South Carolina Income Tax on Military and National Guard Pay

South Carolina does not exclude active component military pay. A soldier on Title 10 orders who is a South Carolina resident is taxed on that pay like any other resident. What South Carolina excludes is the part-time service, and the exclusion has a precise, unusually short measure. Section 12-6-1120(7): "South Carolina gross income does not include compensation or retirement benefits received from the United States or any state for service in a state National Guard or a reserve component of the Armed Forces of the United States. This exclusion only applies to compensation and retirement benefits received for the customary annual training period not to exceed fifteen days for guard members or fourteen days plus travel time for reserve members, weekend drills, and inactive duty training." Three things to take from that. The exclusion covers weekend drills and inactive duty training without limit. That is the bulk of a drilling member's pay and it comes out of South Carolina gross income entirely. The annual training period is capped, and the cap is different for the two populations: fifteen days for a Guard member, fourteen days plus travel time for a reserve member. An annual training that runs seventeen days does not fully clear. The last sentence handles the call-up, and it is narrow: "National Guard or reserve members that are called to active duty are allowed to deduct fifteen days of active duty pay if they have not excluded pay for the annual training period for the same taxable year." Fifteen days, once, and only if the annual training exclusion has not already been used that year. A Guard member mobilised for a twelve-month deployment excludes fifteen days of it and pays South Carolina tax on the rest. That is a substantially worse result than most states in this catalog give a mobilised Guard member, and it is the figure to check before assuming a deployment is tax-free at the state level. The section also excludes retirement benefits for that service, which is redundant now that Section 12-6-1171 deducts all military retirement income without limit, but it is the older of the two provisions and still on the books. Combat zone pay is handled federally. South Carolina taxable income is built from federal taxable income, so pay excluded from federal gross income under the combat zone exclusion never enters the state computation. The filing and payment extension a service member gets federally for service in a combat zone or for hospitalisation carries across for South Carolina purposes, and the Department of Revenue asks for the combat zone service to be noted on the return. Section 12-6-3930 is a small but specific protection: no interest, penalties or other sanctions may be imposed on the active duty income of members of the National Guard and Reserves activated as a result of the conflict in Iraq and the war on terrorism with regard to underpayment of state estimated individual income tax on that active duty income, where the federal government is unable to withhold state income taxes on the pay. It is written to those named operations, so it does not automatically cover a later contingency. A nonresident service member stationed in South Carolina is not taxed by South Carolina on military pay, and a nonresident military spouse is not taxed on wages earned here, both under the federal Servicemembers Civil Relief Act as amended by the Military Spouses Residency Relief Act and the 2023 amendment that lets the couple elect a common residence.