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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.

Prepared by Christopher Adams and reviewed by editorial team.