What South Carolina income tax deductions can a retiree, a person 65 or older, or a military retiree claim on retirement and other income, and how do they interact?

Plain-English summary

South Carolina is a relatively retiree-friendly state, and SC Revenue Ruling #22-11 is the Department's full guide to the three individual income tax deductions that make it so. It supersedes RR #21-13 and, most importantly, folds in Act No. 156 of 2022, which made all military retirement income deductible at any age.

Three deductions — and you can stack them:

1. "General" retirement income deduction (§ 12-6-1170(A)) — any age.
The original owner of a qualified retirement account may deduct retirement income received: up to $3,000 if under 65, up to $10,000 at 65 and older. "Retirement income" means otherwise-taxable distributions from qualified plans — IRC §§ 401, 403, 408, and 457 plans and public (federal/state/local, including military) pensions. Computed separately for each spouse on a joint return.

2. "Age 65 and older" deduction (§ 12-6-1170(B)) — against any income.
A resident who is 65+ by year-end may deduct up to $15,000 against any South Carolina taxable income — wages, investment income, Schedule C or F business income, capital gains, or retirement income. You do not need retirement income to claim it. On a joint return it's $30,000 when both spouses are 65+ (even if only one has income), or $15,000 when only one spouse is 65+. Joint income is not traced per spouse for this deduction.

3. "Military" retirement income deduction (§ 12-6-1171) — 100%, any age.
As amended by Act No. 156 of 2022 (effective tax year 2022), a military retiree may deduct all military retirement income included in SC taxable income, regardless of age. This replaced the two older military deductions (a $17,500 earned-income deduction for any age, and a $30,000 military retirement deduction for age 65+).

How they interact (the reduction rules):

• Amounts deducted as military retirement income under § 12-6-1171 reduce that individual's § 12-6-1170(A) general retirement deduction and § 12-6-1170(B) age-65 deduction — with income tracing, applied per spouse on a joint return (the reduction only hits the amount that spouse could otherwise have claimed).
• The general retirement deduction under (A) reduces the age-65 deduction under (B).
• Surviving-spouse exception: amounts a surviving spouse deducts (for retirement income attributable to a deceased spouse) do not trigger these reductions.

Other key rules the ruling nails down:

• Retirement income must be "otherwise taxable" — so Social Security (already exempt under § 12-6-1120(4)) and total-and-permanent-disability retirement income (§ 12-6-1140(4)) don't count.
• The general deduction is limited to the original owner of the account. Inherit a sibling's or parent's 401(k) and you can't deduct its distributions — but a surviving spouse may deduct retirement income attributable to the deceased spouse (who was the original owner), plus a separate deduction for the survivor's own retirement income.
• For the survivor's deduction, the deceased spouse "keeps aging" — the deduction is figured using the age the deceased would have been on December 31 of the current year, not the age at death. So a survivor's deduction attributable to the deceased can rise from $3,000 to $10,000 once the deceased "would have" turned 65.

The ruling includes 14 detailed worked examples (7 for the § 12-6-1170 deductions, 7 for the § 12-6-1171 military deduction) covering single filers, joint filers with various age combinations, commingled inherited accounts (allocated by fair-market-value ratio), and year-of-death filings.

What this means for you

Retirees under 65

You can deduct up to $3,000 of qualified retirement income as the account's original owner. Watch the "original owner" limit — distributions from an account you inherited (other than from a spouse) don't qualify.

Anyone 65 or older

The big one is the age-65 deduction: up to $15,000 (single or one-spouse-65) or $30,000 (both spouses 65+) against any income, even wages. You don't need retirement income to use it. If you also claim the general retirement deduction, it reduces the age-65 deduction dollar-for-dollar (per spouse on a joint return).

Military retirees

As of tax year 2022 you can deduct 100% of your military retirement income at any age. Note the trade-off: claiming that deduction reduces your general and age-65 deductions on your other income (traced to you individually on a joint return). Part III of the ruling gives a simplified method to compute the required reductions.

Surviving spouses

You get favorable treatment: a deduction for retirement income attributable to your deceased spouse (figured as if the deceased kept aging), plus your own retirement deduction, and those surviving-spouse amounts don't reduce your other deductions. If accounts were commingled, allocate by the fair-market-value ratio at the time of commingling.

Common questions

Q: Can I claim more than one of these deductions?
A: Yes. An individual may qualify for the general retirement deduction, the age-65 deduction, and (if a military retiree) the military deduction in the same year — subject to the reduction rules when the military deduction is claimed.

Q: Is my Social Security income eligible for the retirement deduction?
A: No. Retirement income must be "otherwise taxable." Social Security is already exempt from SC tax, and disability retirement income is excluded, so neither counts toward the retirement deduction.

Q: I'm 65 with only wage income — can I still deduct $15,000?
A: Yes. The age-65 deduction applies against any type of South Carolina taxable income, including wages; you don't need retirement income to claim it.

Q: How much military retirement income can I deduct now?
A: 100%, at any age, for tax years beginning 2022 (Act No. 156 of 2022). This replaced the older capped military deductions. Claiming it reduces your general and age-65 deductions on your other income.

Q: My spouse died — how do I figure the deduction on the retirement income I inherited from them?
A: You apply the deduction as if it still applied to your spouse, treating the deceased as continuing to age (using the age they'd be on December 31 of the current year). You can also claim a separate deduction for your own retirement income, and surviving-spouse amounts don't reduce your other deductions.

Citations and references

Statutes:

• S.C. Code Ann. § 12-6-1170(A) — general retirement income deduction ($3,000 under 65 / $10,000 at 65+), original-owner and surviving-spouse rules
• S.C. Code Ann. § 12-6-1170(B) — age 65-and-older deduction against any income ($15,000 / $30,000)
• S.C. Code Ann. § 12-6-1171 — military retirement income deduction (100% at any age, as amended by Act No. 156 of 2022)
• S.C. Code Ann. § 12-6-1120(4) — Social Security not subject to SC tax; § 12-6-1140(4) — disability retirement income
• IRC §§ 401, 403, 408, 457 — qualified plans within the "retirement income" definition

Related Department guidance (described in prose, not linked): RR #22-11 supersedes RR #21-13; for returns for years before 2022, the phased-in military amounts and guidance in RR #21-13 remain applicable.

Source

• Landing page: SC Advisory Opinion Search
• Original PDF: RR22-11.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

SC REVENUE RULING 22-11

SUBJECT:

Age 65 and Older Deduction Against Any Type Income;
“General” Retirement Income Deduction at Any Age; and
“Military” Retirement Income Deduction at Any Age
(Income Tax)

EFFECTIVE DATE: Tax years beginning 2022.
SUPERSEDES:

SC Revenue Ruling #21-13 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. 2021)
S.C. Code Ann. Section 12-6-1171 (Supp. 2021)
Act No. 156 amending Code Section 12-6-1171(A) (Enacted May 13,
2022)

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.

PURPOSE OF UPDATE AND 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; and
3. Military retirees receiving military retirement income to eliminate taxable military retirement
   income.

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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).
South Carolina Revenue Ruling #21-13 provided 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 was also provided for military retirees and surviving spouses, and for
surviving spouses who inherit a qualifying retirement account and receive retirement income that
is attributable to the deceased spouse.
The purpose of this advisory opinion is to update SC Revenue Ruling #21-13 to address the
expansion of the “military” retirement income deduction by Act No. 156 of 2022, effective for
tax years beginning 2022. The Act amended Code Section 12-6-1171(A) to allow an individual
taxpayer to deduct all military retirement income that is included in South Carolina taxable
income, regardless of age. 1 Military individuals and non-military individuals continue to be
eligible for the “general” retirement deduction and the “age 65 and older deduction” allowed in
Code Section 12-6-1170. Although these two “general” deductions in Code Section 12-6-1170
were not changed by Act No. 156 in 2022, the guidance and examples provided in SC Revenue
Ruling #21-13 regarding the “general” income tax deductions in Code Section 12-6-1170 for all
individuals (military or civilian) are also included in this update to clearly illustrate all
deductions and amounts.
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 – 31
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.
This “full” military retirement income deduction replaces the previous two military retiree deductions:
(1) the earned income deduction of up to $17,500 for an individual of any age with both earned income
and military retirement income and (2) the “military” retirement income deduction of up to $30,000 for an
individual age 65 or older with military retirement income. These deductions were provided in Code
Section 12-6-1171(A)(1) and 12-6-1171(A)(2), respectively.

1

2

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 Deduction – Pages 32 – 62
A. “Military” Retirement Income Deduction for Military Retiree of Any Age - Summary
B. Surviving Spouse Deduction
C. Questions and Answers
D. Examples Calculating Each Deduction –
See page 41 for a description of specific principles illustrated in Examples 1 - 7:
Example 1 – Both Spouses are under Age 65
Example 2 – Both Spouses are under Age 65
Example 3 – Single Military Retiree is Age 65 or Older
Example 4 – Single Military Retiree is Age 65 or Older
Example 5 – Both Spouses are Age 65 or Older. One has military retirement income.
Example 6 – Military Spouse Dies during the Year at Age 70. Surviving Spouse is Age 65.
Example 7 – 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 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.
• 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).
• NOTE – Code Section 12-6-1171 Before Amendment in 2022: The two former military retiree
deductions in Code Section 12-6-1171 (i.e., the earned income deduction for any age military
retiree and the “military” retirement income deduction for a military retiree age 65 and older)
allowed for tax years 2021 and earlier were both phased in from 2016 to 2020. For taxpayer’s
filing original or amended returns for years prior to 2022, the phased-in amounts and the
guidance provided in SC Revenue Ruling #21-13 remain applicable and should be used to
compute the applicable prior year deductions.

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

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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.

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

Surviving Spouse Special Rules

(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.

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Age 65 & Older
General Deduction
(reduces any type of
income)
$15,000 – one
taxpayer is 65
$30,000 – married filing
joint and both spouses
are 65 or older
Military Retiree
Claiming Section
12-6-1171 Deduction:
• Reduction &
Income Tracing
Required by
Military Retiree
• Surviving Spouse –
Reduction Exception

Code Section 12-6-1171, providing for a military retirement income deduction, reads:
(A) An individual taxpayer may deduct all military retirement income that is
included in South Carolina taxable income.
(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.
(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.
(D) The department may require the taxpayer to provide information necessary for
proper administration of this subsection.

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Military Retirement
Income Deduction
(100% at any age)
Definition of
Retirement Income

Surviving Spouse Special Rules

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

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SUMMARY OF CODE SECTION 12-6-1170 DEDUCTIONS 2
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.
2

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
CAUTION: A military retiree or surviving spouse receiving military retirement income
that is attributable to the deceased military spouse should follow the guidance in Part III of
this advisiory opinion. A full 100% deduction is allowed for “military” retirement income
under Code Section 12-6-1171. If non-military retirement income or other income exists,
Code Section 12-6-1170 may require a reduction in the amount of any further “general”
deductions allowed to the military retiree under Code Section 12-6-1170 (as described
briefly below as deduction #1 and deduction #2). Part III of this advisory opinion contains
additional guidance and a simplified calculation method for any required reductions to the
“general” deductions for a military retiree claiming a “military” retirement income
deduction.
DEDUCTION 1: “GENERAL” RETIREMENT INCOME DEDUCTION FOR ANY AGE
Reduction Required for “Military” Retirement Income Deduction Claimed. Amounts deducted
by a military retiree under Code Section 12-6-1171 (“military” retirement income deduction)
reduce his or her “general” retirement income deduction of up to $3,000 if under age 65 or
$10,000 if 65 or older that is provided under Code Section 12-6-1170(A). However, for a
married military retiree who files a joint federal income tax return, this reduction applies to each
spouse separately. In other words, the reduction only applies to the amount the individual
claiming the “military” retirement income 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, examples, and a simplified calculation
method for this reduction.)
Surviving Spouse Reduction Exception. Amounts deducted as a surviving spouse under Code
Section 12-6-1171 (“military” retirement income deduction) do not reduce the $3,000 or $10,000
“general” retirement income deduction under Code Section 12-6-1170(A).
DEDUCTION 2: AGE BASED “GENERAL” DEDUCTION - AGE 65 OR OLDER
DEDUCTION REDUCING ANY TYPE OF INCOME
Reduction Required for “Military” Retirement Income Deduction Claimed. Amounts deducted
by a military retiree under Code Section 12-6-1171 (“military” retirement income deduction)
reduce the $15,000 “general” age 65 and older deduction allowed under Code Section 12-61170. 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

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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, examples, and a simplified calculation method for this
reduction.)
Surviving Spouse Reduction Exception. Amounts deducted as a surviving spouse under Code
Section 12-6-1171 (“military” retirement income deduction) do not reduce the $15,000 “general”
age 65 and older deduction.

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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 3 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 4 or total
   and permanent disability retirement income 5 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).
4
Code Section 12-6-1120(4) exempts social security from South Carolina tax.
5
See Code Section 12-6-1140(4).
3

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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
   AGAINST 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.

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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 on the joint return (e.g., the husband’s wages, the wife’s wages, interest
   income, retirement income, inherited IRA, etc.). 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. 6 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.
   6

13

“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.

14

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).

15

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, 7 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.
7

16

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).
17

EXAMPLES
“GENERAL” RETIREMENT INCOME DEDUCTION FOR ANY AGE
AND
AGE 65 AND OLDER “GENERAL” DEDUCTION REDUCING 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.
• 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).

18

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.8
• Since the taxpayer is under age 65, the age 65 and older deduction to offset any type of income does not
apply this year.

8

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).

19

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 Calculations: Total General Retirement Income Deduction on Joint Return = $4,000
($1,000 + $3,000)
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 Deductions: 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.
20

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 Calculations: General Retirement Income Deductions = $4,000 ($1,000 + $3,000) 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
only 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).
21

Explanation:
• General Retirement Income Deductions: 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 the maximum $3,000 this year.
• 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 9
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 only). 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 “general” 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.
9

22

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 Calculations: General Retirement Income Deductions = $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

23

claimed by each individual taxpayer age 65 or older, if any. 10 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 12-61170(A)(3) and Example 7.
10

24

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 Calculations: 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).

25

Explanation:
•General Retirement Income Deductions: 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. 11 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.
11

26

EXAMPLE 6 – Both Spouses are Age 65 or Older. Year of Death of One Spouse. Filing Status
“Married Filing Joint”. 12
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) 13 – 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 Calculations: 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)

12
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.”
13
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.

27

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 Deductions (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 Deductions – 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.
28

• 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. 14 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.
14

29

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 Calculations: 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 deduction 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

30

($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.

31

PART III
“MILITARY” RETIREMENT INCOME DEDUCTION
UNDER CODE SECTION 12-6-1171
FULL “MILITARY” RETIREMENT INCOME DEDUCTION FOR ANY AGE
AND
SURVIVING SPOUSE DEDUCTION

32

SUMMARY OF CODE SECTION 12-6-1171 DEDUCTION” 15 AND REQUIRED
REDUCTIONS TO “GENERAL” DEDUCTIONS UNDER CODE SECTION 12-6-1170
BY MILTARY RETIREE
DEDUCTION: “MILITARY” RETIREMENT INCOME DEDUCTION FOR ANY AGE
Amount: No Limit - Full 100% Deduction
Law: Code Section 12-6-1171(A)
General Provision – “Military” Retirement Income Deduction for Military Retiree. Code Section
12-6-1171(A) provides an annual income tax deduction from South Carolina taxable income for
an individual of any age who has military retirement income. A qualifying taxpayer may deduct
the entire amount 16 (100%) of military retirement income that is included in South Carolina
taxable income each year.
Surviving Spouse “Military” Retirement Income Deduction Amounts. A surviving spouse
receiving military retirement income that is attributable to the deceased spouse is allowed this
full (100%) “military” retirement income deduction. The deduction is allowed in the same
manner that the deduction would have applied to the deceased spouse had he or she lived in the
current tax year. Note: 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 Sections 12-6-1171(C) and 12-6-1170.
REQUIRED REDUCTIONS FOR MILITARY RETIREE CLAIMING A “GENERAL”
DEDUCTION UNDER CODE SECTION 12-6-1170 AND REDUCTION EXCEPTIONS
FOR CIVILIAN SPOUSE OR SURVIVING SPOUSE:
Law: Code Section 12-6-1170(C)
A. Reduction Amounts Applicable to Military Retiree
Notwithstanding any required reductions below, a qualifying military retiree may deduct the
entire amount (100%) of military retirement income that is included in South Carolina taxable
income each year.
Code Section 12-6-1170(C) requires certain reductions to the amounts allowed under the two
“general” provisions of Code Section 12-6-1170(A) and (B) for a military retiree claiming a
military retirement income deduction under Code Section 12-6-1171.

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.
16
For tax years beginning 2022, Act No. 156 of 2022 expanded this military deduction to a full (100%) deduction
and to military retirees at any age.
For tax years 2021 and before, see SC Revenue Ruling #21-13 and Code Section 12-6-1171(A)(1) and (A)(2),
before amendment in 2022, for guidance regarding the phased-in amounts and requirements of the two deductions
available for individuals who had retired from the military (i.e., the earned income deduction at any age for a retiree
with both earned income and military retirement income and the “military” retirement income deduction of up to
$30,000 for an individual age 65 and older).
15

33

Review of Code Section 12-6-1170 “General” Deductions Discussed in Part II Above.
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.
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. 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. Amounts deducted as retirement income under Code Section 12-6-1170(A) (the “general”
retirement income deduction) reduce the $15,000 or $30,000 general age 65 and older deduction.

For more information and exceptions to the “general” deductions summarized above, see Code
Section 12-6-1170 and Part II above.
Reduction Required to “General” Retirement Income Deduction for Military Retiree. “Military”
retirement income deducted by a military retiree under Code Section 12-6-1171 reduces the
deduction allowed under Code Section 12-6-1170(A)(1), the up to $3,000 or $10,000 “general”
retirement income deduction.
Depending on the amount of the “military” retirement income deduction and the amount of
“civilian” retirement also received by the military retiree, this reduction may be none, a partial
reduction, or a complete reduction to the $3,000 or $10,000 maximum deduction amount.
For most military retirees, this “general” deduction in Code Section 12-6-1170 will not apply.
For example, when a military retiree’s “military” retirement deduction is $3,000 or more under
Code Section 12-6-1171, the “general” retirement income deduction of the military retiree under
age 65 provided in Code Section 12-6-1170(A)(1) is offset to $0. Likewise, when a military
retiree’s “military” retirement deduction is $10,000 or more, the “general” retirement income
deduction of the military retiree age 65 or older provided in Code Section 12-6-1170(A)(1) is
reduced to $0.
For additional guidance on this reduction calculation, see Example 1 below where there is no
reduction to the “general” retirement income deduction and see Example 2 below where there is
complete offset of the “general” retirement income deduction by the “military” retirement
income deduction.
Reduction Required to “General” Age 65 and Older Deduction for Military Retiree Only.
“Military” retirement income deducted by a military retiree under Code Section 12-6-1171
reduces the deduction allowed to the military retiree under Code Section 12-6-1170(B), the up to
$15,000 “general” age 65 or older deduction against any type of income.

34

Depending on the amount of the military retirement income deduction and the amount of other
South Carolina taxable income, this reduction may be a partial reduction or a complete reduction
to the $15,000 maximum deduction amount.
For most military retirees, this “general” deduction in Code Section 12-6-1170 will be
completely offset. For example, 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 a $15,000 or
more “military” retirement income deduction under Code Section 12-6-1171. See Examples 3,
4, and 5 below illustrating the partial or complete offset calculations for this deduction.
B. Surviving Spouse Exception – No Reduction Amounts for Military Retirement
Surviving Spouse – Military Deduction Reductions Above Do Not Apply. 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.
C. Joint Return Calculations When a Military Spouse Receives Military Retirement Income
Steps to Calculate Deductions on Joint Return. The deductions in Code Sections 12-6-1170 and
12-6-1171 should be calculated in a specific order. See the Examples at the end of Part III for
the order of steps in calculating the military and general deductions for a military retiree, a
civilian spouse, and a surviving spouse.
Married Taxpayers Filing a Joint Return – Separate Reduction Calculation of Deductions. The
two reductions discussed above apply to the military spouse only; these reductions do not apply
to a civilian spouse. 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 “general” 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 12-6-1170(C).

35

QUESTIONS AND ANSWERS – CODE SECTION 12-6-1171 DEDUCTION
“MILITARY” RETIREMENT INCOME DEDUCTION FOR ANY AGE (FULL
DEDUCTION)

1. Q. What is “military” retirement income for purposes of the 100% “military” retirement
   income deduction 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 deduction 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 full “military” retirement income
   deduction in Code Section 12-6-1171: 18
3. Active duty in the Armed Forces of the United States (i.e., Army, Navy, Air Force,
   Marine Corps, Space Force, and Coast Guard) 19 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). 20
   Examples of individuals not eligible for the full “military” retirement income deduction
   in Code Section 12-6-1171 include those receiving retirement income from service in the
   following: (1) National Oceanic and Atmospheric Administration; 21 (2) Public Health
   Service; 22 (3) National Guard or reserve component of the Armed Forces, unless such
   retirement is attributable to active military service; (4) South Carolina State Guard;
   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 10 U.S.C. Section 101 defining “armed forces.”
   20
   See Code Section 12-6-1120(7) and SC Revenue Ruling #09-16 for more information.
   21
   See 10 U.S.C. Section 101 defining “uniformed services.”
   22
   See 10 U.S.C. Section 101 defining “uniformed services.”
   17

36

(5) Civilian employees of the United States Coast Guard or Department of Defense;
(6) Civilian employment of a military employer; (7) American Red Cross service to the
Armed Forces; (8) Salvation Army; (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
   deduction 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. Is a military retiree under age 65 eligible for both the 100% “military” retirement income
   deduction in Code Section 12-6-1171(A) and the up to $3,000 “general” retirement
   income deduction in Code Section 12-6-1170(A)(1)?
   A. Yes, a military retiree is eligible for the full “military” retirement income deduction in
   Code Section 12-6-1171(A) and the up to $3,000 “general” retirement income deduction
   in Code Section 12-6-1170(A)(1) discussed in Part II. Code Section 12-6-1170(C)(1),
   however, reduces the “general” retirement income deduction claimed by a military retiree
   under Code Section 12-6-1170. As such, the “general” retirement income deduction in
   Code Section 12-6-1170(A)(1) may be either partially offset or completely offset by the
   “military” retirement income deduction claimed by the military retiree, depending upon
   the amount of the “military” retirement income deduction claimed.
   Note: This reduction computation does not apply to a civilian spouse or a military
   retiree’s surviving spouse.
   Reminder: Notwithstanding any required reductions below, a qualifying military retiree
   may deduct the entire amount (100%) of military retirement income that is included in
   South Carolina taxable income each year.
   Method to Calculate Military Retiree’s Reduction for “General” Non-Military Retirement
   Income: For the military retiree only, the “general” retirement income deduction is
   reduced by the “military” retirement income deduction claimed. Two methods of
   calculating the required deduction are below; each method results in the same answer.
   Method 1: For the military retiree only, the “general” retirement income deduction for the
   retiree under age 65 is the lesser of: (1) the amount of ALL qualified retirement income
   received by the military retiree or (2) 3,000*maximum less the “military” retirement
   income deduction claimed by the military retiree.
   37

Method 2: For the military retiree only, the “general” retirement income deduction is the
lesser of: (1) the amount of non-military qualified retirement income received by the
military retiree or (2) $3,000 maximum less the “military” retirement income deduction
claimed by the military retiree.
Note: If the military retiree is age 65 or older, the higher maximum deduction amount
$10,000 should be used in place of the $3,000 maximum deduction amount.
Calculation Example. Below illustrates one calculation method to determine a partial
offset of the “general” retirement income deduction by the “military” retirement income
deduction claimed by the military retiree. 23 Assume a military retiree under age 65 has
$3,250 of total combined retirement income ($2,000 military retirement + $1,250 civilian
retirement). The “general” retirement income deduction for the original owner of a
retirement plan under age 65 is the lesser of: (1) the amount of ALL qualified retirement
income received or (2) $3,000. As required under Code Section 12-6-1170, the $3,000
maximum “general” retirement income deduction is reduced by the $2,000 “military”
retirement income deduction claimed under Code Section 12-6-1171, resulting in a
$1,000 remaining maximum “general” retirement income deduction. Therefore, after
offset, the military retiree may claim a $1,000 “general” retirement income deduction
(i.e., the lesser of $3,250 or $1,000), and a $2,000 “military” retirement income
deduction. The military retiree may claim total retirement deductions of $3,000. Note:
This $3,000 deduction by the military retiree is the same amount that a civilian retiree
under age 65 would claim as a “general” retirement deduction on $3,250 of civilian
retirement income.
Also, see Example 1 below illustrating no offset to the “general” retirement income
deduction computation for the military retiree claiming a “military” retirement income
deduction since the combined retirement income amount is under $3,000 (e.g., $2,000
military retirement income + $750 civilian retirement income).
Reminder: Notwithstanding any required reductions above, a qualifying military retiree
may deduct the entire amount (100%) of military retirement income that is included in
South Carolina taxable income each year.

5. Q. Is a military retiree age 65 or older eligible for the 100% “military” retirement income
   deduction in Code Section 12-6-1171(A), the “general” retirement income deduction in
   Code Section 12-6-1170(A)(1), and the “general” age 65 and older deduction in Code
   Section 12-6-1170(B)?
   A. Yes, a military retiree is eligible for the full “military” retirement income deduction in
   Code Section 12-6-1171(A) and the two “general” deductions in Code Section 12-6-1170
   discussed in Part II (i.e., the “general” retirement income deduction of up to $10,000 and
   the “general” age 65 and older deduction of up to $15,000 against any type of income).
   An alternative computation method exists that gives the same answer. The alternative computation is illustrated in
   the Examples at the end of Part III below.
   23

38

Code Section 12-6-1170(C)(1), however, reduces the two “general” deductions claimed
by a military retiree under Code Section 12-6-1170. As such, the two deductions in Code
Section 12-6-1170 will be either partially offset or completely offset by the “military”
retirement income deduction claimed by the military retiree, depending on the amount of
the “military” retirement income deduction claimed. See Example 3 below illustrating
the partial offset calculation for the military retiree receiving a combined total of $15,000
of military and non-military retirement.
Note: The reduction computation does not apply to a civilian spouse or a military
retiree’s surviving spouse. See Examples 5 and 7 below.
Method to Calculate Military Retiree’s Reduction for “General” Age 65 and Older
Deduction: For the military retiree only, the “general” age 65 and older deduction against
any type of South Carolina income is the lesser of: (1) the taxable income on the return or
(2) $15,000 maximum deduction, less the “military” retirement income deduction
claimed under Code Section 12-6-1171(A) and less the “general” retirement income
deduction claimed by the military retiree age 65 or older under Code Section 12-61170(A)(1).
SURVIVING SPOUSE AND YEAR OF DEATH ISSUES

6. 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 also
   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 income deduction by the “military” retirement income
   deduction.
   “General” Age 65 and Older Deduction of the Living Taxpayer – No Reduction for
   Amount Claimed as a Surviving Spouse. The age 65 and older deduction (i.e., the
   deduction up to $15,000 against any type of income) 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 under Code Section 12-6-1170(B).
   39

7. Q. On what date is the age determined for a military retiree who dies in the tax year for
purposes of eligibility for the “general” retirement income deduction and the “general”
age 65 and older deduction for any type of income for an individual age 65 and older in
Code Section 12-6-1170?
A. For purposes of calculating the deductions in Code Section 12-6-1170(A)(1) and (B), 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.

8. 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 a full, 100% “military”
   retirement income deduction. 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 12-6-1171(C) and 12-6-1170(C)(1). See Example 7 below.
9. 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 6
   below.

40

EXAMPLES
Military Retiree or Surviving Spouse
Full (100%) “Military” Retirement Income Deduction At Any Age
Examples Calculating Each Deduction under Code Sections 12-6-1171 and 12-6-1170(A) and (B):
Example 1 – Both Spouses are under Age 65
< $3,000 total retirement income by military retiree; no offset to “general” retirement income
deduction of military retiree; separate calculation for civilian spouse
Example 2 – Both Spouses are under Age 65

$15,000 military retirement income; complete offset to “general” retirement income
deduction of military retiree; separate calculation for civilian spouse
Example 3 – Single Military Retiree Age 65 or Older
< $15,000 military retirement income; partial offset to “general” retirement income deduction
and partial offset to “general” age 65 and older deduction
Example 4 – Single Military Retiree Age 65 or Older
$15,000 military retirement income; complete offset to both “general” deductions
Example 5 – Both Spouses are Age 65 or Older. One has military retirement income.
< $15,000 military retirement income; complete offset to “general” retirement income
deduction and partial offset to “general” age 65 and older deduction against any income of
military retiree; separate general retirement income deduction calculation for civilian spouse
Example 6 – Military Spouse Dies during the Year at Age 70. Surviving Spouse is Age 65.
$15,000 military retirement income; complete offset to both “general” deductions of military
retiree; separate calculations for civilian spouse general deductions; no reductions
Example 7 – Year Following Death of Military Spouse. Surviving Spouse is Age 65 or Older.
Reductions do not apply to surviving spouse
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 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).
41

Other important points illustrated in Part III below include, but are not limited to:
“Military” Retirement Income Deduction:
• For tax year 2022 and after. The “military” retirement income deduction for a military retiree of any age
who has military retirement income is 100% of the amount of qualified military retirement income
received for tax years 2022 and thereafter. Code Section 12-6-1171(A).
• For tax years prior to 2022. For taxpayer’s filing original or amended returns for tax years 2021 and
before, see SC Revenue Ruling #21-13 for the provisions in effect in Code Section 12-6-1171(A)(1) for
the military retiree earned income deduction at any age and in Code Section 12-6-1171(A)(2) for the
limited “military” retirement income deduction for age 65 and older.
Military Retiree Claiming Deduction Under Both “Military” and “General” Deductions – Order of
Calculations:
• The order of steps in calculating each deduction for the military retiree is necessary to take into account
the required “partial offset” or “complete offset” of the two “general” deductions in Code Section 12-61170 by the amount of the “military” retirement income deduction claimed by the military retiree under
Code Section 12-6-1171.
• A military retiree’s combined deductions under Code Sections 12-6-1171 and 12-6-1170 of $15,000
will be the same as a non-military individual’s deductions under Code Section 12-6-1170 ($15,000) for
the same income amounts ($15,000); the offset requirements do not result in the military retiree
receiving a lower combined deduction than a civilian individual. A military retiree, however, does not
receive a deduction under both Code Sections 12-6-1171 and 12-6-1170 for the same dollar of income.
“Military” Retirement Income Deduction – Simplified Calculation:
• If the “military” retirement income deduction is $15,000 or more, the steps in the calculation can be
simplified since a “military” retirement income deduction of such an amount will always offset both
deductions in Code Section 12-6-1170 for the military retiree.
Joint Return with a Military Retiree Spouse – “General” Deductions Allowed Under Code Section 12-61170 – Separate Calculation for Each Spouse:
• The deductions in Code Sections 12-6-1171 and 12-6-1170 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) when
the military deduction under Code Section 12-6-1171 is claimed. Code Sections 12-6-1170(C) and 126-1171(A).
• 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 “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
Section 12-6-1170(C) and (A)(1).
Additional Guidance and Examples for a Military Retiree and/or Spouse:
• For additional guidance regarding the “military” retirement income deduction and the application of the
“general” deductions to a military retiree and spouse, see Examples 1 – 7 in Part III of this Revenue
Ruling below.

42

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) - $2,000
Retirement income (Non-Military) - $750

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

Deduction Calculations: “Military” Retirement Income Deduction = $2,000; “General” Retirement
Income Deductions = $3,750 ($750 + $3,000). Total $5,750 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
Retirement Income
(Non-military)
Wife – Age 50
SC Taxable Income before
Adjustments
Military Deduction:
Military Retirement Income
100% Deduction for Any
Age
12-6-1171(A)
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
Retirement
Income
Deduction for
Any Age 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
$ 2,000

$100,000
$ 2,000

$

$

750

$112,750

750

$112,750
$2,000

($2,000)

$750

($ 750)

$3,000 (the
maximum)

($3,000)

($0)
$ 5,750

43

Important Rules for the “Military” Deduction 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 “military” retirement income deduction for a military retiree under age 65 who has military
retirement income is 100% of the amount of qualified military retirement income received. Code
Section 12-6-1171(A).
• 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).
• Reduction Calculation for “General” Retirement Income Deduction of Military Retiree Under Age 65
in Code Section 12-6-1170 – For the military retiree only, 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
“non-military” retirement income received or (2) $3,000 maximum less the “military” retirement
income deduction claimed by the military retiree. Code Sections 12-6-1170(C)(1) and 12-6-1170(A)(1).
• Note: The “general” retirement income deduction of the military retiree is not reduced to $0 when the
military retiree’s “military” retirement income deduction is less than $3,000.
Explanation:
Step 1: Calculate “Military” Retirement Income Deduction for Military Retiree of Any Age:
The “military” retirement income deduction for a military retiree who has military retirement income is
100% of the amount of qualified military retirement income received. Since the wife received $2,000 in a
taxable military pension this year, she is allowed a full $2,000 “military” retirement income deduction.
Step 2: Calculate “General” Retirement Income Deduction of Military Retiree – Caution: A
“Reduction” Calculation (an exception to the General Rule) Applies to the Retiree’s Calculation:
For a military retiree under age 65, the “general” retirement income deduction is the lesser of: (1) the
amount of qualified “non-military” retirement income received or (2) $3,000 maximum. The maximum
$3,000 “general” retirement income deduction is reduced by the “military” retirement income deduction
claimed by the military retiree in Step 1 ($3,000 less $2,000) to a $1,000 remaining “general” retirement
income deduction.
Therefore, the wife’s “general” retirement income deduction is the entire $750, (i.e., the lesser of: (1) her
$750 “civilian” retirement income or (2) her remaining $1,000 “general” retirement deduction after
reduction by the $2,000 full “military” retirement 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, he is allowed the maximum $3,000 general
retirement income deduction this year. This result calculated separately by the civilian spouse is not
reduced by the “military” retirement income deduction claimed by the military spouse.
Note: Since both taxpayers are under age 65, the age 65 and older deduction to offset any type of income
does not apply this year.

44

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:
Wife (Age 50) – Military Retiree:
Earned income - $100,000
Retirement income (Military) - $45,000
Retirement income (Non-Military) - $750

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

Deduction Calculations: “Military” Retirement Income Deduction = $45,000; “General” Retirement
Income Deduction = $3,000. Total $48,000 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
Retirement Income
(Non-military)
Wife – Age 50
SC Taxable Income before
Adjustments
Military Deduction:
Military Retirement Income
100% Deduction for Any
Age
12-6-1171(A)
General Deductions:
Wife – Age 50
General Retirement Income
Deduction
12-6-1170(A)(1)

$
$

Military
Retirement
Income
Deduction for
Any Age 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

$

$

750

$155,750

750

$155,750
$45,000

($45,000)

$0 – after offset
by 12-6-1171
“military”
retirement
income
deduction
$3,000 (the
maximum)

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

($0)

($3,000)

($0)
$48,000

45

Important Rules for the “Military” Deduction 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 “military” retirement income deduction for a military retiree under age 65 who has military
retirement income is 100% of the amount of qualified military retirement income received. Code
Section 12-6-1171(A).
• 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).
• Reduction Calculation Only for “General” Retirement Income Deduction of Military Retiree Under Age
65 in Code Section 12-6-1170 – For the military retiree only, 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
“non-military” retirement income received or (2) $3,000 maximum less the “military” retirement
income deduction claimed by the military retiree. This reduction does not apply to the civilian spouse.
Code Section 12-6-1170(C)(1) and (A)(1).
• Note: The “general” retirement income deduction of the military spouse is reduced to $0 when the
military retiree’s “military” retirement income deduction is $3,000 or more. See Simplified Step 2
reduction method below.
Explanation:
Step 1: Calculate “Military” Retirement Income Deduction for Military Retiree of Any Age:
The “military” retirement income deduction for a military retiree who has military retirement income is
100% of the amount of qualified military retirement income received. Since the wife received $45,000 in
a taxable military pension this year, she is allowed a full $45,000 “military” retirement income deduction.
Step 2: Calculate Military Retiree’s “General” Retirement Income Deduction, Including the
Military Retiree’s Required “Reduction” of the “General” Deduction:
Simplified Deduction “Reduction” Calculation for Military Retiree 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 maximum. When a
military retiree’s “military” retirement deduction is $3,000 or more under Code Section 12-6-1171, the
calculation to determine the deduction offset is simplified since a “military” retirement income deduction
of $3,000 or more will always offset the “general” retirement income deduction of the military retiree
under Code Section 12-6-1170(A) to $0.
Therefore, since the wife claimed a $45,000 “military” retirement income deduction, her “general”
retirement income deduction is completely reduced to $0; she cannot claim a “general” retirement income
deduction for her $750 of civilian retirement income.
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 maximum. Since the
husband (a civilian) received $4,000 in qualified retirement income, he is allowed the maximum $3,000
“general” retirement income deduction this year. This result calculated separately by the civilian spouse is
not reduced by the “military” retirement income deduction claimed by the military spouse.

46

EXAMPLE 3 – Single Military Retiree Age 65 or Older - Filing Status “Single”
Facts: Individual (Military Retiree) age 65 has the following SC taxable income:
Retirement income from a civilian pension - $13,000
Retirement income from a military pension - $2,000
Deduction Calculations: “Military” Retirement Income Deduction = $2,000; “General” Retirement
Income Deduction = $8,000; and “General” Age 65 and Older Deduction = $5,000. Total $15,000
deduction on the single return.
Income
Reported on
Single
Return

Income:
Retirement Income
$13,000
(Non-military) –
Age 65
Retirement Income
$ 2,000
(Military) –
Age 65
SC Taxable Income before $15,000
adjustments
Military Deduction:
Military Retirement Income
100% Deduction for Any
Age
12-6-1171(A)
General Deductions:
Taxpayer – Age 65
“General” Retirement
Income Deduction
12-6-1170(A)(1)

Military
Retirement
Income
Deduction for
Any Age Reported on
Single Return

General
Retirement
Income
Deduction and
General Age 65
and Older
Deduction

SC Taxable
Income
Computation

$13,000
$ 2,000
$15,000
$2,000

($2,000)

$8,000 – after
partial offset by
12-6-1171
deduction
(maximum
$10,000 $2,000 military)
$5,000 – after
offset by 12-61170 and 12-61171
deductions
(maximum
($15,000 $8,000 $2,000)

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

Total SC Deduction on
Single Return

47

($8,000)

($5,000)

$15,000

Important Rules for the “Military” Deduction and Exceptions to “General” Deduction Rules for This
Example:
• Steps to Calculate Deductions for a Single Taxpayer - The deduction in Code Section 12-6-1171 should
be calculated first and then the deductions in Code Section 12-6-1170 should be calculated.
• The “military” retirement income deduction for a military retiree age 65 and older who has military
retirement income is 100% of the amount of qualified military retirement income received. 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 “military” retirement income
deduction. Code Section 12-6-1170(C)(1), (A), and (B).
• Reduction Calculation #1 for “General” Retirement Income Deduction of Military Retiree Age 65 or
Older in Code Section 12-6-1170 – For the military retiree only, 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 “non-military” retirement income received or (2) $10,000 less the “military” retirement
income deduction claimed by the military retiree. Code Section 12-6-1170(C)(1) and (A)(1).
• The “general” retirement income deduction of the military retiree is not reduced to $0 when the military
retiree’s “military” retirement income deduction is less than $10,000.
• Reduction Calculation #2 for “General” Age 65 or Older Deduction of Military Retiree in Code Section
12-6-1170 – For the military retiree only, the “general” age 65 and older deduction against any type of
South Carolina income is the lesser of: (1) the taxable income on the return or (2) $15,000, less the
“general” retirement income deduction claimed by the military retiree and less the “military” retirement
income deduction claimed by the military retiree. Code Section 12-6-1170(C)(1) and (B).
• The “general” age 65 and older deduction of $15,000 against any type of income will not be completely
reduced to $0 for a military retiree who claims less than a $15,000 “military” retirement income
deduction. Code Section 12-6-1170(C)(1).
• A military retiree’s combined deductions under Code Sections 12-6-1171 and 12-6-1170 of $15,000
will be the same as a non-military individual’s deductions under Code Section 12-6-1170 ($15,000) for
the same income amounts ($15,000); the offset requirements do not result in the military retiree
receiving a lower combined deduction than a civilian individual. A military retiree, however, does not
receive a deduction under both Code Sections 12-6-1171 and 12-6-1170 for the same dollar of income.
Explanation:
Step 1: Calculate “Military” Retirement Income Deduction for Military Retiree of Any Age: The
“military” retirement income deduction for a military retiree who has military retirement income is 100%
of the amount of qualified military retirement income received. Since the taxpayer received $2,000 in a
taxable military pension this year, she is allowed a full $2,000 “military” retirement income deduction.
Step 2: Calculate Military Retiree’s “General” Retirement Income Deduction – Caution: A
“Reduction” Calculation (an exception to the General Rule) Applies to the Retiree’s Calculation:
For a military retiree age 65 or older, the “general” retirement income deduction is the lesser of: (1) the
amount of qualified “non-military” retirement income received or (2) $10,000 maximum. The maximum
$10,000 “general” retirement income deduction is reduced by the “military” retirement income deduction
of $2,000 claimed by the military retiree in Step 1 to an $8,000 remaining “general” retirement income
deduction ($10,000 less $2,000). Therefore, the taxpayer’s “general” retirement income deduction is
reduced to $8,000, (i.e., the lesser of: (1) her $13,000 “civilian” retirement income or (2) her remaining
$8,000 “general” retirement deduction after partial reduction by the $2,000 “military” retirement income
deduction).

48

Step 3: Calculate Military Retiree’s “General” Age 65 and Older Deduction against Any Type of
Income – Caution: A “Reduction” Calculation (an exception to the General Rule) Applies to the
Military 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 military retiree in Step 2 and less the “military” retirement income deduction claimed by
the military retiree in Step 1. The remainder, if any, offsets any remaining South Carolina taxable income
on the return.
Therefore, since the taxpayer claimed a $2,000 “military” retirement income deduction and an $8,000
“general” retirement deduction, her $15,000 “general” age 65 and older deduction is $5,000 after partial
offset by $10,000 claimed in Steps 1 and 2 ($15,000 maximum “general” age 65 and older deduction less
$2,000 “military” retirement income deduction and less $8,000 “general” retirement income deduction).
This $5,000 deduction can offset any remaining income on the return (e.g., earned income, civilian
retirement income).

49

EXAMPLE 4 – 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 Calculations: “Military” Retirement Income Deduction = $40,000; “General” Retirement
Income Deduction = $0; and “General” Age 65 and Older Deduction = $0. Total $40,000 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 Deduction:
Military Retirement Income
100% Deduction for Any
Age
12-6-1171(A)
General Deductions:
Taxpayer – Age 65
“General” Retirement
Income Deduction
12-6-1170(A)(1)
Age 65 and Older
Deduction
12-6-1170(B)
Total SC Deduction on
Single Return

Military
Retirement
Income
Deduction for
Any Age 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
$40,000

($40,000)

$0 – after offset
by 12-6-1171
deduction

($0)

$0 – after offset
by 12-6-1171
deduction

($0)
$40,000

Important Rules for the “Military” Deduction and Exceptions to “General” Deduction Rules for This
Example:
• Steps to Calculate Deductions for a Single Taxpayer - The deduction in Code Section 12-6-1171 should
be calculated first and then the deductions in Code Section 12-6-1170 should be calculated.
• The “military” retirement income deduction for a military retiree age 65 and older who has military
retirement income is 100% of the amount of qualified military retirement income received. 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 “general” age 65 and older deduction up to $15,000 against
50

any type of income), but these deductions are reduced by the “military” retirement income deduction.
Code Section 12-6-1170(C)(1), (A), and (B).
• Reduction Calculation #1 for “General” Retirement Income Deduction of Military Retiree Age 65 or
Older in Code Section 12-6-1170 – For the military retiree only, 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 “non-military” retirement income received or (2) $10,000 less the “military” retirement
income deduction claimed by the military retiree. Code Section 12-6-1170(C)(1) and (A)(1).
• The “general” retirement income deduction of the military retiree age 65 or older is reduced to $0 when
the military retiree’s “military” retirement income deduction is $10,000 or more.
• Reduction Calculation #2 for “General” Age 65 or Older Deduction of Military Retiree in Code Section
12-6-1170 – For the military retiree only, the “general” age 65 and older deduction against any type of
South Carolina income is the lesser of: (1) the taxable income on the return or (2) $15,000, less the
“general” retirement income deduction claimed by the military retiree and less the “military” retirement
income deduction claimed by the military retiree. Code Section 12-6-1170(C)(1) and (B).
• 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 $15,000 or more “military” retirement income
deduction. Code Section 12-6-1170(C)(1).
• Note: Both deductions under Code Section 12-6-1170 (i.e., the “general” retirement income deduction
of the military retiree and the “general” age 65 and older deduction of the military retiree) are reduced
to $0 when the military retiree’s “military” retirement income deduction is $15,000 or more. See
Simplified Step 2 and Step 3 reduction calculations below.
Explanation:
Step 1: Calculate “Military” Retirement Income Deduction for Military Retiree of Any Age: The
“military” retirement income deduction for a military retiree of any age who has military retirement
income is 100% of the amount of qualified military retirement income received. Since the taxpayer
received $40,000 in a taxable military pension this year, she is allowed a full $40,000 military retirement
income deduction.
Step 2: Calculate Military Retiree’s “General” Retirement Income Deduction, Including the
Military Retiree’s Required “Reduction” of this “General” Deduction:
See below simplified calculation.
Step 3: Calculate Military Retiree’s “General” Age 65 and Older Deduction against Any Type of
Income, Including the Military Retiree’s Required “Reduction of this “General” Deduction:
See below simplified calculation.
Simplified Deduction “Reduction” Calculations for Military Retiree for Both “General” Deductions
(Step 2 and Step 3 Calculations are Combined)
The above order of calculation of Step 2 and Step 3 for the military retiree is necessary to take into
account the required partial or complete offset of the deductions in Code Section 12-6-1170 by the
amount of the “military” retirement deduction claimed under Code Section 12-6-1171. When a military
retiree’s “military” retirement deduction is $15,000 or more under Code Section 12-6-1171, these two
calculations can be simplified since a “military” retirement deduction of such amount will always offset
both deductions provided in Code Section 12-6-1170(A) and (B) to $0.
Therefore, since the taxpayer claimed a $40,000 “military” retirement income deduction, her $10,000
“general” retirement income deduction is reduced to $0 ($10,000 less $40,000 and her $15,000 “general”
age 65 and older deduction is reduced to $0 after complete offset by the $40,000 “military” retirement
income deduction claimed in Step 1.

51

EXAMPLE 5 – 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 $50,000 SC taxable income:
Wife (Age 65) – Military Retiree:
Earned income - $14,000
Retirement income (Military) - $13,000
Retirement income (Non-Military) - $9,000
Total Income = $36,000

Husband (Age 70) - Civilian:
Earned income - $4,000
Retirement income - $10,000
Total Income = $14,000

Deduction Calculations: “Military” Retirement Income Deduction = $13,000; “General” Retirement
Income Deduction = $10,000; and “General” Age 65 and Older Deduction = $7,000 ($2,000 + $5,000).
Total $30,000 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
$13,000
(Military) –
Age 65
Wife - Retirement Income
$ 9,000
(Non-military) –
Age 65
Military Deduction:
Military Retirement Income
100% Deduction for Any
Age
12-6-1171(A)
General Deductions:
General Retirement Income
Deduction
12-6-1170(A)(1)

Military
Retirement
Income
Deduction for
Any Age Reported on
Joint Return

General Retirement
Income Deduction

General Age
65 and Older
Deduction

$13,000

Deductions
On SC 1040

($13,000)

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

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

52

$2,000 after partial
offset by
amount
claimed
under 12-61171

($ 2,000)

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
Retirement
Income
Deduction for
Any Age Reported on
Joint Return

General Retirement
Income Deduction

General Age
65 and Older
Deduction

Deductions
On SC 1040

$ 4,000
$10,000

$10,000

($10,000)

$5,000
Not limited
(See Step 5
below)

($5,000)

$30,000

Important Rules for the “Military” Deduction 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 deduction 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 the military deduction under Code Section 12-6-1171 is claimed. Code
Sections 12-6-1170(C)(2) and 12-6-1171(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
Section 12-6-1170(C) and (A)(1).
Military Retiree Computation Rules:
• The “military” retirement income deduction for a military retiree of any age who has military retirement
income is 100% of the amount of qualified military retirement income received. Code Section 12-61171(A).
• A military retiree is eligible for the general deductions provided in Code Section 12-6-1170 (i.e.,
“general” retirement income deduction and “general” age 65 and older deduction up to $15,000 against
any type of income), however, the military retirement income deduction claimed reduces the two
“general” deductions allowed under Code Section 12-6-1170. Code Sections 12-6-1170(C), (A)(1), and
(B).
• Reduction Calculation #1 for “General” Retirement Income Deduction of Military Retiree Age 65 or
Older in Code Section 12-6-1170 – For the military retiree only, 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

53

qualified “non-military” retirement income received or (2) $10,000 less the “military” retirement
income deduction claimed by the military retiree. Code Section 12-6-1170(C)(1) and (A)(1).
• The “general” retirement income deduction of the military retiree age 65 or older is reduced to $0 when
the military retiree’s “military” retirement income deduction is $10,000 or more.
• Reduction Calculation #2 for “General” Age 65 or Older Deduction of Military Retiree in Code Section
12-6-1170 – For the military retiree only, the “general” age 65 and older deduction against any type of
South Carolina income is the lesser of: (1) the taxable income on the return or (2) $15,000, less any
“general” retirement income deduction claimed by the military retiree and less the “military” retirement
income deduction claimed by the military retiree. Code Section 12-6-1170(C)(1) and (B).
• The “general” age 65 and older deduction of $15,000 against any type of income is not completely
reduced to $0 for a military retiree who claims less than a $15,000 “military” retirement income
deduction. Code Section 12-6-1170(C)(1).
• A military retiree’s combined deductions under Code Sections 12-6-1171 and 12-6-1170 of $15,000
will be the same as a non-military individual’s deductions under Code Section 12-6-1170 ($15,000) for
the same income amounts ($15,000); the offset requirements do not result in the military retiree
receiving a lower combined deduction than a civilian individual. A military retiree, however, does not
receive a deduction under both Code Sections 12-6-1171 and 12-6-1170 for the same dollar of income.
Civilian Spouse Computation Rules:
• The “general” retirement income deduction for the civilian spouse is computed separately from the
military retiree spouse using the general rules in Part II, but it is not further reduced by any “military”
retirement income deduction claimed by the spouse. Code Sections 12-6-1171 and 12-6-1170(A) and
(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 reduce any remaining taxable income on the joint return. Code Section 12-61170(B).
Explanation:
Step 1: Calculate “Military” Retirement Income Deduction for Military Retiree of Any Age:
The “military” retirement income deduction for a military retiree of any age who has military retirement
income is 100% of the amount of qualified military retirement income received. Since the taxpayer
received $13,000 in a taxable military pension this year, she is allowed a full $13,000 “military”
retirement income deduction.
Step 2: Calculate Military Retiree’s “General” Retirement Income Deduction, Including the
Military Retiree’s Required “Reduction” of the “General” Deduction:
Simplified Deduction “Reduction” Calculation for Military Retiree 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 “non-military” retirement income received or (2) $10,000
maximum less the “military” retirement income deduction claimed by the military retiree. When a
military retiree’s “military” retirement deduction is $10,000 or more under Code Section 12-6-1171, the
calculation to determine the deduction offset is simplified since a “military” retirement income deduction
of $10,000 or more will always offset the “general” retirement income deduction of the military retiree
under Code Section 12-6-1170(A) to $0.
Therefore, since the wife claimed a $13,000 “military” retirement income deduction, her “general”
retirement income deduction is completely reduced to $0; she cannot claim a “general” retirement income
deduction for her $9,000 of civilian retirement income.

54

Step 3: Calculate Military Retiree’s “General” Age 65 and Older Deduction against Any Type of
Income – Caution: A “Reduction” Calculation (an exception to the General Rule) Applies to the
Military 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 military retiree in Step 2 and less the “military” retirement income deduction
claimed in Step 1. The remainder, if any, offsets any remaining South Carolina taxable income on the
return.
Therefore, since the taxpayer claimed a $13,000 “military” retirement income deduction (see Step 1) and
a $0 “general” retirement deduction (see Step 2), her $15,000 “general” age 65 and older deduction is
$2,000 after partial offset by $13,000 claimed in Step 1 ($15,000 maximum “general” age 65 and older
deduction less $13,000 “military” retirement income deduction and less $0 “general” retirement
deduction).
Step 4: 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.
Step 5: 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 civilian husband’s income was $10,000 of civilian retirement income and $4,000 earned
income (i.e., $14,000 income). This $15,000 “general” age 65 and older deduction, after reduction of the
husband’s $10,000 retirement income deduction, may reduce $5,000 ($15,000 less $10,000) of any
remaining taxable income on the joint return (e.g., $4,000 of the civilian husband’s earned income,
$1,000 of the wife’s earned income or her non-military retirement income).

55

EXAMPLE 6 – 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 Calculations: “Military” Retirement Income Deduction = $35,000; “General” Age 65 and
Older Deduction against Any Type of Income = $15,000; Surviving Spouse “General” Retirement
Income Deduction = $3,000. Total $53,000 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 Deduction:
Military Retirement Income
100% Deduction for Any
Age
12-6-1171(A)
General Deductions:
General Retirement Income
Deduction – Per Wife Only
12-6-1170(A)(1)

Military
Retirement
Income
Deduction for
Any Age Reported on
Joint Return

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

General Age
65 and Older
Deduction

$35,000

Deductions
On SC 1040

($35,000)

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

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

56

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

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
Retirement
Income
Deduction for
Any Age 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)

$53,000

Important Rules for the “Military” Deduction 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
the military deduction under Code Section 12-6-1171 is claimed. Code Sections 12-6-1170(C) and 126-1171(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
Section 12-6-1170(C) and (A)(1).
Military Retiree Computation Rules:
• The “military” retirement income deduction for a military retiree of any age who has military retirement
income is 100% of the amount of qualified military retirement income received. Code Section 12-61171(A).
• A military retiree is eligible for the general deductions provided in Code Section 12-6-1170 (i.e., the
“general” retirement income deduction and the “general” age 65 and older deduction), however, the
57

“military” retirement income deduction claimed reduces the two “general” deductions allowed under
Code Section 12-6-1170. Code Section 12-6-1170(C), (A)(1), and (B).
• Note: Both deductions under Code Section 12-6-1170 for the military retiree (i.e., the “general”
retirement income deduction of the military spouse and the “general” age 65 and older deduction of the
military spouse) are reduced to $0 when the deceased military retiree’s “military” retirement income
deduction is $15,000 or more in the year of death.
Civilian Spouse Computation Rules:
• The “general” retirement income deduction for the civilian spouse is computed separately from the
military retiree spouse using the general rules in Part II (i.e., the total retirement income on the joint
return is not combined when computing the deduction), but it is not further reduced by any “military”
retirement income deduction claimed by the spouse. Code Sections 12-6-1171 and 12-6-1170(A) and
(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 Section 12-6-1170(A)(3) and (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 Section 12-6-1170(C), (A)(1), and (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 “military” retirement income
deduction for military retirement income received after the spouse’s death that is attributable to the
deceased spouse. Code Section 12-6-1171(C).
Explanation:
Step 1: Calculate “Military” Retirement Income Deduction for Military Retiree of Any Age: The
“military” retirement income deduction for a military retiree of any age who has military retirement
income is 100% of the amount of qualified military retirement income received. Since the taxpayer (wife)
received $35,000 in a taxable military pension this year, she is allowed a $35,000 military retirement
income deduction.
Step 2: Calculate Military Retiree’s “General” Retirement Income Deduction, Including the
Military Retiree’s Required “Reduction” of this “General” Deduction:
See below simplified calculation.
Step 3: Calculate Military Retiree’s “General” Age 65 and Older Deduction against Any Type of
Income, Including the Military Retiree’s Required “Reduction of this “General” Deduction:
See below simplified calculation.
Simplified Deduction “Reduction” Calculations for Military Retiree for Both “General” Deductions
(Step 2 and Step 3 Calculations are Combined)
The above order of calculation of Step 2 and Step 3 for the military retiree is necessary to take into
account the required partial or complete offset of the deductions in Code Section 12-6-1170 by the
amount of the “military” retirement deduction claimed under Code Section 12-6-1171. When a military
retiree’s “military” retirement deduction is $15,000 or more under Code Section 12-6-1171, these two
calculations can be simplified since a “military” retirement deduction of such amount will always offset
both deductions provided in Code Section 12-6-1170(A) and (B) to $0.
58

Therefore, since the taxpayer claimed a $35,000 “military” retirement income deduction, her $10,000
“general” retirement income deduction is reduced to $0 ($10,000 less $35,000 and her $15,000 “general”
age 65 and older deduction is reduced to $0 after complete offset by the $35,000 “military” retirement
income deduction claimed in Step 1.
Step 4: 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 $0 this year.
Note: His $8,000 dividend income is not “qualified retirement income.”
Step 5: 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 6: 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.

59

EXAMPLE 7 – Year Following Death of Military 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 Calculations: General Retirement Income Deduction = $10,000; General Age 65 and Older
Deduction for Any Type of Income = $5,000; and “Military” Retirement Income and “General”
Deduction Amounts Allowed to a Surviving Spouse = $55,000 ($45,000 + $10,000). Total $70,000
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

60

($5,000)

Income
Reported on
Single
Return

Military Deductions:

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

As Surviving Spouse Military Retirement
Income Deduction for Any
Age
12-6-1171(A)
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

$45,000

($45,000)

$10,000

($10,000)

$70,000

Important Rules for the “Military” Deduction 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 Section 12-6-1170(A)(1) and (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 Section 12-6-1170(A)(3) and (C)(1).
• Under the general rule, the $15,000 “general” age 65 and older deduction that applies to a 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 “military” retirement income deduction, as if the surviving spouse “steps in the shoes”
of the deceased. Any military retirement income amount deducted as a “surviving spouse” does not
reduce the taxpayer’s “general” retirement income deduction or the taxpayer’s “general” age 65 and
older deduction. Code Section 12-6-1171(A) and (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 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.

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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 lesser 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 “general” 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 the “Military” Retirement Income Deduction for Military Retiree of Any Age –
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 of any age is 100% of the amount of qualified military retirement income received by
the surviving spouse. Since the taxpayer received $45,000 in a taxable military pension this year
attributable to the deceased military spouse, he is allowed a full $45,000 “military” retirement income
deduction.
Step 4: Calculate “General” Retirement Income Deduction for Military Retiree – 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 “military” retirement income deduction
claimed. Therefore, the taxpayer is allowed a $10,000 “general” retirement income deduction as a
surviving spouse.
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 17
, 2022
Columbia, South Carolina
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