Moving from Canada to South Carolina: State Tax, Retirement, and Cross-Border Planning

South Carolina is in the middle of cutting its income tax from a graduated schedule (0% to 6.4% for 2025) down to a flat 3.99% by 2027. Combined with low property taxes, a retirement income deduction, no estate tax, and a coastline that includes Myrtle Beach, Hilton Head, and Charleston, the state has become one of the more common landing spots for Canadian retirees leaving Ontario and the Maritimes for warmer weather. The federal cross-border obligations, departure tax, RRSP and TFSA decisions, FBAR, treaty elections, are the same regardless of destination. This page covers what changes because the destination is South Carolina.

How does South Carolina’s tax compare to provinces?

South Carolina’s current top rate of 6.4% (2025), heading toward a flat 3.99%, is lower than every Canadian province’s top marginal rate.

Jurisdiction	Top rate	Notes
Ontario	~20.5% (with surtax)	On income above $220,000
BC	20.5%	On income above $252,752
Alberta	15%	On income above $355,845
Quebec	25.75%	On income above $126,000
South Carolina (2025)	6.4% top rate	Graduated, on income above roughly $17,000
South Carolina (target, 2027)	3.99% flat	Contingent on revenue triggers

South Carolina’s brackets compress quickly, most income above the first bracket lands at the top rate, so the graduated structure behaves close to a flat tax already. Once the 3.99% rate is fully phased in, South Carolina will sit among the lower state income tax rates nationally for states that impose one at all.

How is South Carolina moving to a flat tax?

South Carolina passed Act 163 of 2022, which collapsed what had been a six-bracket system down to three brackets immediately and set a schedule to reduce the top rate over time, contingent on the state meeting revenue growth conditions each year. The top rate has moved from 7% before the act to 6.4% for 2025, with the stated target of 3.99% by 2027. As with similar phase-downs in North Carolina and Georgia, each year’s cut depends on actual revenue coming in above a set threshold, so the final date could slip if collections soften.

The rate applies to South Carolina taxable income, which starts from federal taxable income and applies state-specific additions and subtractions, including the retirement income deduction described below.

What about retirement income in South Carolina?

This is the feature that draws the most Canadian retirees to the state, and it’s worth walking through carefully because the deduction structure has two tiers.

Under 65. South Carolina exempts up to $10,000 of qualifying retirement income per taxpayer. Qualifying retirement income generally includes pension income, 401(k) and IRA distributions, and similar payments, though the specifics of what counts have shifted with recent legislation, so this should be confirmed against the current-year instructions before it anchors a filing decision. All military retirement income is exempt regardless of age or amount, a separate and more generous carve-out.

Age 65 and older. The deduction rises to $15,000 per person, and unlike the under-65 exemption, it applies against any income, not just retirement income specifically. A married couple filing jointly where both spouses are 65 or older can claim up to $30,000 combined.

For a Canadian retiree drawing an RRSP/RRIF and collecting CPP and OAS, the exemption reduces the South Carolina tax on a meaningful slice of retirement income before the remainder is taxed at the graduated (soon to be flat) rate. This is a real advantage over states like North Carolina, which has no retirement income exemption at all, and it’s one reason South Carolina competes directly with Florida for the Canadian retiree market even though Florida has no income tax whatsoever.

How does South Carolina treat the RRSP?

South Carolina starts its income calculation from federal taxable income. Because the RRSP treaty deferral under Article XVIII keeps the plan’s annual growth out of federal taxable income (assuming the election is made or deemed made), South Carolina doesn’t pick it up either. The state effectively respects the deferral, and there’s no separate South Carolina election required.

When RRSP or RRIF withdrawals happen, the distribution flows into federal taxable income and then into South Carolina’s calculation, where it can qualify for the retirement income deduction described above before the state rate applies. This is a more favorable structure than California, which disregards the treaty and taxes RRSP growth annually rather than on withdrawal.

The TFSA is a foreign trust for US purposes and its income is included in federal taxable income, so it flows through to South Carolina as well. The standing recommendation is to close the TFSA before leaving Canada rather than try to manage the ongoing US reporting.

What happens on the Canadian side when I leave?

The same departure sequence as any province-to-US move:

• Deemed disposition at fair market value of worldwide assets (with the usual exclusions for Canadian real property, pension plans, and certain other properties)
• Final Canadian return from January 1 to the departure date
• Provincial tax at the rates of your province of residence on departure day
• T1161 and T1243 if applicable
• CRA non-resident notification
• RRSP left open (treaty deferral applies), TFSA closed

What other taxes does South Carolina have?

Sales tax. South Carolina’s state sales tax is 6%, and counties can add local option taxes on top, bringing the combined rate up to roughly 9% in some areas. Horry County (Myrtle Beach) and Beaufort County (Hilton Head) each carry local additions, so the exact rate depends on the municipality. This is well below Ontario’s 13% HST on most goods and services.

Property tax. South Carolina property taxes are notably low. A primary residence is assessed at 4% of fair market value (versus 6% for second homes and rental property, a meaningful distinction for anyone buying before deciding whether the home will be a full-time residence). Combined with local mill rates, effective property tax rates on an owner-occupied home typically land around 0.5% to 0.6% of market value, among the lowest in the country. On top of the assessment ratio, South Carolina offers a homestead exemption for residents 65 and older (or permanently disabled) that exempts the first $50,000 of a home’s fair market value from property tax entirely. Between the 4% assessment ratio and the senior homestead exemption, a retiree’s property tax bill in South Carolina can end up a fraction of what the same home value would generate in Ontario municipal and education taxes.

Estate and inheritance tax. South Carolina has no state estate tax and no inheritance tax. The only estate tax exposure is the federal estate tax ($13.61 million exemption for US citizens and residents). This makes estate planning simpler than in states like Washington that impose their own estate tax at a much lower threshold.

How does SC compare to other retiree destinations?

Canadian retirees weighing South Carolina are usually cross-shopping it against Florida (no income tax at all, but higher property insurance and hurricane exposure), Georgia (a flat rate heading toward 4.99% with no retirement income exemption), and North Carolina (a lower flat rate already but, again, no retirement carve-out). South Carolina’s retirement income deduction is the differentiator: it doesn’t get you to zero state tax the way Florida does, but it meaningfully narrows the gap while offering lower property insurance costs than Florida and a milder climate than the Carolina Piedmont. Charleston draws a different profile, professionals and remote workers rather than retirees, and for that group the state tax picture is the flat-rate calculation without the retirement deduction layered in.

What should I do next?

The Canadian exit follows the standard departure checklist. On the South Carolina side, the main planning items are confirming which income qualifies for the retirement deduction, timing the move around the age-65 threshold if it’s close, and deciding whether a purchased home will be a primary residence (4% assessment) from day one.

• Departure tax checklist, the full Canadian exit sequence
• RRSP and TFSA on a US move, federal treatment and reporting
• First US tax return after moving from Canada, the arrival-year mechanics
• State income tax for cross-border filers, comparing South Carolina to other states
• Moving from Ontario to Florida, the no-income-tax alternative for retirees
• Moving from Canada to Georgia, a flat-rate state without a retirement exemption
• Moving from Canada to North Carolina, a lower flat rate but no retirement carve-out
• Moving from Canada to Louisiana, the flat 3% Gulf corridor with energy-sector pull

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.