South Carolina provisions for lump sum distributions are the same as the federal provisions except South Carolina does not impose a premature distribution penalty. If you used federal Form 4972 for a lump sum distribution, you must use the South Carolina SC4972 to compute the South Carolina tax.
An individual may deduct up to $3,000 of qualified retirement income, and, beginning in the tax year in which the individual reaches age sixty-five, up to $10,000 of qualified retirement income.
A surviving spouse receiving qualified retirement income attributable to the deceased spouse may deduct up to $3,000 or $10,000, whichever would have applied, based on age, had the deceased spouse lived. The surviving spouse retirement deduction is in addition to the individual retirement deduction.
Beginning in the tax year in which a resident reaches age sixty-five, he or she is entitled to a deduction of $15,000 against any South Carolina income. However, the sixty-five and older deduction is reduced by any individual retirement deduction mentioned above. The age-65-and-over deduction is not reduced by any surviving spouse retirement deduction.
If an age-65-and-older deduction has been claimed on SC1040, do not include any individual retirement deduction on line 10 of SC4972.
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