South Carolina vs. Georgia Retirement Taxes
I have clients on both sides of the Savannah River. Some retire in Bluffton or Hilton Head. Others live across the river in Savannah. Geographically, we’re talking about communities that are incredibly close to one another. From a tax perspective, though, you’re dealing with two very different systems.
So which is better for retirees: South Carolina or Georgia?
If you want the short version, both are pretty good. Neither taxes Social Security benefits at the state level, and both provide tax breaks for retirees. But depending on your age, the type of income you have, the value of your home, and how your assets are structured, one can absolutely be better than the other.
The mistake is looking at a list of “best states for retirees” and assuming the ranking applies to you. It might not.
You Don’t Have a Tax Problem. You Have a Planning Problem.
That’s a line I use in my book, Lowcountry Retirement, and it gets to the heart of this comparison.
Bluffton and Hilton Head are just a short drive from Savannah, but crossing the river puts you into a completely different tax system. The income-tax rules change. The property-tax rules change. The exemptions change. Even the deadlines for claiming some of those benefits can change.
So instead of asking which state has lower taxes, I think there's a much better question: Which state has lower taxes for you?
Because the answer can be very different depending on whether you're 62 or 72, whether most of your money is in an IRA or a Roth, and whether you're buying a $500,000 home or a $1.5 million home.
First, Social Security Is Basically a Tie
Let's start with the easy one. South Carolina doesn't tax Social Security benefits at the state level. Neither does Georgia.
So if you and your spouse are receiving $60,000, $70,000, or $80,000 a year from Social Security, that income isn't going to determine which side of the Savannah River wins the state-tax comparison.
Federal taxes are a different story. Depending on your other income, up to 85% of Social Security benefits can potentially be included in taxable income federally. That's one reason IRA distributions, capital gains, part-time income, and eventually Required Minimum Distributions need to be considered together rather than independently.
But from a South Carolina-versus-Georgia standpoint, Social Security itself is basically a tie.
Georgia Gets Very Interesting Once You’re 65
This is where Georgia starts looking really attractive.
For eligible taxpayers ages 62 through 64, Georgia allows up to $35,000 per person of qualifying retirement income to be excluded from state income tax. Once you reach 65, that jumps to $65,000 per person.
So if you're married and both spouses are 65 or older, that's potentially $130,000 of qualifying retirement income excluded from Georgia state income tax.
That's a big deal.
And remember, Social Security isn't taxed by Georgia either. So think about what that could mean for a retired couple living in Savannah. Maybe they're receiving $70,000 a year from Social Security and have another $130,000 of qualifying retirement income that can be excluded.
You could potentially be talking about $200,000 of annual income with little or none of it subject to Georgia state income tax, depending on exactly where that income comes from and whether both spouses qualify.
That's why I think Georgia gets overlooked as a retirement-tax state. Everybody immediately thinks about Florida because Florida doesn't have an individual state income tax. And yes, Florida still has the cleaner answer. Zero is zero.
But for the right retired couple over 65, Georgia can get surprisingly close in the real world.
South Carolina Is Retirement-Friendly Too—but the Numbers Are Different
South Carolina isn't exactly hostile to retirees. Social Security isn't taxed, and South Carolina provides deductions for qualifying retirement income and taxpayers age 65 and older.
But the income-tax benefit generally isn't nearly as large as Georgia's potential $65,000-per-person retirement-income exclusion.
If we're looking strictly at retirement income taxation, I think Georgia deserves a lot of credit. For a married couple over 65 with substantial IRA distributions, pension income, or other qualifying retirement income, that $130,000 potential combined exclusion can be meaningful.
But before we declare Georgia the winner, South Carolina has a card of its own to play.
Property taxes.
South Carolina’s Primary Residence Advantage Is a Big Deal
This is one of the most important differences for people considering Bluffton or Hilton Head.
In South Carolina, a qualifying owner-occupied primary residence is generally assessed at a 4% assessment ratio, compared with 6% for second homes and investment properties. But the difference doesn't stop there. A qualifying primary residence is also generally exempt from the school operating portion of the property tax, while a second home is not.
I've seen people look up the property taxes on a house they're considering in Bluffton or Hilton Head and nearly fall out of their chair. Then you find out they're looking at a tax bill based on the property being treated as a second home rather than an owner-occupied primary residence.
Here's why that matters. On a $1 million home, the difference between a 4% and 6% assessment ratio means the assessed value used in the tax calculation starts at $40,000 instead of $60,000. And then you still have the school operating tax difference on top of that.
So the tax bill you see attached to a property online may have very little to do with what you'll actually pay after you buy it and establish it as your primary residence. That's a big deal in Bluffton and Hilton Head, where plenty of homes have historically been second homes.
If you're comparing a $750,000, $1 million, or $1.5 million home in South Carolina with one in Georgia, don't just grab the prior owner's tax bill from Zillow and plug it into your retirement plan. Find out what the property taxes should look like for you as a South Carolina resident using the 4% primary-residence assessment.
South Carolina’s Homestead Exemption
For qualifying homeowners age 65 and older, South Carolina's Homestead Exemption can exempt the first $50,000 of the home's fair market value from certain property taxes. It isn't a complete exemption from property taxes, but it's another piece of the equation.
There's also a practical point people miss: you have to apply.
Tax benefits aren't very valuable if you never claim them.
This is why I think somebody moving to the Lowcountry should pay as much attention to the property-tax rules as the state income-tax rate. If you're going to have a relatively modest taxable retirement income but own a very expensive primary residence, property taxes may be the bigger number.
Georgia Has a Property-Tax Trick of Its Own
Georgia approaches property taxes differently, and Savannah retirees have an important provision worth understanding.
In Chatham County, the Stephens-Day exemption can freeze a qualifying property's base-year value for certain portions of the property-tax calculation. In other words, your home's market value might continue rising, but the taxable value used for some local taxes doesn't necessarily rise right along with it.
That can become increasingly valuable if you buy a home and stay there for a long time.
Georgia counties can also offer homestead exemptions and additional senior property-tax relief, including potential school-tax relief, although the specific benefits and qualifications can vary. Many Georgia homestead and valuation protections also require you to apply, often by an annual deadline.
So now we have an actual fight.
Georgia may have the advantage on retirement income taxes. South Carolina may have an advantage on the primary residence. Georgia then comes back with valuation protections of its own.
This is why there isn't a universal winner.
Let’s Put Some Numbers Around It
Here's the kind of example I think is much more useful than comparing state tax rates.
Suppose a married retired couple is deciding between Savannah and Bluffton. They own a $600,000 home and have $150,000 of annual income.
In South Carolina, their primary-residence property-tax treatment may be more favorable, but more of their retirement income may be subject to state income tax.
In Georgia, their property taxes may be higher, but a significant portion of their retirement income could potentially be excluded from state income tax.
That's essentially the example I use in Lowcountry Retirement, because it illustrates why there isn't a universal winner. The answer depends on the couple's particular combination of income, assets, home value, age, and how the plan is structured.
Change the facts and you can change the winner.
The Kind of Money You Have Matters More Than People Realize
Imagine two couples who both have a $3 million net worth.
The first couple has most of its money in traditional IRAs and 401(k)s. The second has much more money in Roth IRAs and taxable investments.
Same $3 million. Completely different tax situation.
That's why I don't particularly care when somebody sends me an article ranking the “10 Best States for Retirement Taxes.”
Best for whom?
If almost all your retirement income is Social Security, the state-income-tax difference may be relatively small because neither South Carolina nor Georgia taxes it. If you're taking substantial distributions from a $3 million traditional IRA, suddenly those state retirement-income rules get a lot more interesting.
Your tax return doesn't care where some magazine ranked your state. It cares about your income.
Your IRA Can Become a Much Bigger Deal Later
This is another reason I don't like doing this comparison based on one year's tax return.
Suppose you're 65 with $2 million sitting in traditional IRAs and 401(k)s. You may not need much from those accounts today because you're living on Social Security and money from a taxable account.
Great. But that IRA isn't going away.
Eventually Required Minimum Distributions begin, and the government starts telling you how much you have to take out every year whether you need the money or not. A tax situation that looks fantastic today can look very different later when substantially more taxable income starts coming out of retirement accounts.
That's why retirement tax planning should be forward-looking. I don't just want to know what South Carolina or Georgia would charge you this year. I want to know what the next 10 or 20 years might look like.
Roth Conversions Can Change the Math
This gets even more interesting during the years between retirement and Required Minimum Distributions.
For many retirees, those can be some of the best tax-planning years they'll ever have. The paycheck disappears. Maybe Social Security hasn't started yet. RMDs haven't started. Suddenly you're sitting in a lower tax bracket than you were during your career.
That's often when Roth conversions become interesting. But a Roth conversion creates taxable income today, so state taxes become another part of that calculation.
I talk about this in the book as looking through the windshield rather than just managing this year's tax bill. Future required distributions, Social Security timing, Medicare premiums, and portfolio withdrawals all interact. When they're coordinated, you have more control. When they're not, you're usually reacting after the fact.
Does that mean you should move from Bluffton to Savannah because you might save some money on Roth conversions? Probably not.
This is where tax planning can become ridiculous if you let it. If moving saves you $3,000 in taxes but costs $40,000 and puts you somewhere you don't actually want to live, congratulations—you saved yourself into a loss.
Taxes matter. They just aren't the only thing that matters.
The House Can Change the Entire Answer
Everybody wants to compare state income taxes because they're easy to find online. But if you're buying a $750,000, $1 million, or $1.5 million house, property taxes can easily become just as important.
Then add homeowners insurance, HOA fees, club dues, flood insurance depending on the property, maintenance, and, of course, the actual cost of the house.
Let's say Georgia saves you $4,000 a year in state income taxes. Sounds great.
But what if the house you want in Savannah costs $200,000 more? What if the house in Bluffton has a club membership that costs $15,000 a year? What if you buy on Hilton Head and your insurance costs are substantially different?
You can win the tax comparison and still lose the financial comparison by a mile.
I've never understood making a major retirement decision based on one line of the spreadsheet.
Savannah and Bluffton Aren’t the Same Retirement
There's also a much more basic question: Where do you actually want to live?
Someone who wants to walk to restaurants in downtown Savannah is probably looking for a very different retirement from someone who wants to live in a golf community in Bluffton. Someone who wants to be near the beach on Hilton Head may not care that another location could save a few thousand dollars a year.
And that's okay.
I'm all for minimizing taxes. We spend a lot of time doing exactly that. But I don't believe the goal of retirement is to pay the absolute least amount of tax humanly possible.
The goal is to live a good retirement without paying more tax than you need to.
Those are not the same thing.
Don’t Let the Tax Tail Wag the Retirement Dog
I've seen people get completely wrapped around the axle trying to avoid taxes. They'll consider moving, changing investments, buying products they don't understand, or making financial decisions they wouldn't otherwise make because somebody told them it would save taxes.
Sometimes the savings are meaningful. Sometimes we're rearranging somebody's entire financial life to save what amounts to a rounding error.
Before making a major decision, I like asking a very simple question: How many actual dollars are we talking about?
Not the tax rate. Not the percentage. How many dollars?
If one state saves you $10,000 every year for the next 20 years, I'm interested.
If we're talking about $1,200 and you like your current house, your friends are nearby, your golf group meets every Wednesday, and your grandchildren live 15 minutes away, I'm probably not packing the moving truck.
So Is South Carolina or Georgia Better for Retirees?
If you're forcing me to pick a winner strictly from a retirement-income-tax perspective, Georgia can be extremely attractive once you're 65.
The $65,000-per-person exclusion is meaningful. For a qualifying married couple where both spouses are 65 or older, that's potentially $130,000 of qualifying retirement income excluded from Georgia income tax, on top of Social Security benefits that Georgia doesn't tax.
That's not Florida. But depending on your income, it can get surprisingly close.
South Carolina fights back on the property-tax side. The 4% assessment ratio for a qualifying primary residence, the school operating tax treatment, and the Homestead Exemption can all matter—particularly for someone buying an expensive home in Bluffton or Hilton Head.
And Georgia has its own property-tax protections, particularly for a long-term homeowner in Chatham County.
So I wouldn't pick a winner based on a headline.
I'd run the numbers.
The Bottom Line
If you're deciding whether to retire in Bluffton, Hilton Head, Savannah, or somewhere else nearby, absolutely compare the taxes. There can be meaningful differences between South Carolina and Georgia.
And don't overlook Georgia. For a qualifying married couple age 65 or older, potentially excluding up to $130,000 of qualifying retirement income—on top of Social Security that Georgia doesn't tax—is a pretty compelling benefit.
But don't stop there. Look at the actual property taxes on the house you're considering. Understand South Carolina's primary-residence rules. Understand Georgia's homestead and valuation protections. Look at your IRA distributions, Roth money, capital gains, future RMDs, and the income you expect to have ten years from now—not just this year.
Then look at the house, insurance, community costs, family, healthcare, lifestyle, and where you actually want to wake up every morning.
If you genuinely like South Carolina and Georgia equally and one saves you a meaningful amount of money, take the savings. But if you love one and merely tolerate the other, I'm not spending my retirement chasing a slightly smaller tax bill.
The goal isn't to win at taxes.
It's to win at retirement.
