If disability retirement income was taxed on your federal income tax return, and you qualify as being permanently and totally disabled, you may be able to deduct this income from your South Carolina taxable income.
You must be totally and permanently disabled, unable to be substantially gainfully employed, and you must be receiving income from a disability retirement plan and be eligible for the homestead exemption under SC Code Section 12-37-250 to qualify. You must have a physician's statement establishing that you are permanently and totally disabled. If you are mailing your return, include a copy of this statement with your return.
The deduction is limited to payments received from retirement plans. Third party sick pay reported on a W-2 does not qualify for the disability retirement deduction.
A surviving spouse may take a disability retirement deduction for amounts received in the year the disabled spouse died. For subsequent years, a surviving spouse is not eligible for the disability deduction for their deceased spouse.