South Carolina Special Handling of Military Retirement Distributions TurboTax South Carolina uses a "M" to designate those distributions from a military retirement plan.

[FerrariAiken]

South Carolina Special Handling of Military Retirement Distributions

TurboTax South Carolina uses a "M" to designate those distributions from a military retirement plan. I am retired military, but I can not find what is meant by the above statement.

[DMarkM1]

On the SC tax forms military retirement income is computer coded with an "M" to identify the deduction.  To take advantage of this be sure you have answered all the military questions in "My Info" and when you entered the 1099-R for your military pension you answered the follow on questions indicating this is military retirement pay.  Once you get into the SC interview the questions will be triggered to verify your military retirement income to be excluded.  

Right now, in South Carolina, military retirees under the age of 65 can claim state tax exemptions of up to $14,600. Retirees who are over 65, can claim an exemption of up to $27,000.

[Cindy501]

According to South Carolina bill 179 starting in 2021 a person entire military retirement is tax exempt not just up to $30,000.  See below:

TO AMEND SECTION 12-6-1171(A) OF THE 1976 CODE, RELATING TO MILITARY RETIREMENT INCOME DEDUCTION, TO ENACT THE "WORKFORCE ENHANCEMENT AND MILITARY RECOGNITION ACT," TO ALLOW THE DEDUCTION OF RETIREMENT BENEFITS ATTRIBUTABLE TO SERVICE ON ACTIVE DUTY IN THE ARMED FORCES OF THE UNITED STATES.

Be it enacted by the General Assembly of the State of South Carolina:

SECTION    1.    This act may be cited as the "Workforce Enhancement and Military Recognition Act."

SECTION    2.    Section 12-6-1171(A) of the 1976 Code is amended to read:

"Section 12-6-1171.    (A)(1)    An individual taxpayer who has military retirement income, each year may deduct an amount of his South Carolina earned income from South Carolina taxable income equal to the amount of military retirement income that is included in South Carolina taxable income, not to exceed seventeen thousand five hundred dollars. In the case of married taxpayers who file a joint federal income tax return, the deduction allowed by this section shall be calculated separately as though they had not filed a joint return, so that each individual's deduction is based on the same individual's retirement income and earned income. For purposes of this item, 'South Carolina earned income' has the same meaning as provided in Section 12-6-3330. Beginning in tax year 2021, an individual taxpayer who has military retirement income, each year may deduct an amount of his South Carolina earned income from South Carolina taxable income equal to the full amount of military retirement income.

(2) Notwithstanding item (1), beginning in the year in which an individual taxpayer reaches age sixty-five, an individual taxpayer who has military retirement income may deduct up to thirty thousand dollars of military retirement income that is included in South Carolina taxable income. Beginning in tax year 2021, the amount of the deduction shall be the full amount of military retirement income that is included in South Carolina taxable income."

SECTION    3.    This act takes effect upon approval by the Governor and applies to taxable years beginning after 2021.

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[Hydrox1]

I believe South Carolina is not exempting my military retirement on the South Carolina return. When I called in they sent me a list of states that had the military retirement taxed. South Carolina was on the list. Does Turbo Tax know that is was exempted starting with the 2022 year? It wants to take the military pension out of my $10,000 deduction. This is not correct. Anyone else have this problem?

[ErnieS0]

TurboTax will exempt your military retirement.

• After you enter your 1099-R, you will see a screen “Where is your distribution from?”
• Select Military retirement distribution.
• In South Carolina, you will see a screen for “Military Retirement Income.”
• Select YES to Did you receive eligible military retirement income in 2022?, then Continue.
• On “Enter Military Retirement Income” you should see the taxable amount from the federal section. If you do not, you can adjust this number.
   

Governor Henry McMaster (R-S.C.) signed the Workforce Enhancement and Military Recognition Act in 2022, which exempts all military retirement pay that is included in South Carolina taxable income from the state's Income Tax, no matter the taxpayer's age.

The new exemption is effective for tax year 2022, meaning retirees can claim it next year when they fill out their Income Tax return for this year. This deduction also can be claimed by a surviving spouse receiving military retirement income from their deceased spouse.

Other Income Tax exclusions:

• Any federal tax-exempt pension or compensation provided by the U.S. Department of Veterans Affairs
• Combat pay and certain benefits not included in federal taxable income
• Retirement income paid by the U.S. government for service in the Reserves or National Guard
• Income received for service in the National Guard or the Reserves for customary annual training, weekend drills, and other inactive duty training is generally exempt
• Service pay for non-resident military personnel on active duty in South Carolina who are legal residents of other states

Additional details and examples related to these deductions and other general retirement and age-65 Income Tax deductions are found in Revenue Ruling 21-13.

@Hydrox1

[jjdoylect333]

Has TurboTax updated their software to reflect that South Carolina no longer taxes military retirement income.  

[DaveF1006]

Yes it has. After you enter the 1099R in the federal program, the program will ask if this is a military retirement distribution. You will check the box that indicates that this is a military distribution.

After that, the exclusion will appear as a subtraction from federal taxable income in your SC1040 in line p4.

@jjdoylect333  

[acidblack]

March 17th and Turbotax is adding my military retirement to my SC income.  Very frustrating, appears I'll have to paper file with the correct numbers.

[DMarkM1]

SC does exempt military retirement benefits from taxable income.  Use the steps below to generate the SC exemption.

1. In the "My Info" section 
2. "Edit" your personal information.  
3. Select "Yes" you have military service.  
4. Select "Former/Retired Military" 
5. Continue.  
6. In Federal "Wages & Income"
7. Select "Retirement..." section
8. Edit the retirement 1099R
9. Verify entries match form
10. After form entry you will arrive at a page asking "Where is this distribution from?"
11. Select "Military Retirement"
12. Continue
13. In the SC state interview
14. Edit the "Income" section
15. You should be asked to verify/enter your military retirement benefits amount
16. Alternatively, the "Retirement Income Deduction" topic is available on the page titled "Here's the income SC handles differently."
17. Start/edit that topic

@acidblack