South Carolina lowers income tax, two-bracket system set
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Columbia, South Carolina. Governor Henry McMaster signed a law Wednesday that replaces the state's three-tier individual income tax system with two brackets beginning in tax year 2026. Under the new schedule taxpayers will pay 1.99% on income up to $30,000 and 5.21% on income above that amount, down from a previous top rate of 6.0%. McMaster said the changes are intended to reduce residents' tax burden and create a path toward eventual elimination of the personal income tax.
Columbia, South Carolina. The law removes federal standard and itemized deductions from the state taxable-income calculation and replaces them with a new South Carolina Income Adjusted Deduction, or SCIAD, which state officials say is designed to give greater benefit to lower- and middle-income taxpayers and phases out at higher income levels. Officials estimate about 42.8% of taxpayers will see lower tax bills. The statute also sets automatic future tax cuts beginning in 2027 if state income tax revenues grow by at least 5% in a year; those cuts would continue until the top rate reaches 1.99% and could move the state toward eventual elimination of the personal income tax. House Speaker Murrell Smith said the changes make South Carolina more competitive and better positioned for job growth, and other lawmakers described the measure as major tax relief. The changes apply to income earned beginning in 2026.
More context
Timeline
- 1. President promoted federal tax changes and related taxpayer benefits during a Western trip.
- 2. Treasury Department released data showing average tax refunds above $3,400, up about $340 year-over-year.
- 3. Torchlight Strategies published a Missouri poll finding majority opposition to eliminating the state income tax.
- 4. South Carolina lawmakers passed H.4216; Gov. Henry McMaster signed it, effective tax year 2026.
- 5. South Carolina legislators began forming a group to examine property tax implications following income tax changes.
Why it matters
South Carolina's new tax law could lower your tax bill if you're a resident. The changes aim to benefit lower and middle-income taxpayers, with about 42.8% expected to see a decrease. Check with a tax professional to understand how this impacts you.
Sources
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