her
   brother’s 401(k) account, then the sister is not the “original owner” of the qualified
   account and is not eligible for the general retirement income deduction for distributions
   received from the inherited 401(k). However, if the sister has a qualified account of her
   own, she is eligible for the general retirement income deduction for qualified
   distributions from her own account. See Example 1.
   An exception to the general rule limiting the general retirement income deduction is
   provided for a surviving spouse receiving retirement income attributable to a deceased
   spouse(s) who was the original owner of the retirement account. For a complete
   discussion, see Questions 8 - 13 below under the Q and A section “Surviving Spouse and
   Year of Death Issues.”
   AGE BASED “GENERAL” DEDUCTION - AGE 65 OR OLDER DEDUCTION FOR
   ANY TYPE OF INCOME (up to $15,000 or $30,000)
5. Q. For the age 65 and older deduction, is an individual required to have retirement income to
   qualify?
   A. No. The age 65 and older deduction is available as a deduction from any South Carolina
   taxable income. The age 65 and older deduction may offset income from wages,
   investments, Schedules C (sole proprietorship) or F (farming), capital gains, retirement
   income, etc. See Examples 4 and 5.
6. Q. For a married couple filing a joint return, is the income of each spouse separately traced
   when computing the age 65 and older deduction when one spouse is 65 or older but the
   other spouse is under age 65 at the end of the tax year?
   A. No. The age 65 and older deduction is $15,000 for married taxpayers filing a joint return
   when only one spouse is 65 or older. Since the statute does not require that married
   taxpayers filing a joint return allocate income as if they had filed a separate return, the
   income reported on the joint return is not traced separately for each spouse in determining
   the deduction. Accordingly, the $15,000 deduction may be used to offset any South
   Carolina taxable income on the joint return (even the income of the spouse who is under
   age 65). See Example 3.

11

See the exception for a married individual claiming the “military” retirement income
deduction under Code Section 12-6-1171 discussed in Part III.

7. Q. How is the age 65 and older deduction amount determined for a married couple filing a
   joint return when both spouses are 65 or older at the end of the tax year if only one
   spouse has income?
   A. The age 65 and older deduction is available as a deduction from any South Carolina
   taxable income. The deduction is $30,000 for married taxpayers filing a joint return when
   both are 65 or older in the tax year. The deduction is $30,000 per joint income tax return.
   The statute does not require that married taxpayers filing a joint return allocate income as
   if they had filed separately. 5 In the case of married taxpayers who file a joint income tax
   return, the deduction is not based on each individual’s separate income.
   For example, assume both spouses are age 65. Husband has $100,000 wage income and
   the wife does not work. The return shows no other income. The couple may claim a
   $30,000 age 65 and older deduction on their joint South Carolina income tax return. See
   Examples 4 and 5.
   See the exception for a married individual claiming the “military” retirement income
   deduction under Code Section 12-6-1171 discussed in Part III.
   SURVIVING SPOUSE AND YEAR OF DEATH ISSUES
8. Q. What are the exceptions to the general provisions for the “general” retirement income
   deduction for any age and the “general” age 65 and older deduction reducing any type of
   income in Code Section 12-6-1170(A) and (B), respectively, for a surviving spouse
   receiving qualified retirement income attributable to the deceased spouse?
   A. Code Section 12-6-1170(A)(3) and (B) provides special provisions from the two general
   provisions discussed above for a surviving spouse receiving retirement income
   attributable to the deceased spouse(s).
   “General” Retirement Income Deduction – As a Surviving Spouse. A surviving spouse
   receiving retirement income that is attributable to the deceased spouse applies the general
   retirement income deduction under Code Section 12-6-1170(A) (i.e., the $3,000 or
   $10,000 deduction) in the same manner that the deduction applied to the deceased
   spouse, as if the deceased was alive in the current tax year. Note: See Questions 9 and
   10 below for guidance to determine the “age” of the deceased spouse for purposes of
   calculating the deduction amount in the year of death and thereafter.

Code Section 12-6-1140(9) prior to amendment provided that if a married taxpayer eligible for this deduction files
a joint federal income tax return with a spouse who is not eligible for this deduction, then their joint income must be
allocated between them on a pro-rata basis in the manner the Department provides. Code Section 12-6-1140(9) was
repealed in 1998.
5

12

“General” Age 65 and Older Deduction Claimed by the Surviving Spouse. Retirement
income received by a surviving spouse that is attributable to a deceased spouse does not
reduce the surviving spouse’s age 65 and older deduction (i.e., the deduction up to
$15,000 against any type of income) under Code Section 12-6-1170(B). See Example 7.

9. Q. In the year of death of an individual who dies at age 64 before turning age 65 in the
   current tax year, what is the age of the deceased spouse for purposes of the general
   retirement income deduction in Code Section 12-6-1170(A) or the age 65 and older
   deduction in Code Section 12-6-1170(B)?
   A. For purposes of Code Section 12-6-1170, it has been the Department’s longstanding
   position that the deceased continues to age, without regard to the actual date of his or her
   death. Accordingly, in the year of death and thereafter, the age of a deceased individual is
   determined as of each December 31st, and not on the date of death.
   For example, assume a single individual dies June 1 at age 64, six months before his 65th
   birthday on December 1. Since the deceased continues to age for purposes of the
   deductions in Code Section 12-6-1170, on the final South Carolina individual income tax
   return filed in the year of death, the individual is eligible for the higher general retirement
   income deduction amount of $10,000 allowed to a 65 year or older individual (increased
   from the $3,000 amount for an age 64 or under individual) and is also eligible for the age
   65 and older deduction of up to $15,000. See Examples 6 and 7.
   Note: For income tax purposes, if a spouse dies during the tax year, the couple may be
   considered married for the entire year for filing status purposes. If the surviving spouse
   does not marry before the end of the tax year, a joint return may be filed for the surviving
   spouse and deceased spouse, if the executor consents. See IRC Section 6013, “Joint
   Returns of Income Tax by Husband and Wife,” and IRS Publication 559, “Final Income
   Tax Return of Decedent.”
10. Q. In each year after the death of a spouse, what age of the deceased spouse does a surviving
    spouse use to calculate the “surviving spouse” general retirement income deduction
    amount?
    A. A surviving spouse (of any age) receiving retirement income attributable to the deceased
    spouse determines the retirement income deduction “as a surviving spouse” each year in
    the same manner that the deduction would have applied to the deceased spouse had he or
    she lived. It has been the Department’s longstanding position that the deceased spouse
    continues to age each year, without regard to the actual date of his or her death. As such,
    the age of the deceased spouse had he or she been living on December 31st of the current
    tax year is used to calculate the deduction amount; the age of the deceased spouse on the
    date of death or the age of the surviving spouse is not used to determine the deduction
    amount attributable to the deceased spouse.

13

For example, if a spouse dies at age 63 and the surviving spouse is age 70, then in the
year of death the retirement income deduction claimed by the deceased spouse would be
up to $3,000 for the tax year (see Question 9 above for filing status guidance). The
surviving spouse would also compute her own retirement income deduction, if any,
separately from the deceased spouse’s retirement income deduction.
In the year after death, when the deceased spouse would have been age 64 (had he lived),
the surviving spouse receiving retirement income attributable to the deceased spouse may
claim a maximum $3,000 retirement income deduction attributable to the deceased spouse
“as a surviving spouse.” The surviving spouse computes her own retirement income
deduction, if any, separately from the deceased spouse’s retirement income deduction.
In the subsequent tax year when the deceased spouse would have been age 65 (had he
lived), the retirement income deduction attributable to the deceased spouse does not
remain at $3,000; the surviving spouse retirement income deduction amount increases to
a maximum of $10,000 for the year the deceased spouse would have been 65 and older
(had he not died) and for each year thereafter (i.e., the deduction is computed in the same
manner as if the deceased spouse was alive in the current tax year). The surviving spouse
computes her own retirement income deduction, if any, separately from the deceased
spouse’s retirement income deduction.

11. Q. Is a surviving spouse allowed a general retirement income deduction as a “surviving
    spouse” for qualifying retirement income attributable to the deceased spouse and also a
    general retirement income deduction as a “taxpayer” for his or her own retirement
    income?
    A. Yes. A surviving spouse receiving retirement income that is attributable to the deceased
    spouse applies the general retirement income deduction in the same manner as the
    deduction applied to the deceased. In addition, if a surviving spouse also has his or her
    own retirement income, then another, separate general retirement income deduction is
    allowed. See Example 7.
12. Q. Is a surviving spouse eligible to claim the “general” retirement income deduction as a
    surviving spouse for income attributable to the deceased spouse if the deceased spouse
    was not the original owner of the qualified retirement account that the surviving spouse
    inherited?
    A. No. The retirement income deduction is limited to the “original owner” of the qualified
    retirement account. For example, if a spouse (e.g., the husband) inherited his mother’s
    401(k) accounts, the husband is not eligible to claim the retirement income deduction for
    distributions from these accounts. Likewise, when the husband dies and his wife inherits
    the 401(k) accounts that were originally owned by the husband’s mother, then the
    surviving spouse (wife) is not entitled to claim a retirement deduction for any
    distributions in which the deceased spouse was not the original owner (e.g., husband’s
    mother’s inherited accounts).

14

13. Q. How is the retirement deduction determined if the qualified retirement accounts of the
deceased spouse and the surviving spouse are not maintained in separate accounts?
A. For reasons other than tax purposes, 6 funds of a deceased spouse may be maintained in a
separate account (e.g., 401(k) spousal rollover IRA) or the funds may be combined in the
surviving spouse’s retirement account (e.g., IRA) and may not be readily identifiable in
the combined account.
For purposes of the retirement deduction, the question arises as to how to determine
which retirement distributions arise from the deceased spouse’s qualified retirement
accounts and which retirement distributions arise from the surviving spouse’s qualified
retirement accounts. The statute provides that the surviving spouse receiving the
retirement income attributable to the deceased spouse applies the retirement deduction in
the same manner as the deduction applied to the deceased spouse. If the funds are
commingled, then the method to allocate the accounts of each spouse is to use the fair
market value of each spouse’s account at the date the assets are commingled by the
surviving spouse. If the accounts are combined, the relative allocation as a percentage
should remain fixed in subsequent years.
For example, assume the surviving spouse inherited the deceased spouse’s retirement
accounts. The assets of the deceased spouse’s retirement accounts are transferred to, and
commingled with, the surviving spouse’s account. At the time of transfer into the
account, the fair market value of the deceased spouse’s account is $100,000. The value
of the surviving spouse’s own retirement account on the same date is $300,000. The
surviving spouse continues to take distributions from the account. The allocation method
and computation of deductions are illustrated below.
Original Owner of
Fair Market Value
Qualified Retirement
of Account at Time
Account
of Transfer
Living (Surviving) Spouse
$300,000
Deceased Spouse (Wife)
$100,000
TOTAL
$400,000

Allocation of Account to
Each Spouse for Retirement
Income Deduction Purposes
$300,000/$400,000 = 75%
$100,000/$400,000 = 25%

Allocation of Distributions between Original Owners. Assume the surviving spouse and
the deceased spouse (had she been living in the current tax year) are 65 or older. The
surviving spouse takes distributions of $30,000 from the combined account. The
distributions made from the qualified retirement account are eligible for the retirement
income deduction based on the ratios of 75% and 25%. As such, $22,500 ($30,000 x
75%) of the account distribution is considered attributable to the living spouse’s qualified
retirement and $7,500 ($30,000 x $25%) of the account distribution is considered
attributable to the deceased spouse’s qualified retirement.

The purpose of this advisory opinion is to address the tax deductions available under Code Sections 12-6-1170 and
12-6-1171. This document is not intended to provide retirement planning advice. An appropriate professional or
retirement advisor should be consulted to determine what funds may be rolled over into the survivor’s accounts.
6

15

Calculation of Retirement Income Deductions for the Living Taxpayer and as a Surviving
Spouse, and Calculation of the Age 65 and Older Deduction for the Living Taxpayer. The
taxpayer filing a single return calculates his total $22,500 general retirement income
deductions and general age 65 and older deduction as follows.
Income
General
Reported on Retirement
Single Return Income
Deduction
Reported on
Single Return
As Taxpayer
Income:
Retirement Income –
Living Spouse Account
(Non-military)
Retirement Income –
Received from Deceased
Spouse Account
(Non-military)
SC Taxable Income
before Adjustments
General Deductions:
Taxpayer – Age 65+
General Retirement
Income Deduction
12-6-1170(A)(1)
As Surviving Spouse –
General Retirement
Income Deduction
(Deceased Spouse Age
65+, if living in current
year)
12-6-1170(A)(3)
Age 65 and Older
Deduction
12-6-1170(B)

General
Retirement
Income
Deduction
Reported on
Single Return
As Surviving
Spouse

Age 65 and Older
Deduction
Reported on
Single Return
As Taxpayer

SC Taxable
Income
Computation

$22,500

$22,500

$ 7,500

$ 7,500

$30,000

$30,000
$10,000

($10,000)

$7,500 limited
Lesser of $10,000
or retirement
income
attributable to
deceased spouse

($ 7,500)

$5,000
($15,000 - $10,000
general retirement
deduction of living
taxpayer)

Total 12-6-1170
Deductions on Single
Return

($ 5,000)

$22,500

Explanation: The $22,500 ($30,000 x 75%) account distribution attributable to the living spouse
is eligible for a $10,000 general retirement income deduction. The $7,500 ($30,000 x $25%)
account distribution attributable to the deceased spouse is also eligible for a $10,000 general
retirement income deduction “as a surviving spouse” (but is limited to $7,500, the amount of
retirement income attributable to the deceased spouse). The total deduction on the single return is
$22,500 ($17,500 for two general retirement income deductions as the taxpayer and as the
surviving spouse and a $5,000 age 65 and older deduction for the taxpayer).
16

EXAMPLES

GENERAL RETIREMENT INCOME DEDUCTION FOR ANY AGE
AND
AGE 65 AND OLDER DEDUCTION FOR ANY TYPE OF INCOME
Examples Calculating Each Deduction in Code Section 12-6-1170:
Example 1 – Taxpayer is under Age 65 - Filing Status “Single”
Example 2 – Both Spouses are under Age 65 – Filing Status “Married Filing Joint”
Example 3 – One Spouse is under Age 65 and One Spouse is Age 65 or Older
Example 4 – Both Spouses are Age 65 or Older. Only One Spouse has Income.
Example 5 – Both Spouses are Age 65 or Older. Only One Spouse has Retirement Income.
Example 6 – Both Spouses are Age 65 or Older. Year of Death of One Spouse. Filing
Status “Married Filing Joint.”
Example 7 – Year Following Death of Spouse. Surviving Spouse is Age 65 or Older.
Important Points to Remember and Assumptions Used in Examples:
• The examples assume all retirement income is qualified retirement income.
• The examples apply to any legal marriage. When necessary, to clearly illustrate a specific
person’s income or deduction amounts, the examples will refer to one spouse as the “husband”
and the other spouse as the “wife.”
• The examples use the term “general” retirement income deduction and “general” age 65 and
older deduction to refer to the deductions in Code Section 12-6-1170 that are available to both
non-military and military individuals. When appropriate, the term “military” retirement income
deduction in Code Section 12-6-1171(A)(2) is used to distinguish the “general” age 65 and
older deduction in Code Section 12-6-1170(B).
• The age of a deceased individual had he or she been living on December 31st of the current tax
year is used to calculate the deduction amounts (i.e., the deceased continues to age in the
current tax year and thereafter, without regard to the actual date and year of his or her death).

17

EXAMPLE 1 – Taxpayer is under Age 65 - Filing Status “Single”
Facts: Taxpayer age 50 has the following SC taxable income:
Earned income - $50,000
Retirement income from pension - $1,000
Income from an IRA inherited from parent - $2,000
Deduction Calculation: General Retirement Income Deduction = $1,000
Income
Reported on
Single
Return
Income:
Earned Income
Retirement Income Original Owner
(Non-military)
Income from IRA Inherited
from Parent
SC Taxable Income before
Adjustments
General Deductions:
Taxpayer – Age 50
General Retirement Income
Deduction
12-6-1170(A)(1)
Age 65 and Older
Deduction
12-6-1170(B)
Total SC Deduction on
Single Return

General
Retirement
Income
Deduction
Reported on
Single Return

Age 65 and
SC Taxable
Older Deduction Income
Reported on
Computation
Single Return

$50,000
$ 1,000

$50,000
$ 1,000

$ 2,000

$ 2,000

$53,000

$53,000
$1,000

($1,000)

$0
$1,000

Explanation:
• General Retirement Income Deduction: The general retirement income deduction for the original
owner of a retirement plan under age 65 is the lesser of: (1) the amount of qualified retirement income
received or (2) $3,000. Since the taxpayer received $1,000 in qualified retirement income this year, the
general retirement income deduction is limited to $1,000.
• No general retirement income deduction is allowed for the $2,000 received from an IRA inherited from
the taxpayer’s parent, since the taxpayer was not the original owner of that retirement account.7
• Since the taxpayer is under age 65, the age 65 and older deduction to offset any type of income does not
apply this year.

7

If the taxpayer was a surviving spouse and had inherited the IRA account from his deceased spouse years ago, the
taxpayer would be allowed a $2,000 general retirement income deduction as a surviving spouse for the retirement
income from this inherited IRA. See Code Section 12-6-1170(A)(3).

18

EXAMPLE 2 – Both Spouses are under Age 65 – Filing Status “Married Filing Joint”
Facts: Married couple filing a joint return has the following SC taxable income:
Husband (Age 50):
Earned income - $5,000
Retirement income - $1,000

Wife (Age 55):
Earned income - $100,000
Retirement income - $45,000

Deduction Calculation: General Retirement Income Deduction = $4,000
Income
Reported on
Joint Return

Income:
Earned Income – Joint
Retirement Income Husband (Non-military)
Retirement Income - Wife
(Non-military)
SC Taxable Income before
Adjustments
General Deductions:
Husband – Age 50
General Retirement
Income Deduction
12-6-1170(A)(1)
Wife – Age 55
General Retirement Income
Deduction
12-6-1170(A)(1)
Joint Return - Age 65 and
Older Deduction
12-6-1170(B)
Total SC Deduction on
Joint Return

General
Retirement
Income
Deduction
Reported on
Joint Return

Age 65 and
SC Taxable
Older Deduction Income
Reported on
Computation
Joint Return
(Based on
Combined
Income)

$105,000
$ 1,000

$105,000
$ 1,000

$ 45,000

$ 45,000

$151,000

$151,000
$1,000

($1,000)

$3,000

($3,000)

($0)
$4,000

Important Rule for the General Retirement Income Deduction for This Example:
• The general retirement income deduction is computed separately for each individual taxpayer on the
joint return (i.e., the total retirement income is not combined when computing the deduction). Code
Section 12-6-1170(A)(1).
Explanation:
• General Retirement Income Deduction: The general retirement income deduction for the original
owner of a retirement plan under age 65 is the lesser of: (1) the amount of qualified retirement income
received or (2) $3,000. Since the husband (age 50) received $1,000 in qualified retirement income, his
general retirement income deduction is limited to $1,000 this year. Since the wife (age 55) received
$45,000 in qualified retirement income, she is allowed the maximum $3,000 general retirement income
deduction this year.

19

EXAMPLE 3 – One Spouse is under Age 65 and One Spouse is Age 65 or Older – Filing Status
“Married Filing Joint”
Facts: Married couple filing a joint return has the following SC taxable income:
Husband (Age 65):
Earned income - $5,000
Retirement income - $1,000

Wife (Age 50):
Earned income - $45,000
Retirement income - $4,000

Deduction Calculation: General Retirement Income Deduction = $4,000 and Age 65 and Older
Deduction to Offset Any Type of Income = $14,000. Total $18,000 deduction on the joint return.
Income
Reported on
Joint Return

Income:
Earned Income – Joint
Retirement Income Husband (Non-military)
Retirement Income - Wife
(Non-military)
SC Taxable Income before
Adjustments
General Deductions:
Husband – Age 65
General Retirement Income
Deduction
12-6-1170(A)(1)
Wife – Age 50
General Retirement Income
Deduction
12-6-1170(A)(1)
Joint Return - Age 65 and
Older Deduction
12-6-1170(B)

General
Retirement
Income
Deduction
Reported on
Joint Return

Age 65 and
SC Taxable
Older Deduction Income
Reported on
Computation
Joint Return
(Based on
Combined
Income)

$50,000
$ 1,000

$50,000
$ 1,000

$ 4,000

$ 4,000

$55,000

$55,000
$1,000

($1,000)

$3,000

($3,000)

$14,000
($15,000 less
husband’s
$1,000
retirement
income
deduction)

Total SC Deduction on
Joint Return

($14,000)

$18,000

Important Rules for General Retirement Income Deduction and Age 65 and Older Deduction for This
Example:
• The general retirement income deduction is computed separately for each individual taxpayer on the
joint return (i.e., the total retirement income is not combined when computing the deduction). Code
Section 12-6-1170(A)(1).
• The age 65 and older deduction can offset any type of South Carolina taxable income on a joint return;
joint income is used to calculate this deduction; income is not traced separately for each spouse. Code
Section 12-6-1170(B).
20

Explanation:
• General Retirement Income Deduction: The general retirement income deduction for the original
owner of a retirement plan under age 65 is the lesser of: (1) the amount of qualified retirement income
received or (2) $3,000. The general retirement income deduction for the original owner of a retirement
plan age 65 or older is the lesser of: (1) the amount of qualified retirement income received or (2)
$10,000. Since the husband (age 65) received $1,000 in qualified retirement income this year, his
general retirement income deduction is limited to $1,000. Since the wife (age 50) received $4,000 in
qualified retirement income this year, her general retirement income deduction is $3,000.
• Age 65 and Older Deduction: The age 65 and older deduction when only one spouse is 65 or older is
the lesser of: (1) the joint taxable income or (2) $15,000 less the general retirement income deduction 8
claimed by the individual taxpayer age 65 or older. The remainder offsets any remaining taxable
income on the joint return. Therefore, the age 65 and older deduction on the joint return is $14,000
($15,000 less husband’s $1,000 general retirement income deduction). The $14,000 deduction can
offset any remaining taxable income on the joint return (e.g., husband’s or wife’s wages, interest
income, retirement income, inherited IRA, etc.).
Note: Since the wife is under age 65, her $3,000 general retirement income deduction does not reduce
the husband’s age 65 and older deduction.

This reduction of the general retirement income deduction from the age 65 and older deduction does not apply to a
surviving spouse for the retirement income received that is attributable to the deceased spouse. See Code Section 126-1170(A)(3) and Example 7.
8

21

EXAMPLE 4 – Both Spouses are Age 65 or Older. Only One Spouse has Income of Any Type. Filing
Status “Married Filing Joint”.
Facts: Married couple filing a joint return has the following SC taxable income:
Husband (Age 70):
Earned income - $50,000
Retirement income - $0

Wife (Age 65):
Earned income - $0
Retirement income - $0

Deduction Calculation: General Retirement Income Deduction = $0 and the Age 65 and Older Deduction
to Offset Any Type of Income = $30,000
Income
Reported on
Joint Return

Income:
Earned Income
Retirement Income
(Non-military)
SC Taxable Income before
Adjustments
General Deductions:
Husband – Age 70
General Retirement
Income Deduction
12-6-1170(A)(1)
Wife – Age 65
General Retirement Income
Deduction
12-6-1170(A)(1)
Joint Return - Age 65 and
Older Deduction
12-6-1170(B)
Total SC Deduction on
Joint Return

General
Retirement
Income
Deduction
Reported on
Joint Return

Age 65 and
SC Taxable
Older Deduction Income
Reported on
Computation
Joint Return
(Based on
Combined
Income)

$50,000
$0

$50,000
$0

$50,000

$50,000
$0

$0

$30,000

$30,000
$30,000

Important Rule for Age 65 and Older Deduction for This Example:
• The maximum $30,000 deduction (and not the maximum $15,000 deduction) applies when both spouses
are age 65 and older, even if one spouse has no income. Code Section 12-6-1170(B).
Explanation:
• General Retirement Income Deduction: None. Neither individual taxpayer has qualified retirement
income this year.
• Age 65 and Older Deduction: The age 65 and older deduction when both spouses are 65 or older is the
lesser of: (1) the joint taxable income or (2) $30,000 less the general retirement income deduction

22

claimed by each individual taxpayer age 65 or older, if any. 9 The remainder offsets any remaining
South Carolina taxable income on the joint return.
Therefore, the age 65 and older deduction on this joint return is $30,000 (the maximum $15,000 for the
husband and $15,000 for the wife less $0 general retirement income deduction) and can offset any
taxable income on the joint return (e.g., the husband’s earned income).

This reduction of the retirement deduction from the age 65 and older deduction does not apply to a surviving spouse
for the retirement income received that is attributable to the deceased spouse. See Code Section 12-6-1170(A)(3)
and Example 7.
9

23

EXAMPLE 5 – Both Spouses are Age 65 or Older. Only One Spouse has Retirement Income. Filing
Status “Married Filing Joint”.
Facts: Married couple filing a joint return has the following SC taxable income:
Husband (Age 70):
Earned income - $50,000
Retirement income - $0

Wife (Age 65):
Earned income - $0
Retirement income - $45,000

Deduction Calculation: General Retirement Income Deduction = $10,000 and
Age 65 and Older Deduction to Offset Any Type of Income = $20,000. Total $30,000 deduction on the
joint return.
Income
Reported on
Joint Return

Income:
Earned Income
Retirement Income – Wife
(Non-military)
SC Taxable Income before
Adjustments
General Deductions:
Husband – Age 70
General Retirement Income
Deduction
12-6-1170(A)(1)
Wife – Age 65
General Retirement Income
Deduction
12-6-1170(A)(1)
Joint Return - Age 65 and
Older Deduction
12-6-1170(B)

General
Retirement
Income
Deduction
Reported on
Joint Return

Age 65 and
SC Taxable
Older Deduction Income
Reported on
Computation
Joint Return
(Based on
Combined
Income)

$50,000
$45,000

$50,000
$45,000

$95,000

$95,000
$0

$0

$10,000

($10,000)

$20,000
($30,000 less
$10,000
retirement
income
deduction)

Total SC Deduction on
Joint Return

($20,000)

$30,000

Important Rules for General Retirement Income Deduction and Age 65 and Older Deduction for This
Example:
• The general retirement income deduction is computed separately for each individual taxpayer on the joint
return (i.e., the total retirement income is not combined when computing the deduction). Code Section
12-6-1170(A)(1).
• The age 65 and older deduction can offset any type of South Carolina taxable income on a joint return;
joint income is used to calculate this deduction; income is not traced separately for each spouse. Code
Section 12-6-1170(B).

24

Explanation:
•General Retirement Income Deduction: The general retirement income deduction for the original
owner of a retirement plan age 65 or older is the lesser of: (1) the amount of qualified retirement
income received or (2) $10,000. Therefore, the husband’s general retirement income deduction is $0
this year. The wife’s general retirement income deduction is $10,000.
•Age 65 and Older Deduction: The age 65 and older deduction when both spouses are 65 or older is
the lesser of: (1) the joint taxable income or (2) $30,000 less the general retirement income deduction, if
any, claimed by both individual taxpayer’s age 65 or older. 10 Therefore, the age 65 or older deduction
on the joint return is $20,000 ($30,000 maximum deduction less $10,000 general retirement income
deduction claimed). The $20,000 deduction can offset any remaining South Carolina taxable income on
the joint return (e.g., earned income or retirement income).

This reduction of the retirement income deduction from the age 65 and older deduction does not apply to a
surviving spouse for the retirement income received that is attributable to the deceased spouse. See Code Section 126-1170(A)(3) and Example 7.
10

25

EXAMPLE 6 – Both Spouses are Age 65 or Older. Year of Death of One Spouse. Filing Status
“Married Filing Joint”. 11
Facts: Married couple filing a joint return has the following SC taxable income. The surviving spouse
receives a retirement payment each month as beneficiary of the deceased spouse’s state pension.
Wife (Age 65) 12 – Died During Tax Year:
Earned income - $0
Retirement income - $9,000 (received before death)

Husband (Age 70):
Earned income - $15,000
Retirement income - $10,000
Retirement income attributable to
deceased spouse - $4,500*

Deduction Calculation: General Retirement Income Deductions = $23,500 ($10,000 for the husband +
$9,000 for the wife + $4,500 as the surviving spouse) and Age 65 and Older Deduction to Offset Any
Type of Income = $11,000 ($30,000 less $19,000.) Total $34,500 deduction on the joint return.
Income
Reported on
Joint Return

Income:
Earned Income
Retirement Income –
Husband (Non-military)
Retirement Income –
Husband (Non-military)
*As Beneficiary of a
Portion of Deceased
Spouse’s Pension
Retirement Income – Wife
(Non-military)
SC Taxable Income before
Adjustments
General Deductions:
Husband – Age 70
General Retirement Income
Deduction
12-6-1170(A)(1)
Wife – Age 65
General Retirement Income
Deduction
12-6-1170(A)(1)
Joint Return – Age 65 and
Older Deduction
12-6-1170(B)

General
Retirement
Income
Deduction
Reported on
Joint Return

Age 65 and
SC Taxable
Older Deduction Income
Reported on
Computation
Joint Return
(Based on
Combined
Income)

$15,000
$10,000

$15,000
$10,000

$ 4,500

$ 4,500

$ 9,000

$ 9,000

$38,500

$38,500
$10,000

($10,000)

$ 9,000

($ 9,000)

$11,000

($11,000)

For income tax purposes, if a spouse dies during the tax year, the couple may be considered married for the entire
year for filing status purposes. If the surviving spouse does not marry before the end of the tax year, a joint return
may be filed for the surviving spouse and deceased spouse, if the executor consents. See IRC Section 6013, “Joint
Returns of Income Tax by Husband and Wife,” and IRS Publication 559, “Final Income Tax Return of Decedent.”
12
It has been the Department’s longstanding position that the age of a deceased spouse is determined as of
December 31 each year for purposes of the deductions in Code Sections 12-6-1170 and 12-6-1171. See Question 9
above.
11

26

Income
Reported on
Joint Return

As Surviving Spouse –
General Retirement
Income Deduction
12-6-1170(A)(3)
Total SC Deduction on
Joint Return

General
Retirement
Income
Deduction
Reported on
Joint Return
$4,500

Age 65 and
SC Taxable
Older Deduction Income
Reported on
Computation
Joint Return
(Based on
Combined
Income)
($4,500)

$34,500

Important Rules for General Retirement Income Deduction (As the Taxpayer(s) and As a Surviving Spouse)
and Age 65 and Older Deduction for This Example:
• The general retirement income deduction is computed separately for each individual taxpayer (one
computation for the husband and one computation for the wife) on the joint return (i.e., the total
retirement income is not combined when computing the deduction). Code Section 12-6-1170(A)(1).
• A surviving spouse is also allowed a separate, additional general retirement income deduction for
retirement income received by the survivor that is attributable to the deceased spouse. The deduction is
computed in the same manner that the deduction would have applied to the deceased if still living in the
current tax year. Code Section 12-6-1170(A)(3).
• The age of a spouse who dies during the current tax year when she would have turned age 65 is
determined at December 31 (not at the date of death or based on the age of the surviving spouse) for
purposes of determining the eligible maximum deduction amounts (i.e., $3,000 or $10,000 general
retirement income deduction amount or eligibility for the age 65 or older deduction).
• The age 65 and older deduction can offset any type of South Carolina taxable income on the joint
return; income is not traced separately for each spouse. Code Section 12-6-1170(B).
• The age 65 and older deduction is reduced by amounts deducted for the general retirement income
deduction for each taxpayer age 65 and older, however, any amount deducted as a “surviving spouse”
for the separate, general retirement income deduction does not reduce the age 65 and older deduction on
the return. Code Sections 12-6-1170(B) and 12-6-1170(A)(3).
Explanation:
• General Retirement Income Deduction – As a Taxpayer: The general retirement income deduction
for the original owner of a retirement plan age 65 or older is the lesser of: (1) the amount of qualified
retirement income received or (2) $10,000. Since the husband (age 70) received $10,000 in qualified
retirement income this year from his own retirement plan, his separate, general retirement income
deduction is $10,000. Since the wife (age 65) received $9,000 in qualified retirement income this year
before her death from her own retirement plan, her general retirement income deduction is limited to
$9,000.
• General Retirement Income Deduction – As a Surviving Spouse: The general retirement income
deduction as a “surviving spouse” receiving retirement income that is attributable to the deceased
spouse (i.e., the deceased spouse was the original owner of the retirement plan) is the lesser of: (1) the
amount of qualified retirement income received or (2) $10,000. Since the husband received $4,500 in
qualified retirement income this year from the deceased spouse’s retirement plan, his separate, general
retirement income deduction as a surviving spouse based on the deceased wife’s age (age 65) had she
lived the entire year is $4,500. Note: This deduction is not limited to $3,000 based on the deceased age
of 64 on the date of death this year.

27

• Age 65 and Older Deduction: The age 65 and older deduction when both spouses are 65 or older is the
lesser of: (1) the joint taxable income or (2) $30,000 less the general retirement income deduction
claimed by each individual taxpayer age 65 or older, if any. 13 The remainder offsets any remaining
South Carolina taxable income on the joint return. Therefore, the age 65 and older deduction on this
joint return is $11,000 ($30,000 maximum less $10,000 of the husband’s general retirement income
deduction less $9,000 of the wife’s general retirement income deduction and less $0 for the $4,500
surviving spouse general retirement income deduction. The $11,000 deduction can offset any remaining
taxable income on the joint return (e.g., the husband’s earned income).
NOTE: See Question 13 above for information on calculating the general retirement income deduction
if the qualified retirement accounts of the deceased spouse and the surviving spouse are not maintained
in separate accounts.

This reduction of the retirement income deduction from the age 65 and older deduction does not apply to a
surviving spouse for the retirement income received that is attributable to the deceased spouse. See Code Section 126-1170(A)(3) and Example 7.
13

28

EXAMPLE 7 – Year Following Death of Spouse. Surviving Spouse is Age 71 - Filing Status
“Single”.
Facts: Taxpayer filing a single return has the following SC taxable income:
Husband (Age 71) Surviving Spouse:
Earned income - $50,000
Retirement income - $1,000
Retirement income attributable to deceased spouse - $45,000
Wife died in prior year (Age 66, the age the wife would be at the end of this tax year if still alive)
Deduction Calculation: General Retirement Income Deduction as a “Taxpayer” = $1,000; General
Retirement Income Deduction as a “Surviving Spouse” = $10,000; and Age 65 and Older Deduction to
Offset Any Type of Income = $14,000. Total $25,000 on the single return.
Income
Reported on
Single
Return

Income:
Earned Income
Retirement Income
(Non-military)
Retirement Income –
Received from Deceased
Spouse Account
(Non-military)
SC Taxable Income before
Adjustments
General Deductions:
Taxpayer – Age 71
General Retirement Income
Deduction
12-6-1170(A)(1)
As Surviving Spouse –
General Retirement Income
Deduction (Deceased
Spouse Age 66, if still
living)
12-6-1170(A)(3)
Age 65 and Older
Deduction
12-6-1170(B)

General
Retirement
Income
Deduction
Reported on
Single Return
As Taxpayer

General
Retirement
Income
Deduction
Reported
As Surviving
Spouse

Age 65 and Older
Deduction
Reported on Single
Return

SC Taxable
Income
Computation

$50,000
$ 1,000

$50,000
$ 1,000

$45,000

$45,000

$96,000

$96,000
$1,000

($1,000)

$10,000

($10,000)

$14,000
($15,000 less
$1,000 retirement
income deduction
of taxpayer only)

Total SC Deduction on
Single Return

29

($14,000)

$25,000

Important Rules for General Retirement Income Deduction (As the Taxpayer and As a Surviving Spouse)
and Age 65 and Older Deduction for This Example:
• The general retirement income deductions are computed separately for the individual as a “taxpayer”
(i.e., the total retirement income is not combined when computing the deduction). Code Section 12-61170(A)(1).
• A surviving spouse is also allowed a separate, additional general retirement income deduction for
retirement income received by the survivor that is attributable to the deceased spouse. The age of the
deceased spouse had she been living in the current tax year (not the deceased spouse’s age on the date
of death) is used for purposes of determining the eligible maximum deduction amounts (i.e., $3,000 or
$10,000 general retirement income deduction amount or eligibility for the age 65 and older deduction).
Code Section 12-6-1170(A)(3).
• The age 65 and older deduction can offset any type of South Carolina taxable income on the return.
Code Section 12-6-1170(B).
• The age 65 and older deduction is reduced by amounts deducted for the general retirement income
deduction for the taxpayer age 65 and older. A general retirement income deduction amount deducted
as a “surviving spouse” does not reduce the age 65 and older deduction. Code Section 12-6-1170(A)(3).
Explanation:
• General Retirement Income Deduction – As a Taxpayer: The general retirement income deduction
for the original owner of a retirement plan age 65 or older is the lesser of: (1) the amount of qualified
retirement income received or (2) $10,000. Therefore, the taxpayer (husband) is allowed a $1,000
retirement income deduction this year.
• General Retirement Income Deduction – As a Surviving Spouse: The general retirement income
deduction for a “surviving spouse” receiving retirement income that is attributable to a deceased spouse
age 65 or older (i.e., the deceased spouse was the original owner of the retirement plan) is the lesser of:
(1) the amount of qualified retirement income received or (2) $10,000. Since the husband received
$45,000 in qualified retirement income this year from the deceased spouse’s retirement plan, his
separate, general retirement income deduction as a “surviving spouse” is $10,000. The amount is based
on the deceased wife’s age (age 66) as of December 31 of the current tax year; it is not $3,000 based on
her age of 64 on the date of death.
• Age 65 and Older Deduction: The age 65 and older deduction on a single return when the individual is
65 or older is the lesser of: (1) the taxable income or (2) $15,000 less the general retirement income
deduction claimed by the individual as the taxpayer (but not as the surviving spouse). Therefore, the age
65 deduction on the single return is $14,000 ($15,000 maximum less $1,000 general retirement income
deduction of the individual taxpayer only). The $14,000 deduction can offset any remaining South
Carolina taxable income on the single return (e.g., earned income, retirement income, or income
inherited from a deceased spouse).
NOTE: See Question 13 above for information on calculating the general retirement income deduction
if the qualified retirement accounts of the deceased spouse and the surviving spouse are not maintained
in separate accounts.

30

PART III
MILITARY DEDUCTIONS
UNDER CODE SECTION 12-6-1171
AGE BASED RETIREMENT DEDUCTION - AGE 65 OR OLDER DEDUCTION FOR
MILITARY RETIREMENT INCOME
EARNED INCOME DEDUCTION - MILITARY RETIREE OF ANY AGE WITH BOTH
EARNED INCOME AND MILITARY RETIREMENT INCOME

31

SUMMARY OF CODE SECTION 12-6-1171 DEDUCTIONS 14
DEDUCTION 1: AGE BASED RETIREMENT DEDUCTION - AGE 65 OR OLDER
DEDUCTION FOR MILITARY RETIREMENT INCOME
Maximum Amount: $30,000
Law: Code Section 12-6-1171(A)(2)
General Provision. Code Section 12-6-1171(A)(2) provides an annual income tax deduction from
South Carolina taxable income for an individual age 65 or older who has military retirement
income. A qualifying taxpayer may deduct up to $30,000 15 of military retirement income that is
included in South Carolina taxable income each year.
Joint Return - Calculation of Deductions. If one spouse (or both) receives qualified military
retirement income, then the deduction amounts under Code Sections 12-6-1171 and 12-6-1170
for a return with filing status “married filing joint” must be calculated separately for each spouse
(one deduction for the husband and one deduction for the wife). The separate computation
amount of the “general” age 65 and older deduction is a maximum of $15,000 for each spouse.
However, this deduction can offset any type of remaining income on the joint return, after
required reductions (e.g., each separate “general” age 65 and older deduction can offset both the
civilian spouse’s or the military retiree spouse’s remaining income). See Code Section 12-61170(C).
Code Section 12-6-1170(C) – Reduction Required for Military Retirees Claiming a Deduction
under Code Section 12-6-1171. Code Section 12-6-1170(C) provides modifications to the
amounts allowed under the general provisions of Code Section 12-6-1170(A) and (B) discussed
in Part II. Code Section 12-6-1170(C) provides:
• Reduction Required for “General” Retirement Income Deduction or Age 65 and Older
Deduction Claimed. Amounts deducted by a military retiree under Code Section 12-6-1171
(military deductions) reduce the deductions allowed under Code Section 12-6-1170 (the
$3,000 or $10,000 “general” retirement income deduction and the “general” age 65 and
older deduction) by the amount the military retiree deducts under Code Section 12-6-1171.
• Reductions Calculated “Separately” for Married Couple Filing a Joint Return. In the case
of married taxpayers who file a joint federal income tax return, the reduction required
above applies to each individual separately. In other words, the reduction only applies to
the amount the individual military retiree claiming the deduction pursuant to Code Section
12-6-1171 otherwise could have claimed under Code Section 12-6-1170 if the individual
had not filed a joint return.

This summary is a brief overview of Code Sections 12-6-1171 and 12-6-1170(C) written in general terms. See the
examples in this Revenue Ruling for more detailed guidance.
15
This deduction was phased in from 2016 to 2020. The maximum deduction for tax years 2020 and thereafter is
$30,000. The maximum deduction was $27,000 for tax year 2019; $24,000 for tax year 2018; $21,000 for tax year
2017; and $18,000 for tax year 2016.
14

32

Surviving Spouse Deduction Amounts. A surviving spouse receiving military retirement income
that is attributable to the deceased spouse is allowed the $30,000 military retirement deduction in
the same manner that the deduction would have applied to the deceased spouse had he or she
lived in the current tax year. If the surviving spouse also has his or her own qualified retirement
income, a separate, additional deduction is allowed for his or her own retirement income. See
Code Section 12-6-1171(C).
Code Section 12-6-1170(C) - Surviving Spouse Reduction Exception. Amounts deducted as a
surviving spouse under Code Section 12-6-1171 do not reduce the $3,000 or $10,000 “general”
retirement income deduction claimed as a surviving spouse under Code Section 12-6-1170.
DEDUCTION 2: EARNED INCOME DEDUCTION - MILITARY RETIREE OF ANY
AGE WITH BOTH EARNED INCOME AND MILITARY
RETIREMENT INCOME
Maximum Amount: $17,500
Law: Code Section 12-6-1171(A)(1)
General Provision. Code Section 12-6-1171(A)(1) provides that an individual who has both
earned income (e.g., wages or income from self-employment) and military retirement income
may deduct an amount of his or her “South Carolina earned income” from South Carolina
taxable income equal to the amount of military retirement income that is included in South
Carolina taxable income. The maximum deduction amount is $17,500. 16
Married Taxpayer – Joint Return Deduction Computation. When computing the earned income
deduction on a return having a filing status “married filing joint,” the earned income reported by
the military retiree is traced separately for the military spouse. Code Section 12-6-1171(A)(1).
Reductions Required for “General” Retirement Income Deduction Claimed. Amounts deducted
from earned income under Code Section 12-6-1171 reduce the “general” retirement income
deduction allowed under Code Section 12-6-1170(A) discussed in Part II, as follows:
•

Separate Reduction Required for Married Taxpayer Filing a Joint Return. Taxpayers
filing a joint federal income tax return must reduce their “general” retirement income
deduction under Code Section 12-6-1170 as it applies to each individual separately. As
such, any reduction only applies to the amount the individual claiming the deduction
pursuant to Code Section 12-6-1171 otherwise could have claimed under Code Section
12-6-1170 if the individual had not filed a joint return. Code Section 12-6-1170(C).

Surviving Spouse Deduction Amount. A surviving spouse receiving military retirement income
that is attributable to the deceased spouse is allowed the $17,500 earned income deduction in the
same manner as it applied to the deceased military retiree spouse. The surviving spouse’s
deduction is the lessor of: (1) his earned income, (2) his taxable military retirement income
received attributable to the deceased military spouse, or (3) $17,500. Code Sections 12-61171(A)(1) and 12-6-1171(C).
The deduction was phased in from tax years 2016 – 2020. The maximum deduction for tax years 2020 and
thereafter is $17,500. The maximum deduction was $14,600 for tax year 2019; $11,700 for tax year 2018, $8,800 in
tax year 2017; and $5,900 in tax year 2016.
16

33

Surviving Spouse Reduction Exception. Amounts deducted as a surviving spouse under Code
Section 12-6-1171 do not reduce the general retirement income deduction allowed under Code
Section 12-6-1170(A) (see Part II of the general retirement income deduction discussed above).
Note: The earned income deduction does not reduce the retiree’s military retirement income
deduction.
QUESTIONS AND ANSWERS – CODE SECTION 12-6-1171 MILITARY DEDUCTIONS
Earned Income Deduction For Any Age With Military Retirement (Up to $17,500)
and Military Retirement Age 65 and Older Deduction (Up to $30,000).

1. Q. What is “military” retirement income for purposes of the deductions allowed by Code
   Section 12-6-1171?
   A. Code Section 12-6-1171(B) defines the term “retirement income,” as used in this section,
   to mean the total of all otherwise taxable income not subject to a penalty for premature
   distribution17 received by the taxpayer or the taxpayer’s surviving spouse in a taxable
   year from a qualified military retirement plan.
   For purposes of a surviving spouse, “retirement income” also includes a retirement
   benefit plan and dependent indemnity compensation related to the deceased spouse’s
   military service.
2. Q. Who qualifies as “military” for purposes of their military retirement income when
   determining eligibility for the deductions allowed by Code Section 12-6-1171?
   A. Resident individuals who actively served in the following areas prior to retirement who
   receive military retirement income are eligible for the deductions in Code Section 12-61171: 18
3. Active duty in the Armed Forces of the United States (i.e., Army, Navy, Air Force,
   Marine Corps, and Coast Guard) and
4. Active service in a state National Guard, or reserve component of the Army, Navy,
   Air Force, Marine Corps, and Coast Guard (excluding retirement benefits received
   from the United States or any state for the customary annual training period not to
   exceed 15 days for guard members or 14 days plus travel time for reserve members,
   weekend drills, and inactive duty training 19).
   17
   South Carolina does not impose a penalty for premature distribution. This penalty is imposed for federal income
   tax purposes under Internal Revenue Code Section 72(t).
   18
   Generally, qualified military retirement plans are administered by either the Department of Defense’s Defense
   Finance and Accounting Service (DFAS) or the Department of Homeland Security’s U.S. Coast Guard Pay and
   Personnel Center (USCG). Treasury Reg. Section 1.61-11(a) provides, in general, pensions and retirement
   allowances paid either by the Government or by private persons constitute gross income unless excluded by law.
   19
   See Code Section 12-6-1120(7) and SC Revenue Ruling #09-16 for more information.

34

Examples of individuals not eligible for the deductions in Code Section 12-6-1171
include those receiving retirement income from service in the following: (1) American
Red Cross service to the Armed Forces; (2) Civilian employees of the United States
Coast Guard or Department of Defense; (3) Civilian employment of a military employer;
(4) National Guard or reserve component of the Armed Forces, unless such retirement is
attributable to active military service; (5) National Oceanic and Atmospheric
Administration; (6) Public Health Service; (7) Salvation Army; (8) South Carolina State
Guard; (9) Other private, nonprofit, or governmental organizations providing services to
the Armed Forces; and (10) United States Merchant Marines.

3. Q. Is retirement income that is not included in South Carolina taxable income eligible for the
   deductions in Code Section 12-6-1171?
   A. Based on the definition of “retirement income” in Code Section 12-6-1171(B), retirement
   income eligible for the deduction must otherwise be taxable income. Examples of
   military income not included in South Carolina taxable income are the portion of pension
   or retirement income received by retired service personnel, residents of this State, that
   can be attributed to time served in the National Guard or Reserve components of the
   Armed Forces of the United States. The non-taxable portion is determined by using a
   ratio of the time actually served in the National Guard or Reserve to the total time spent
   in military service, times total yearly pension or retirement. See Code Section 12-61120(7) and Regulation 117-640.3, “National Guard or Reserve Pension or Retirement
   Income.”
4. Q. What is “earned income”?
   A. Code Section 12-6-3330 defines “earned income” as income that is earned income within
   the meaning of Internal Revenue Code Section 911(d)(2) or 401(c)(2) and is taxable in
   South Carolina, with certain listed exceptions. Examples include: wages or income from
   self-employment.
5. Q. Is a military retiree age 65 or older allowed both the maximum “military” retirement
   income deduction and the maximum “general” retirement income deduction or “general”
   age 65 and older deduction?
   A. No. Code Section 12-6-1170(C)(1) reduces the two deductions under Code Section 12-61170 for a military retiree. For example, if a military retiree over age 65 has $50,000 of
   military retirement income, then the maximum age 65 and older “military” retirement
   income deduction allowed is $30,000 under Code Section 12-6-1171. The $10,000
   “general” retirement income deduction under Code Section 12-6-1170(A) and the
   “general” age 65 and older deduction for any type of income of $5,000 ($15,000
   maximum “general” age 65 and older deduction less $10,000“general” retirement income
   deduction) under Code Section 12-6-1170(B) for the military retiree is reduced to $0 after
   complete offset by the $30,000 military retirement income deduction. However, this
   computation is different for a civilian spouse or a military retiree’s surviving spouse. See
   Examples 3 and 5 below.

35

6. Q. Is a military retiree eligible for both deductions in Code Section 12-6-1171 – the age 65
and older “military” retirement income deduction and the earned income deduction for
any age?
A. Yes. Code Section 12-6-1171(A)(1) provides an earned income deduction to an
individual of any age who has both earned income and military retirement income. Code
Section 12-6-1171(A)(2) further provides a military retirement income deduction for a
military retiree age 65 and older who has qualified military retirement income. The
statute does not require one deduction to reduce the other deduction. Accordingly, the
total maximum deduction allowed to a military retiree under Code Section 12-6-1171 is
$47,500 (up to a $17,500 earned income deduction and up to a $30,000 age 65 and older
military retirement income deduction). See Examples 2, 3, and 4 below.
SURVIVING SPOUSE AND YEAR OF DEATH ISSUES

7. Q. Do the reductions required in Code Section 12-6-1170(A) and (B) for computing the
   “general” retirement income deduction for any age and for computing the “general” age
   65 and older deduction reducing any type of income applicable to a military retiree apply
   to a surviving spouse who is receiving qualified “military” retirement income attributable
   to the deceased military spouse?
   A. No. Code Section 12-6-1170(C) provides exceptions for a surviving spouse receiving
   military retirement income that is attributable to the deceased spouse(s) from the two
   reductions required for a military retiree.
   General Retirement Income Deduction – No Reduction for Amount Claimed as a
   Surviving Spouse. A surviving spouse receiving retirement income that is attributable to
   the deceased spouse computes the “general” retirement income deduction under Code
   Section 12-6-1170(A) (i.e., the $3,000 or $10,000 deduction) in the same manner that the
   deduction would have applied to the deceased spouse had he or she been living on
   December 31st of the current tax year, except the surviving spouse is not required to
   reduce the “general” retirement deduction by the “military” retirement deduction.
   Age 65 and Older Deduction of the Living Taxpayer – No Reduction for Amount
   Claimed as a Surviving Spouse. The age 65 and older deduction continues to be reduced
   by any amount the surviving taxpayer deducts as a general retirement income deduction
   attributable to his or her own retirement income. However, amounts deducted as a
   surviving spouse under the “general” retirement deduction in Code Section 12-6-1170(A)
   for retirement income attributable to a deceased spouse do not reduce the surviving
   spouse’s age 65 and older deduction (i.e., the deduction up to $15,000 against any type of
   income) under Code Section 12-6-1170(B).

36

8. Q. On what date is the age determined for a military retiree who dies in the tax year for
purposes of eligibility for the “military” retirement income deduction for an individual
age 65 and older in Code Section 12-6-1171(A)(2)?
A. For purposes of calculating the deduction in Code Section 12-6-1171(A)(2), in the year of
death and thereafter, the age of the deceased military spouse had he or she been living on
December 31st of the current tax year is used to calculate the deduction amount; the age
of the deceased military spouse on the date of death or the age of the surviving spouse is
not used to determine the deduction amount attributable to the deceased military spouse.

9. Q. If a surviving spouse is receiving military retirement income attributable to his deceased
   military spouse, is he eligible for the $17,500 earned income deduction in Code Section
   12-6-1171(A)(1), in the same manner as his deceased military spouse?
   A. Yes. Code Section 12-6-1171(A)(1) allows an individual taxpayer who has military
   retirement income each year to deduct an amount of South Carolina earned income from
   South Carolina taxable income equal to the amount of military retirement income that is
   included in South Carolina taxable income, not to exceed $17,500. For purposes of a
   surviving spouse, “retirement income” includes retirement income from a qualified
   military retirement plan as a surviving spouse and a retirement benefit plan and
   dependent indemnity compensation related to the deceased spouse’s military service.
   For example, assume a surviving spouse is receiving military retirement income
   attributable to his deceased spouse and is employed as a security guard at a private
   business. Code Section 12-6-1171(C) and (A)(1) permits the surviving spouse to reduce
   his earned income by the lesser of: (1) his earned income, (2) taxable military retirement
   income attributable to the deceased military spouse, or (3) $17,500.
10. Q. Is a surviving spouse allowed a “general” retirement income deduction for his own
    retirement income, a “general” age 65 and older deduction, a separate “general”
    retirement income deduction for retirement income received that is attributable to the
    deceased military spouse, and a separate “military” retirement income deduction for
    military retirement income received that is attributable to the deceased military spouse?
    A. Yes. A surviving spouse 65 or older is eligible for his own “general” retirement income
    deduction of up to $10,000, his own “general” age 65 and older deduction of $15,000
    (reduced by his own general retirement deduction, if any). If the surviving spouse is also
    receiving retirement income attributable to the deceased military spouse who would have
    been 65 or older had she been living in the current tax year, then the surviving spouse is
    also eligible for a separate $10,000 “general” retirement income deduction as a surviving
    spouse. In addition, if the surviving spouse is also receiving “military” retirement income
    attributable to the deceased military spouse, then he is eligible for up to $30,000
    “military” retirement income deduction. The maximum deductions in this example
    available to the taxpayer under Code Sections 12-6-1170 and 12-6-1171(A)(2) would be
    $55,000. Any separate surviving spouse calculation for retirement income that is
    attributable to the deceased spouse does not affect the living spouse’s deductions allowed
    under Code Section 12-6-1171 or Code Section 12-6-1170. See Code Sections 12-61171(C) and 12-6-1170(C)(1). See Example 5 below.
    37

11. Q. In the year of death, can the surviving spouse also receive a surviving spouse “general”
retirement income deduction under Code Section 12-6-1170 if the deceased spouse also
claims a “general” retirement income deduction on the final joint income tax return?
A. Yes. Code Sections 12-6-1171(C) and 12-6-1170(C)(1) allow a surviving spouse a
separate, additional general retirement income deduction for retirement income received
by the survivor that is attributable to the deceased spouse. See Example 4 below.

38

EXAMPLES
Military Retiree or Surviving Spouse - Earned Income Deduction
and
Age 65 and Older Military Retirement Income Deduction
Examples Calculating Each Deduction:
Example 1 – Both Spouses are under Age 65
Example 2 – Single Military Retiree Age 65 or Older
Example 3 – Both Spouses are Age 65 or Older. One has military retirement income.
Example 4 – Military Spouse Dies during the Year at Age 70. Surviving Spouse is Age 65.
Example 5 – Year Following Death of Military Spouse. Surviving Spouse is Age 65 or Older.
Important Points to Remember and Assumptions Used in Examples
• The examples assume all retirement income is qualifying retirement income.
• The examples apply to any legal marriage. When necessary, to clearly illustrate a specific person’s
income or deduction amounts, the examples will refer to one spouse as the “husband” and the other
spouse as the “wife.” In examples illustrating military retiree deductions, it is assumed the “wife” is the
military retiree.
• The examples use the term “general” retirement income deduction and “general” age 65 and older
deduction to refer to the Code Section 12-6-1170 deductions and the term “military” retirement income
deduction to refer to the Code Section 12-6-1171(A)(2) deduction.
• The age of a deceased individual had he or she been living on December 31st of the current tax year is
used to calculate the deduction amounts (i.e., the deceased continues to age in the current tax year and
thereafter, without regard to the actual date and year of his or her death).
• The deductions in Code Section 12-6-1171 were both phased in from 2016 to 2020. This advisory
opinion uses the fully phased-in credit amounts - $17,500 for the deduction in Code Section 12-61171(A)(1) and $30,000 for the deduction in Code Section 12-6-1171(A)(2).
• NOTE: For taxpayer’s filing original or amended returns for years prior to 2020, the phased-in amounts
below should be used to compute the applicable prior year deduction allowed in Code Section 12-61171:
Code Section 12-6-1171(A)(1) – Earned Income Deduction: The deduction was phased in from tax
years 2016 – 2020. The maximum deduction for tax years 2020 and thereafter is $17,500. The
maximum deduction was $14,600 for tax year 2019; $11,700 for tax year 2018, $8,800 in tax year
2017; and $5,900 in tax year 2016.
Code Section 12-6-1171(A)(2) – “Military” Retirement Income Deduction: The maximum
deduction for tax years 2020 and thereafter is $30,000. The maximum deduction was $27,000 for
tax year 2019; $24,000 for tax year 2018; $21,000 for tax year 2017; and $18,000 for tax year 2016.

39

EXAMPLE 1 – Both Spouses are under Age 65 - Filing Status “Married Filing Joint”
Facts: Married couple filing a joint return has the following SC taxable income:
Wife (Age 50) – Military Retiree:
Earned income - $100,000
Retirement income (Military) - $45,000

Husband (Age 60) - Civilian:
Earned income - $6,000
Retirement income - $4,000

Deduction Calculation: Military Retiree Earned Income Deduction = $17,500; “General” Retirement
Income Deduction = $3,000. Total $20,500 deduction on the joint return.
Income
Reported on
Joint Return
(traced to
each
individual)

Income:
Earned Income – Husband
Retirement Income
(Non-military) –
Husband - Age 60
Earned Income – Wife
Retirement Income
(Military) –
Wife - Age 50
SC Taxable Income before
Adjustments
Military Deductions:
Earned Income Deduction
12-6-1171(A)(1)
Military Retirement Income
Deduction for Age 65 and
Older
12-6-1171(A)(2)
General Deductions:
Wife – Age 50
General Retirement Income
Deduction
12-6-1170(A)(1)
Husband – Age 60
General Retirement Income
Deduction
12-6-1170(A)(1) and (C)
Joint Return - Age 65 and
Older Deduction
12-6-1170(B)
Total SC Deduction on
Joint Return

$
$

Military Retiree
Earned Income
Deduction –
Any age
Military Retiree
with Both
Earned Income
and Military
Retirement
Income

Military
Retirement
Income
Deduction - Age
65 and Older
Deduction
Reported on
Joint Return

General
Retirement
Income
Deduction

6,000
4,000

General Age 65
and Older
Deduction

SC Taxable
Income
Computation

$
$

6,000
4,000

$100,000
$ 45,000

$100,000
$ 45,000

$155,000

$155,000
$17,500

($17,500)

$0 – offset
completely by
earned income
deduction
$3,000

($0)

($3,000)

($0)
$20,500

40

Important Rules for Military Deductions and Exceptions to General Deduction Rules for This Example:
• Steps to Calculate Deductions on a Joint Return - The deductions in Code Sections 12-6-1171 and 12-61170 should be calculated in a specific order – first calculate all deductions for the military retiree and
then calculate all deductions for the civilian spouse.
• The earned income deduction is calculated only on the military individual’s retirement income and
earned income; it is not calculated on joint income amounts. Code Section 12-6-1171(A)(1).
• The earned income deduction is the lesser of: (1) earned income of the military individual, (2) taxable
military retirement income of the individual, or (3) the $17,500 maximum deduction allowed. Code
Section 12-6-1171(A)(1).
• The “general” retirement income deduction is computed separately for each individual taxpayer on the
joint return (i.e., the total retirement income is not combined when computing the deduction). Code
Section 12-6-1170(C)(2).
• The general retirement income deduction for the military retiree is reduced by the earned income
deduction claimed. Code Section 12-6-1170(C)(1).
Explanation:
Step 1: Calculate Earned Income Deduction of Military Retiree:
The earned income deduction of the wife is the lesser of: (1) earned income of the military individual
($100,000), (2) taxable military retirement income ($45,000), or (3) $17,500. Therefore, the wife’s earned
income deduction is $17,500; this deduction reduces her $100,000 taxable earned income to $82,500. No
portion of the military spouse’s earned income deduction offsets the husband’s earned income this year.
Step 2: Calculate “General” Retirement Income Deduction of Military Spouse – Caution: A
“Reduction” Calculation (an exception to the General Rule) Applies to the Retiree’s Calculation:
The general retirement income deduction for the original owner of a retirement plan under age 65 is the
lesser of: (1) the amount of qualified retirement income received or (2) $3,000. This result is further
reduced by the earned income deduction claimed in Step 1. Therefore, since the wife (a military retiree)
claimed a $17,500 earned income deduction, her $3,000 “general” retirement income deduction is
reduced to $0 ($3,000 less $17,500). Note: The answer would be different if the wife had $0 earned
income; she would then be allowed a $3,000 “general” retirement income deduction, but $0 military
retiree earned income deduction.
Step 3: Calculate Civilian Spouse “General” Retirement Income Deduction
The general retirement income deduction for the original owner of a retirement plan under age 65 is the
lesser of: (1) the amount of qualified retirement income received or (2) $3,000. Since the husband (a
civilian) received $4,000 in qualified retirement income, his general retirement income deduction is the
maximum $3,000 this year.

41

EXAMPLE 2 – Single Military Retiree Age 65 or Older - Filing Status “Single”
Facts: Individual (Military Retiree) age 65 has the following SC taxable income:
Earned income from a civilian job - $20,000
Retirement income from a civilian pension - $10,000
Retirement income from a military pension - $40,000
Deduction Calculation: Military Retiree Earned Income Deduction= $17,500; “Military” Retirement
Income Deduction = $30,000. Total $47,500 deduction on the single return.
Income
Reported on
Single
Return

Income:
Earned Income
Retirement Income
(Non-military) –
Age 65
Retirement Income
(Military) –
Age 65
SC Taxable Income before
adjustments
Military Deductions:
Earned Income Deduction
12-6-1171(A)(1)
Military Retirement Income
Deduction for Age 65 and
Older
12-6-1171(A)(2)
General Deductions:
Taxpayer – Age 65
“General” Retirement
Income Deduction
12-6-1170(A)(1)
Age 65 and Older
Deduction
12-6-1170(B)

Military Retiree
Earned Income
Deduction –
Any age
Military Retiree
with Both
Earned Income
and Military
Retirement
Income

Military
Retirement
Income
Deduction - Age
65 and Older
Deduction
Reported on
Single Return

General
Retirement
Income
Deduction and
General Age 65
and Older
Deduction

SC Taxable
Income
Computation

$20,000
$10,000

$20,000
$10,000

$40,000

$40,000

$70,000

$70,000
$17,500

($17,500)
$30,000

($30,000)

$0 – after offset
by Section 126-1171
deduction
$0 – after offset
by Section 126-1171
deduction

Total SC Deduction on
Single Return

($0)

($0)

$47,500

Important Rules for Military Deductions and Exceptions to General Deduction Rules for This Example:
• Steps to Calculate Deductions for a Single Taxpayer - The deductions in Code Section 12-6-1171
should be calculated first and then the deductions in Code Section 12-6-1170 should be calculated.
• An individual’s earned income military retirement deduction is the lesser of: (1) earned income of the
military individual, (2) military retirement income of the individual, or (3) the $17,500 maximum
deduction allowed. Code Section 12-6-1171(A)(1).
42

• The “military” retirement income deduction for a military retiree age 65 and older who has military
retirement income is the lesser of: (1) the amount of qualified military retirement income received or (2)
$30,000. Code Section 12-6-1171(A)(2).
• The earned income deduction does not reduce the “military” retirement income deduction. Code
Section 12-6-1171(A).
• A single military retiree is eligible for the general deductions provided in Code Section 12-6-1170 (i.e.,
“general” retirement income deduction and the “general” age 65 and older deduction up to $15,000
against any type of income), but these deductions are reduced by the earned income deduction and the
“military” retirement income deduction. Code Sections 12-6-1170(C)(1), 12-6-1170(A)(1), and 12-61170(B).
• The “general” retirement income deduction for the original owner of a retirement plan age 65 or older is
the lesser of: (1) the amount of qualified retirement income received or (2) $10,000. This result is
further reduced by any earned income deduction claimed. Code Sections 12-6-1170(C)(1) and 12-61170(A)(1).
• The “general” age 65 and older deduction of $15,000 against any type of income will be completely
reduced to $0 for a military retiree who claims the maximum $30,000 “military” retirement income
deduction. Code Section 12-6-1170(C)(1).
Explanation:
Step 1: Calculate Earned Income Deduction of Military Retiree:
The earned income deduction of the military retiree is the lesser of: (1) earned income of the military
individual ($20,000), (2) taxable military retirement income ($40,000), or (3) $17,500. Therefore, the
taxpayer’s earned income deduction is $17,500; this deduction reduces her $20,000 taxable earned
income to $2,500.
Step 2: Calculate “Military” Retirement Income Deduction for Age 65 and Older Military Retiree:
The “military” retirement income deduction for a military retiree age 65 and older who has military
retirement income is the lesser of: (1) the amount of qualified military retirement income received or (2)
$30,000. Since the taxpayer received $40,000 in a taxable military pension this year, she is allowed a
$30,000 military retirement income deduction.
Step 3: Calculate “General” Retirement Income Deduction for Military Individual – Caution: A
“Reduction” Calculation (an exception to the General Rule) Applies to the Retiree’s Calculation:
The “general” retirement income deduction for the original owner of a retirement plan age 65 or older is
the lesser of: (1) the amount of qualified retirement income received or (2) $10,000. This result is further
reduced by the earned income deduction claimed in Step 1 and by the “military” retirement income
deduction for age 65 and older claimed in Step 2. Therefore, since the taxpayer claimed a $17,500 earned
income deduction, her $10,000 “general” retirement income deduction is reduced to $0 ($10,000 less
$17,500).
Step 4: Calculate “General” Age 65 and Older Deduction against Any Type of Income – Caution:
A “Reduction” Calculation (an exception to the General Rule) Applies to the Retiree’s Calculation:
The “general” age 65 and older deduction against any type of South Carolina taxable income on a return
is the lesser of: (1) the taxable income or (2) $15,000, less the general retirement income deduction
claimed by the individual in Step 3. This result is further reduced by the earned income deduction claimed
in Step 1 and by the “military” retirement income deduction claimed in Step 2. The remainder, if any,
offsets any remaining South Carolina taxable income on the return. Therefore, since the taxpayer claimed
a $17,500 earned income deduction and a $30,000 “military” retirement income deduction, her $15,000
“general” age 65 and older deduction is reduced to $0 ($15,000 less $47,500).

43

EXAMPLE 3 – Both Spouses are Age 65 or Older. Wife has Military Retirement Income. Filing
Status “Married Filing Joint”.
Facts: Married couple filing a joint return has the following SC taxable income:
Wife (Age 65) – Military Retiree:
Earned income - $14,000
Retirement income (Military) - $45,000
Retirement income (Non-Military) - $9,000

Husband (Age 70) - Civilian:
Earned income - $10,000
Retirement income - $10,000

Deduction Calculations: Military Retiree Earned Income Deduction = $14,000; “Military” Retirement
Income Deduction = $30,000; “General” Retirement Income Deduction = $10,000; and “General” Age 65
and Older Deduction = $5,000. Total $59,000 deduction on the joint return.
Income
Reported on
Joint Return
(traced to
each
individual)

Income – Separate
Tracing: Military Wife
Wife – Earned Income
$14,000
Wife - Retirement Income
$45,000
(Military) –
Age 65
Wife - Retirement Income
$ 9,000
(Non-military) –
Age 65
Military Deductions:
Earned Income Deduction
12-6-1171(A)(1)
Military Retirement Income
Deduction for Age 65 and
Older
12-6-1171(A)(2)
General Deductions:
General Retirement Income
Deduction
12-6-1170(A)(1)

Military Retiree
Earned Income
Deduction –
Any age
Military Retiree
with Both
Earned Income
and Military
Retirement

Military
Retirement
Income
Deduction - Age
65 and Older
Deduction
Reported on
Joint Return

General Retirement
Income Deduction

General Age
65 and Older
Deduction

$14,000

Deductions
On SC 1040

($14,000)
$30,000

($30,000)

$0 – after complete
offset by amount
claimed under
Section 12-6-1171

Age 65 and Older
Deduction
12-6-1170(B)

44

$0 - after
complete
offset by
amount
claimed
under
Section 126-1171

Income
Reported on
Joint Return
(traced to
each
individual)

Income - Separate
Tracing: Civilian Husband
Husband – Earned Income
Husband - Retirement
Income
(Non-military) –
Age 70
General Deductions:
General Retirement Income
Deduction – Per Separate
Tracing of Husband’s
Retirement Income (Age
70)
12-6-1170(A)(1)
Age 65 and Older
Deduction Per Joint
Return
12-6-1170(B)
Total SC Deduction on
Joint Return

Military Retiree
Earned Income
Deduction –
Any age
Military Retiree
with Both
Earned Income
and Military
Retirement

Military
Retirement
Income
Deduction - Age
65 and Older
Deduction
Reported on
Joint Return

General Retirement
Income Deduction

General Age
65 and Older
Deduction

Deductions
On SC 1040

$10,000
$10,000

$10,000

($10,000)

$5,000

($5,000)

$59,000

Important Rules for Military Deductions and Exceptions to General Deduction Rules for This Example:
Computation Rules Applicable to the Joint Return:
• Steps to Calculate Deductions on a Joint Return - The deductions in Code Sections 12-6-1171 and 12-61170 should be calculated in a specific order – first calculate all deductions for the military retiree and
then calculate all deductions for the civilian spouse.
• All deductions under Code Sections 12-6-1171 and 12-6-1170 for this joint return must be calculated
separately for each spouse since military deductions under Code Section 12-6-1171 are claimed. Code
Sections 12-6-1170(C)(2) and 12-6-1171(A)(1).
• The “separate” amount of the “general” age 65 and older deduction is a maximum of $15,000 for each
spouse. However, this deduction can offset any taxable income reported on the joint return. Code
Sections 12-6-1170(C) and 12-6-1170(A)(1).
Military Retiree Computation Rules:
• The earned income deduction is calculated only on the military individual’s earned income and military
retirement income (not on the joint income). Code Section 12-6-1171(A)(1).
• An individual’s earned income military retirement deduction is the lesser of: (1) earned income of the
military individual, (2) military retirement income of the individual, or (3) the $17,500 maximum
deduction allowed. Code Section 12-6-1171(A)(1).
• The “military” retirement income deduction for a military retiree age 65 and older who has military
retirement income is the lesser of: (1) the amount of qualified military retirement income received or (2)
$30,000. Code Section 12-6-1171(A)(2).
• The earned income deduction does not reduce the military retirement income deduction. Code Section
12-6-1171(A).

45

• A military retiree is eligible for the general deductions provided in Code Section 12-6-1170, however,
the earned income deduction claimed and the military retirement income deduction claimed reduce the
two “general” deductions allowed under Code Section 12-6-1170. Code Sections 12-6-1170(C), 12-61170(A)(1), and 12-6-1170(B).
• The “general” retirement income deduction for the original owner of a retirement plan age 65 or older is
the lesser of: (1) the amount of qualified retirement income received or (2) $10,000. This result is
further reduced by the earned income deduction claimed. Code Sections 12-6-1170(C) and 12-61170(A)(1).
Civilian Computation Rules:
• The “general” retirement income deduction for the civilian is computed separately from the military
spouse using the general rules in Part II, but it is not further reduced by any earned income deduction
claimed by the spouse. Code Sections 12-6-1170 and 12-6-1170(C)(2).
• The age 65 and older deduction for the civilian spouse is the lesser of: the income reported on the joint
return or $15,000. The deduction is not limited to only the civilian spouse’s separate income; it can
offset any remaining taxable income on the joint return. Code Section 12-6-1170(B).
Explanation:
Step 1: Calculate Earned Income Deduction of Military Retiree:
The earned income deduction of the wife is the lesser of: (1) earned income of the military individual
($14,000), (2) taxable military retirement income ($45,000), or (3) $17,500. Therefore, the wife’s earned
income deduction is $14,000; this deduction reduces her $14,000 taxable earned income to $0.
Step 2: Calculate “Military” Retirement Income Deduction for Age 65 and Older Military Retiree:
The “military” retirement income deduction for a military retiree age 65 and older who has military
retirement income is the lesser of: (1) the amount of qualified military retirement income received or (2)
$30,000. Since the taxpayer received $45,000 in a taxable military pension this year, she is allowed a
$30,000 military retirement income deduction.
Step 3: Calculate “General” Retirement Deduction for Military Individual – Caution: “Reduction”
Calculations (an exception to the General Rule) Apply to the Retiree’s Calculation:
The “general” retirement income deduction for the original owner of a retirement plan age 65 or older is
the lesser of: (1) the amount of qualified retirement income received or (2) $10,000. This result is further
reduced by the earned income deduction claimed in Step 1 and by any “military” retirement income
deduction claimed in Step 2. Therefore, since the taxpayer claimed a $14,000 earned income deduction,
her $10,000 “general” retirement income deduction is reduced to $0 ($10,000 less $14,000).
Step 4: Calculate “General” Age 65 and Older Deduction against Any Type of Income – Caution:
A “Reduction” Calculation (an exception to the General Rule) Applies to the Retiree’s Calculation:
The “general” age 65 and older deduction against any type of South Carolina taxable income on a return
is the lesser of: (1) the joint taxable income or (2) $15,000, less the general retirement income deduction
claimed by the retiree in Step 3. This result is further reduced by the earned income deduction claimed in
Step 1 and by the “military” retirement income deduction for an age 65 and older retiree claimed in Step

2. The remainder, if any, offsets any remaining South Carolina taxable income on the joint return.
   Therefore, since the military retiree taxpayer (the wife) claimed a $14,000 earned income deduction and a
   $30,000 “military” retirement income deduction, her $15,000 “general” age 65 and older deduction is
   reduced to $0 ($15,000 less $44,000).
   Step 5: Calculate Civilian Spouse “General” Retirement Income Deduction:
   The “general” retirement income deduction for the original owner of a retirement plan age 65 and older is
   the lesser of: (1) the amount of qualified retirement income received or (2) $10,000. Since the husband
   received $10,000 in qualified retirement income, his “general” retirement income deduction is the
   maximum $10,000 this year.
   46

Step 6: Calculate Civilian Spouse “General” Age 65 and Older Deduction against Any Type of
Income – Computed Separately from Military Spouse, but Applies to Joint Income:
The “general” age 65 and older deduction against any type of South Carolina taxable income on a joint
return is computed “as if separate” and is the lesser of: (1) the joint taxable income or (2) $15,000, less
the “general” retirement income deduction claimed by the civilian taxpayer. Therefore, the $15,000 age
65 deduction on the joint return, after reduction of the civilian husband’s $10,000 “general” retirement
income deduction, may reduce up to $5,000 ($15,000 less $10,000) of any remaining taxable income on
the joint return (e.g., earned income or retirement income of either spouse).
Note: The answer would remain the same if the husband’s only income was $10,000 of civilian retirement
income and $0 earned income. The $15,000 age 65 deduction, after reduction of the husband’s $10,000
retirement income deduction, may reduce $5,000 ($15,000 less $10,000) of any of the military retiree
wife’s remaining taxable income on the joint return (e.g., military or non-military retirement income).

47

EXAMPLE 4 – Military Wife Dies during the Tax Year at Age 70. Surviving Husband is Age 65 or
Older - Filing Status “Married Filing Joint”.
Facts: Married couple filing a joint return has the following SC taxable income:
Husband (Age 70) – Civilian (Surviving Spouse)
Earned income - $10,000
Dividend income - $8,000
Retirement income (self; non-military) - $0
Retirement income (spousal IRA) - $3,000

Wife (Age 65) – Military Retiree:
Earned income - $18,500
Retirement income (Military) - $35,000
Retirement income (Non-Military) - $10,000
Wife received income prior to death

Deduction Calculation: Military Retiree Earned Income Deduction = $17,500; “Military” Retirement
Income Deduction = $30,000; “General” Age 65 and Older Deduction against Any Type of Income =
$15,000; Surviving Spouse “General” Retirement Income Deduction = $3,000. Total $65,500 deduction
on the joint return.
Income
Reported on
Joint Return
(traced to
each
individual)
Income – Separate
Tracing of Military Wife
Earned Income and
Retirement:
Wife - Earned Income
$18,500
Wife - Retirement Income
$35,000
(Military) –
Age 65
Wife - Retirement Income
$10,000
(Non-military) –
Age 65
Military Deductions:
Earned Income Deduction
12-6-1171(A)(1)
Military Retirement Income
Deduction for Age 65 and
Older
12-6-1171(A)(2)
General Deductions:
General Retirement Income
Deduction – Per Wife Only
12-6-1170(A)(1)

Military Retiree
Earned Income
Deduction – Any
Age Military
Retiree with Both
Earned Income
and Military
Retirement

Military
Retirement
Income
Deduction - Age
65 and Older
Deduction
Reported on
Joint Return

General Retirement
Deduction –
As Taxpayer(s) or
As Surviving
Spouse

General Age
65 and Older
Deduction

$17,500

Deductions
On SC 1040

($17,500)
$30,000

($30,000)

$0 - after complete
offset by amount
claimed under
Section 12-6-1171

Age 65 and Older
Deduction – Per Wife Only
12-6-1170(B)

48

$0 - after
complete
offset by
amount
claimed under
Section 12-61171

Income
Reported on
Joint Return
(traced to
each
individual)

Income - Civilian
Husband Wages and
Retirement:
Earned Income - Husband
Dividend Income Husband
Husband - Retirement
Income
(Non-military) –
Age 70
General Deductions:
General Retirement Income
Deduction – Per Husband
Only
12-6-1170(A)(1)
Age 65 and Older
Deduction – Per Joint
Return
12-6-1170(B)
As Surviving Spouse –
General Retirement Income
Deduction 12-6-1170(A)(1)
– Spousal IRA Inherited
(Non-military)
Total SC Deduction on
Joint Return

Military Retiree
Earned Income
Deduction – Any
Age Military
Retiree with Both
Earned Income
and Military
Retirement

Military
Retirement
Income
Deduction - Age
65 and Older
Deduction
Reported on
Joint Return

General Retirement
Deduction –
As Taxpayer(s) or
As Surviving
Spouse

General Age
65 and Older
Deduction

Deductions
On SC 1040

$10,000
$ 8,000
$0

N/A

($0)

$15,000

$ 3,000

$3,000

($15,000)

($ 3,000)

$65,500

Important Rules for Military Deductions and Exceptions to General Deduction Rules for This Example:
Computation Rules Applicable to the Joint Return:
• Steps to Calculate Deductions on a Joint Return - The deductions in Code Sections 12-6-1171 and 12-61170 should be calculated in a specific order – first calculate all deductions for the military retiree;
calculate all deductions for the civilian spouse; and then calculate all surviving spouse deductions.
• All deductions under Code Sections 12-6-1171 and 12-6-1170 for this joint return must be calculated
separately for each spouse (one computation for the husband and one computation for the wife) since
military deductions under Code Section 12-6-1171 are claimed. Code Sections 12-6-1170(C) and 12-61171(A).
• The “separate” amount of the “general” age 65 and older deduction is a maximum of $15,000 for each
spouse. However, this deduction can offset any taxable income reported on the joint return. Code
Sections 12-6-1170(C) and 12-6-1170(A)(1).
Military Retiree Computation Rules:
• The earned income deduction and “military” retirement income deduction are calculated only on the
military individual’s retirement income and earned income; they are not calculated on joint income
amounts (i.e., earned income and retirement income is traced separately for each spouse). Code Section
12-6-1171(A)(1).
49

• The earned income deduction does not reduce the “military” retirement income deduction. Code
Section 12-6-1171(A).
• A military retiree is eligible for the general deductions provided in Code Section 12-6-1170, however,
the earned income deduction claimed and the military retirement income deduction claimed reduce the
two “general” deductions allowed under Code Section 12-6-1170. Code Sections 12-6-1170(C), 12-61170(A)(1), and 12-6-1170(B).
Civilian Computation Rules:
• The “general” retirement income deduction for the civilian is computed separately from the military
spouse using the general rules in Part II, but it is not further reduced by any earned income deduction
claimed by the spouse. Code Sections 12-6-1170 and 12-6-1170(C)(2).
• The age 65 and older deduction for the civilian spouse is the lesser of: (1) the income reported on the
joint return or (2) $15,000. The deduction is not limited to only the civilian spouse’s separate income; it
can offset any remaining taxable income on the joint return. Code Section 12-6-1170(B).
Surviving Spouse Rules:
• A surviving spouse is also allowed a separate, additional general retirement income deduction for
retirement income received by the survivor that is attributable to the deceased spouse. The deduction is
computed in the same manner that the deduction would apply to the deceased had she been living in the
current tax year. Code Sections 12-6-1170(A)(2) and 12-6-1170(C)(1).
• The age 65 and older deduction is NOT reduced by amounts deducted as a “surviving spouse” for the
separate, general retirement income deduction. Code Sections 12-6-1170(C), 12-6-1170(A)(1), and 126-1170(B).
• Additional surviving spouse deductions are allowed in the year of death of the military retiree spouse
for income attributable to the deceased spouse. This includes the earned income deduction and the
military retirement income deduction for military retirement income received after the spouse’s death
that are attributable to the deceased spouse. Code Section 12-6-1171(C).
Explanation:
Step 1: Calculate Earned Income Deduction of Military Retiree:
The earned income deduction of the wife is the lesser of: (1) earned income of the military individual
($18,500), (2) taxable military retirement income ($35,000), or (3) $17,500. Therefore, the wife’s earned
income deduction is $17,500; this deduction reduces her $18,500 taxable earned income to $1,000.
Step 2: Calculate “Military” Retirement Income Deduction for Age 65 and Older Military Retiree:
The “military” retirement income deduction for a military retiree age 65 and older who has military
retirement income is the lesser of: (1) the amount of qualified military retirement income received or (2)
$30,000. Since the taxpayer (wife) received $35,000 in a taxable military pension this year, she is allowed
a $30,000 military retirement income deduction.
Step 3: Calculate “General” Retirement Deduction for Military Individual – Caution: “Reduction”
Calculations (an exception to the General Rule) Apply to the Retiree’s Calculation:
The “general” retirement income deduction for the original owner of a retirement plan age 65 or older is
the lesser of: (1) the amount of qualified retirement income received or (2) $10,000. This result is further
reduced by the earned income deduction claimed in Step 1 and by the “military” retirement income
deduction for age 65 and older claimed in Step 2. Therefore, since the taxpayer claimed a $17,500 earned
income deduction, her $10,000 “general” retirement income deduction is reduced to $0 ($10,000 less
$17,500).

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Step 4: Calculate “General” Age 65 and Older Deduction against Any Type of Income – Caution:
“Reduction” Calculations (an exception to the General Rule) Apply to the Retiree’s Calculation:
The “general” age 65 and older deduction against any type of South Carolina taxable income on a return
is the lesser of: (1) the taxable income or (2) $15,000, less the general retirement income deduction
claimed by the taxpayer in Step 3. This result is further reduced by the earned income deduction claimed
in Step 1 and by the “military” retirement income deduction claimed in Step 2. The remainder, if any,
offsets any remaining South Carolina taxable income on the return. Therefore, since the taxpayer claimed
a $17,500 earned income deduction and a $30,000 “military” retirement income deduction, her $15,000
“general” age 65 and older deduction is reduced to $0 ($15,000 less $47,500).
Step 5: Calculate Civilian Spouse “General” Retirement Income Deduction – As a Taxpayer:
The general retirement income deduction for the original owner of a retirement plan age 65 and older is
the lesser of: (1) the amount of qualified retirement income received or (2) $10,000. Since the husband
received $0 in qualified retirement income, his “general” retirement income deduction is the maximum $0
this year. Note: His $8,000 dividend income is not “qualified retirement income.”
Step 6: Calculate Civilian Spouse “General” Age 65 and Older Deduction against Any Type of
Income – Computed Separately from Military Spouse, but Applies to Joint Income:
The age 65 and older deduction against any type of South Carolina taxable income on a joint return is
computed “as if separate” and is the lesser of: (1) the joint taxable income or (2) $15,000, less the general
retirement income deduction claimed by the civilian taxpayer. Therefore, the $15,000 age 65 deduction
on the joint return, after reduction of the civilian husband’s $0 “general” retirement income deduction,
may reduce up to $15,000 of any remaining taxable income on the joint return (e.g., earned income,
dividend income, or retirement income of either spouse).
Step 7: Calculate Civilian Spouse “General” Retirement Income Deduction – As a Surviving Spouse:
The general retirement income deduction as a “surviving spouse” receiving retirement income that is
attributable to the deceased spouse (i.e., the deceased spouse was the original owner of the IRA) is the
lesser of: (1) the amount of qualified retirement income received or (2) $10,000. Since the husband
received $3,000 in qualified retirement income this year from the deceased spouse’s IRA, his separate,
general retirement income deduction as a surviving spouse based on the deceased wife’s age (age 65) had
she lived until December 31st of the current tax year is $3,000.

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EXAMPLE 5 – Year Following Death of Spouse. Surviving Spouse Only. Survivor is Age 71 - Filing
Status “Single”.
Facts: The individual filing a single return has the following SC taxable income:
Husband – Surviving Spouse (Age 71) – Non-military:
Earned income of survivor - $50,000
Retirement income of survivor - $25,000
Retirement income attributable to deceased spouse - $45,000 (Military)
Retirement income attributable to deceased spouse - $10,000 (Non-military)
Wife Deceased in prior year (Age 66, if still living)
Deduction Calculation: General Retirement Income Deduction for Any Age and Age 65 and Older
Deduction for Any Type of Income = $10,000; Deduction Amounts Allowed to a Surviving Spouse =
$57,500. Total $72,500 deduction on the single return.
Income
Reported on
Single
Return

Income:
Earned Income of Survivor
Retirement Income of
Survivor
(Non-military)
Retirement Income –
Received from deceased
spouse account
(Military)
Retirement Income –
Received from deceased
spouse account
(Non-Military)
SC Taxable Income before
adjustments
General Deductions:
Taxpayer - General
Retirement Income
Deduction –
12-6-1170(A)(1)
Taxpayer - General Age
65 and Older Deduction
12-6-1170(B)

General
Retirement
Income
Deduction
Reported on
Single Return
(Age 71)

12-6-1170 and
12-6-1171
Deductions
Allowed to a
Surviving
Spouse

Age 65 and Older
Deduction
Reported on
Single Return

SC Taxable
Income
Computation

$50,000
$25,000

$50,000
$25,000

$45,000

$45,000

$10,000

$10,000

$130,000

$130,000
$10,000

($10,000)

$5,000 – offset
partially by
general retirement
deduction

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($5,000)

Income
Reported on
Single
Return

Military Deductions:

General
Retirement
Income
Deduction
Reported on
Single Return
(Age 71)

As Surviving Spouse Military Earned Income
Deduction
12-6-1171(A)(1)
As Surviving Spouse Military Retirement
Income Deduction for Age
65 and Older
12-6-1171(A)(2)
As Surviving Spouse General Retirement Income
Deduction (Age 66, if still
living)
12-6-1170(A)(1)
Total SC Deduction on
Single Return

12-6-1170 and
12-6-1171
Deductions
Allowed to a
Surviving
Spouse

Age 65 and Older
Deduction
Reported on
Single Return

SC Taxable
Income
Computation

$17,500

($17,500)

$30,000

($30,000)

$10,000

($10,000)

$72,500

Important Rules for Military Deductions and Exceptions to General Deduction Rules for This Example:
Computation Rules Applicable to the Single Return with Deductions as a Surviving Spouse of a
Deceased Military Retiree:
• The “general” retirement income deduction should be separately calculated first for the taxpayer based
on the taxpayer’s own retirement income. Code Sections 12-6-1170(A)(1) and 12-6-1170(C)(1).
• The “general” retirement income deduction should then be separately calculated for amounts
attributable to the deceased spouse based on the deceased’s originally owned retirement income
(civilian or military). Any amounts deducted as a surviving spouse do not reduce the taxpayer’s general
retirement income deduction. Code Sections 12-6-1170(A)(3) and 12-6-1170(C)(1).
• Under the general rule, the $15,000 age 65 and older general deduction that applies to return with a
filing status “single” is reduced by any amount the taxpayer deducts as a general retirement income
deduction, however, any amounts deducted as a surviving spouse do not reduce the taxpayer’s general
age 65 and older deduction. Code Section 12-6-1170(B).
• A surviving spouse receiving military retirement income that is attributable to the deceased spouse is
eligible for the earned income deduction and military retirement income deduction, as if the surviving
spouse “steps in the shoes” of the deceased. Any earned income deduction or military retirement
income amounts deducted as a “surviving spouse” do not reduce the taxpayer’s “general” retirement
income deduction or the taxpayer’s age 65 and older deduction. Code Section 12-6-1171(A) and 12-61171(C).
• A surviving spouse receiving retirement income that is attributable to the deceased spouse applies the
deduction eligibility and amounts based on the age of the deceased spouse, as if the deceased was living
on December 31st of the current tax year. Code Section 12-6-1171(C).
NOTE: See Part II, Question 10 above for information on calculating the general retirement income
deduction if the qualified retirement accounts of the deceased spouse and the surviving spouse are not
maintained in separate accounts.
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Explanation:
Calculation of Deductions – “As the Taxpayer”
Step 1: Calculate Taxpayer’s “General” Retirement Income Deduction:
The general retirement income deduction for the original owner of a retirement plan age 65 and older is
the lesser of: (1) the amount of qualified retirement income received or (2) $10,000. Since the single
taxpayer (surviving husband) received $25,000 in his own qualified retirement income, his general
retirement income deduction is the maximum $10,000 this year.
Step 2: Calculate Taxpayer’s “General” Age 65 and Older Deduction against Any Type of Income:
The “general” age 65 and older deduction against any type of South Carolina income is the lessor of: (1)
the taxable income on the single return or (2) $15,000, less the general retirement income deduction
claimed by the individual taxpayer age 65 or older in Step 1. This result is NOT further reduced by any
amounts deducted as a surviving spouse below. The remainder offsets any remaining taxable income on
the return. Therefore, the husband’s age 65 and older deduction is $5,000 ($15,000 less husband’s
$10,000 general retirement income deduction). The $5,000 deduction can offset any remaining taxable
income on the return (e.g., earned income, retirement income, or income inherited from the deceased
spouse).
Calculation of Deductions – As a Surviving Spouse “Stepping Into the Shoes” of the Deceased
Military Spouse:
Step 3: Calculate Earned Income Deduction - As a Surviving Spouse:
The earned income deduction applies to the surviving spouse in the same manner as it applied to the
deceased military retiree. The surviving spouse’s deduction is the lesser of: (1) his earned income
($50,000), (2) his taxable military retirement income received attributable to the deceased military spouse
($45,000), or (3) $17,500. Therefore, the surviving spouse’s earned income deduction is $17,500; this
deduction reduces his $50,000 taxable earned income from any source to $32,500.
Step 4: Calculate the Military Retirement Income Deduction for Age 65 and Older – As a Surviving
Spouse:
The “military” retirement income deduction applies to the surviving spouse in the same manner as it
applied to the deceased military retiree. The surviving spouse’s “military” retirement income deduction
for a military retiree who would have been age 66 had she been living on December 31st of the current tax
year is the lesser of: (1) the amount of qualified military retirement income received by the surviving
spouse or (2) $30,000. Since the taxpayer received $45,000 in a taxable military pension this year
attributable to the deceased military spouse, he is allowed a $30,000 military retirement income
deduction.
Step 5: Calculate “General” Retirement Deduction for Military Individual – As a Surviving Spouse
Caution: Reduction Calculations Required by Military Retiree DO NOT Apply to Military
Surviving Spouse:
The “general” retirement income deduction attributable to a deceased military spouse who was the
original owner of the retirement plan and who would be 65 or older on December 31st of the current tax
year had she lived is the lesser of: (1) the amount of qualified retirement income received by the surviving
spouse or (2) $10,000. This result is NOT further reduced by any earned income deduction claimed and
by any “military” retirement income deduction for age 65 and older claimed. Therefore, the taxpayer is
allowed a $10,000 “general” retirement income deduction as a surviving spouse.

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Note: “General” age 65 and older deduction – As a surviving spouse. Since the taxpayer is filing a single
return, the surviving taxpayer cannot also receive the “general” age 65 and older deduction up to $15,000
the deceased spouse received in prior years when the couple filed a joint income tax return.

SOUTH CAROLINA DEPARTMENT OF REVENUE

s/W. Hartley Powell

W. Hartley Powell, Director

November 5
, 2021
Columbia, South Carolina

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