Guides
South Carolina Tax Guide: Income, Business, Property and Local Taxes
How South Carolina taxes income, businesses and property, and what the Charleston area adds on top, with the state or local source beside every rule.
South Carolina taxes residents' income, with new rates and a new state deduction from tax year 2026 under H.4216. It charges a state sales tax that counties and cities add to, and it leaves property tax to the counties, where the rate on a home depends on whether it is your legal residence. Businesses add their own layer: state income and withholding taxes, unemployment insurance, and a business license from each city or county where they work.
Income tax for individuals
The 2026 rates and deduction, what still reduces South Carolina income, and how to pay during the year.
- SC income tax in 2026For tax year 2026, South Carolina taxes income under $30,000 at 1.99% and income of $30,000 or more at 5.21% minus $966. The state return now starts from federal adjusted gross income, ignores the federal standard and itemized deductions, and gives its own South Carolina Income Adjusted Deduction (SCIAD) instead. The state's own subtractions, such as the retirement, age 65, military retirement and 44% capital gains deductions, were not amended by the act.
- The SC Income Adjusted DeductionThe South Carolina Income Adjusted Deduction (SCIAD) replaces the federal standard and itemized deductions on South Carolina returns from tax year 2026. It is $15,000 for single or married filing separately, $22,500 for head of household and $30,000 for married filing jointly or surviving spouse, and it phases out as federal AGI rises, disappearing at $95,000, $142,500 and $190,000 respectively.
- SC retirement and age 65 deductionsSouth Carolina lets the original owner of a qualified retirement plan deduct up to $3,000 of taxable retirement income a year, rising to $10,000 from the year they turn 65. Separately, residents 65 and older get a deduction of up to $15,000 each against any kind of income, reduced by the retirement deduction they claim. H.4216 did not amend Section 12-6-1170, which holds both deductions.
- Does SC tax Social Security?No. South Carolina computes gross income without Internal Revenue Code Section 86, the federal rule that makes part of Social Security taxable, so Social Security and Tier 1 railroad retirement benefits are not taxed by the state. H.4216 did not change that. What is new for 2026 is that the taxable part of your benefits is still counted in federal AGI, which South Carolina now uses to phase out its new SCIAD.
- SC military retirement deductionSouth Carolina lets a military retiree deduct all military retirement income included in South Carolina taxable income, at any age, under Section 12-6-1171. Surviving spouses can deduct military survivor benefits and dependency and indemnity compensation the same way. H.4216 did not amend Section 12-6-1171, but the military deduction still reduces the retiree's own general retirement and age 65 deductions.
- SC 44% capital gains deductionSouth Carolina lets individuals, estates and trusts deduct 44% of their net capital gain, which is net long-term gain (assets held more than one year) minus net short-term loss. At the 2026 top rate of 5.21%, that taxes the remaining 56% of a long-term gain at an effective rate of about 2.9%. H.4216 did not amend Section 12-6-1150, but the full gain still counts in federal AGI for the new SCIAD phase-out.
- The SC 529 plan deductionSouth Carolina lets you deduct contributions to its own Section 529 college savings plan, Future Scholar, up to the plan's maximum account limits, with no separate state dollar cap. Contributions made during 2026 or by April 15, 2027 can be deducted on the 2026 return. H.4216 did not change this deduction, so it still sits on top of the new SC Income Adjusted Deduction.
- SC tax credits for individualsOf South Carolina's main individual credits, H.4216 changed only one: from 2026 the state earned income tax credit is capped at $200. The two wage earner credit, the child and dependent care credit, the refundable tuition credit and the credit for taxes paid to another state all continue under their existing statutes. Most are nonrefundable, so they can reduce South Carolina tax to zero but not below it.
- SC estimated tax in 2026South Carolina expects estimated payments from anyone who will owe $100 or more after withholding, but the 2026 SC1040ES worksheet was printed before H.4216 and still uses the old rates and starting point. For 2026, estimate from federal AGI using the new SCIAD and the 1.99% and 5.21% rates. You avoid an underpayment penalty if your withholding and timely estimates cover at least 90% of your 2026 tax or 100% of your 2025 tax, rising to 110% if your 2025 AGI was over $150,000.
Moving to or from South Carolina
When you become a resident, the year you move, and what a new arrival should sort out first.
- Moving to SC: a tax checklistThe tax side of a move to South Carolina comes down to a handful of steps: pin down the date you became domiciled here, get South Carolina tax withheld or paid from that date, apply for the reduced property tax ratio on your new home, and plan your first return as a part-year resident. From 2026 the state return also works differently from the federal one, starting from federal AGI with South Carolina's own deduction and two tax rates.
- Who counts as an SC residentFor income tax, a South Carolina resident is anyone domiciled here: the place you treat as your permanent or indefinite home and intend to return to. There is no day-count test, so time spent in or out of the state does not settle the question on its own. Once you are domiciled here, you stay a resident until you abandon South Carolina and set up a new permanent home somewhere else.
- Filing a part-year SC returnIn the year you move into or out of South Carolina, Section 12-6-1710 gives you a choice. You can report all of your income for the year as if you were a resident and claim a credit for tax paid to the other state, or you can file as a nonresident using Schedule NR, which taxes everything you earned while a resident plus South Carolina-source income from the rest of the year. Which costs less depends on the other state's tax and on when your income arrived.
Business taxes
State income, license, withholding and unemployment taxes, and where South Carolina departs from the federal rules.
- SC business license taxSouth Carolina has no statewide business license. Cities and counties that choose to levy one charge a business license tax, an excise on the privilege of doing business that is measured by gross income, not profit. Since Act 176 standardized the rules, every jurisdiction that levies it uses a May 1 to April 30 license year, an April 30 renewal date, a standard application and a common class schedule, but each sets its own rates.
- Corporate income tax & license feeA C corporation doing business in South Carolina pays income tax at 5% of its South Carolina taxable income, which starts from federal taxable income. Every corporation, S corporations included, also pays an annual license fee of $15 plus $1 for each $1,000 of capital stock and paid-in surplus, with a $25 minimum. H.4216 changed individual rates for 2026; it did not change either corporate charge.
- Active trade or business incomeSouth Carolina lets owners of sole proprietorships, partnerships, S corporations and LLCs taxed as one of those choose a 3% rate on active trade or business income instead of the regular individual rates. Individuals elect it each year on Form I-335; a qualifying partnership or S corporation can instead elect to pay the 3% tax itself, computed on Form I-435. H.4216 did not amend the statute, but SCDOR has not yet said how the election fits the new 2026 rate structure.
- Nonresident owner withholdingA partnership or S corporation with South Carolina income must withhold 5% of each nonresident owner's share of South Carolina taxable income, whether or not it distributed any cash, and pay it by the 15th day of the third month after year end. No withholding is required for an owner who files an I-309 affidavit, joins a composite return or is tax-exempt, or on income the entity already paid tax on under the 3% entity-level election.
- SC withholding for employersAn employer that pays South Carolina wages and files federal withholding returns must withhold South Carolina income tax, deposit it on the same schedule as its federal deposits, file a WH-1605 for each of the first three quarters, and file the WH-1606 fourth-quarter and annual reconciliation by 31 January with copies of its W-2s. The 2026 withholding formula SCDOR posted was issued in November 2025, before H.4216; the act directs SCDOR to adjust the tables.
- SC unemployment insurance taxSouth Carolina unemployment insurance (UI) tax is paid by the employer, not withheld from employees, on the first $14,000 of each employee's wages in a calendar year. For 2026 the Department of Employment and Workforce (DEW) assigns total rates from 0.06% to 5.46%, each including a 0.06% administrative assessment, and a new employer pays 1.06%. Reports and payments are due quarterly through DEW's SUITS portal.
- SC use taxSouth Carolina use tax is owed by the buyer when tangible goods are bought for use in South Carolina and the seller did not collect South Carolina sales tax. The rate is the same as sales tax: the 6% state rate plus the local rate where the item is used. Individuals usually report it on their income tax return; businesses report it on a sales and use tax return or a UT-3.
- SC bonus depreciation addbackSouth Carolina does not allow federal bonus depreciation under IRC Section 168(k). In the year an asset is placed in service, you add back the difference between your federal depreciation and the depreciation you would have claimed without bonus, then take extra South Carolina depreciation in the later years of the same recovery period. The asset carries a higher South Carolina basis until it is fully depreciated or sold.
- SC conformity to federal tax lawSouth Carolina adopts the Internal Revenue Code as it stood on a fixed date, currently December 31, 2024, minus a list of sections it never adopts. The 2026 Legislature did not move that date, so the federal changes enacted in July 2025 are not part of South Carolina law, and returns that claim them need state adjustments. Separately, H.4216 decoupled individuals from federal deductions starting in 2026.
- SC business tax creditsSouth Carolina has dozens of income tax credits for businesses, each with its own statute, schedule and limits. Most are nonrefundable: you claim them on a TC schedule summarized on the SC1120TC or SC1040TC, they cannot reduce tax below zero, and many are capped at a share of the tax owed, with unused amounts carried forward. For most Charleston-area small businesses, the credits worth checking first are the jobs credit, the research credit and the apprenticeship credit.
Property tax
The 4% legal-residence ratio, exemptions, vehicle tax and how to appeal an assessment.
- SC business personal property taxSouth Carolina taxes the furniture, fixtures and equipment a business uses. You report their cost and income tax depreciation on an annual return, the net value is assessed at 10.5%, and the county bills the tax at local millage, due January 15. Starting with property tax year 2027, Act 243 of 2026 exempts the first $10,000 of net depreciated value for qualifying small businesses and sends every business personal property return to SCDOR.
- The 4% legal residence ratioSouth Carolina taxes the home you own, occupy and are domiciled in on 4% of its fair market value instead of the 6% used for second homes and rentals, and that home is also exempt from school operating millage. The lower ratio is not automatic: you apply to the county assessor, with proof of domicile, before the first penalty date for the first tax year you claim, which is usually January 15 after the tax year.
- Homestead exemption (65+, disabled)South Carolina exempts the first $50,000 of the fair market value of your permanent home and legal residence from county, municipal, school and special assessment property taxes if you are 65 or older, totally and permanently disabled, or legally blind, and have been a South Carolina resident for at least a year. You apply in writing to the county auditor, not the assessor and not on your income tax return, and the exemption then continues until something changes.
- Vehicle property taxSouth Carolina counties charge property tax on registered vehicles every registration year, and you pay it to the county treasurer before the DMV will issue or renew the registration. The tax is the vehicle's value from SCDOR's guides, times 6% for a personal car, pickup or motorcycle (10.5% for business or heavy vehicles), times the local millage. Renewals are due by the last day of the month the tag expires.
- Appealing a property assessmentIf your county assessor mails a notice raising your home's value or changing its classification, you have 90 days from the mailing to object to the assessor in writing. An unresolved objection moves to an assessor conference, a written protest within 30 days, the county board of assessment appeals within 30 days of the assessor's response, and then the Administrative Law Court. In a year with no notice you can object in writing at any time, and filing before the first penalty date makes it count for that year.
Charleston-area local taxes
Accommodations, hospitality and sales tax rates, and business licenses, town by town.
- Sales tax rates by townEvery municipality and unincorporated area in Charleston and Berkeley counties has a 9% combined sales tax rate: the 6% state rate plus 3% in local taxes. Dorchester County is 7%, which matters because Summerville and North Charleston both extend into it. The rate that applies is the one where the sale is delivered, not where your business is based.
- Accommodations tax by townA short-term rental or hotel room in the Charleston area carries two layers of tax: 10% reported to the SCDOR in Charleston and Berkeley counties (8% in Dorchester County), plus local accommodations taxes reported to the county or town. In Charleston County, the county's 2% fee applies everywhere, and eight cities and towns add 1% or 2% on top, all collected by Charleston County Revenue Collections. A City of Charleston property in Charleston County totals 14%.
- Hospitality tax on food and drinkMost Charleston-area cities and towns charge a 2% local hospitality tax on prepared meals and beverages, on top of sales tax. It is not reported to the SCDOR: you file a separate monthly return, usually by the 20th, with the city, the town or Charleston County acting as its collector. A restaurant meal in the City of Charleston carries 9% sales tax plus 2% hospitality tax.
- Local business licenses by townIn the Charleston area you need a business license from each city, town or county where you do business, not just where your office is. Charleston County Revenue Collections licenses unincorporated Charleston County and seven municipalities, including North Charleston and James Island. The City of Charleston, Mount Pleasant, Summerville, Isle of Palms, Kiawah Island and Hanahan run their own offices. Every one renews by April 30.
Sources
Reviewed by Matthew Haigler, CPA on . The information on this site is general in nature and is not tax, legal, or accounting advice for your situation. Tax law changes and the right answer depends on facts we would need to review with you. Please speak with a qualified professional before acting on anything you read here.
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