Recently enacted South Carolina legislation creates a personal income tax deduction for military retirement benefits and amends the textile revitalization tax credit applicable to tax years beginning after 2015.
The new deduction will allow eligible individuals to deduct up to $17,500 of their earned income from South Carolina taxable income each year once the deduction is phased-in. Married taxpayers filing jointly should calculate the deduction separately. Taxpayers 65 and older may deduct up to $30,000 of their military retirement income that is included in South Carolina taxable income. Surviving spouses that are receiving military retirement income attributable to their deceased spouse may apply the 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. Beginning in tax year 2016, the deduction is $5,900 and will increase by $2,000 a year until it is fully phased-in in 2020. The deduction for those taxpayers 65 and older is $18,000 and will increase by $3,000 a year until it is fully phased-in in 2020.
The legislation clarifies that if a taxpayer claims the deduction for military retirement benefits, he or she must reduce their retirement income tax deduction taken under code section 12-6-1170 by the amount of the military retirement benefits deduction. However, this clause does not apply to a surviving spouse taking the military retirement benefits deduction.
Additionally, the legislation makes changes to the textile revitalization tax credit. Specifically, for all projects placed in service after December 31, 2014 and for all tax years for which final returns have not been filed as of April 30, 2016, unused credit may be carried forward for the succeeding five years, at the individual, partnership or limited liability company level.
H.B. 3147, Laws 2016, effective June 7, 2016 and applicable as noted