As a North Carolina resident receiving a South Carolina employee pension, you do not need to file a South Carolina state tax return[3][9]. South Carolina does not tax the retirement income of nonresident individuals[9]. Your pension income will be taxable in your state of residence, which is North Carolina.
In North Carolina, your pension income will be subject to the state's flat income tax rate of 4.75%[3]. However, North Carolina offers some tax benefits for retirees:
1. Social Security benefits are not taxable in North Carolina[3].
2. North Carolina has a "Bailey exemption" for certain government pensions, but this applies only if you had five or more years of creditable service as of August 12, 1989[1].
It's important to note that while you don't need to file a South Carolina tax return, you will need to report this pension income on your North Carolina state tax return. North Carolina taxes most retirement income, including out-of-state pensions, at its flat rate[3].
Citations:
[1] https://www.kiplinger.com/retirement/601218/8-things-you-must-know-about-retiring-to-the-carolinas
[2] https://pamharringtonexclusives.com/blog/south-carolina-retirement-taxes/
[3] https://www.actsretirement.org/resources-advice/finance-saving-money/tax-benefits-for-retirees/north-carolina/
[4] https://support.taxslayer.com/hc/en-us/articles/360028657632-Is-my-retirement-income-taxable-to-South-Carolina
[5] https://www.actsretirement.org/resources-advice/finance-saving-money/tax-benefits-for-retirees/south-carolina/
[6] https://wildewood-downs.com/blog/tax-deductions-for-senior-citizens-in-south-carolina/
[7] https://smartasset.com/retirement/south-carolina-retirement-taxes
[8] https://www.kiplinger.com/retirement/602202/taxes-in-retirement-how-all-50-states-tax-retirees
[9] https://dor.sc.gov/tax/individual-income/faq
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