Income tax for individuals
The South Carolina Income Adjusted Deduction (SCIAD), Explained
The 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.
- Set by new Section 12-6-1140(15), added by H.4216 (Act No. 110 of 2026).
- The phase-out runs on federal AGI, not South Carolina income.
- In the phase-out range you lose about 27 cents of SCIAD for each extra dollar of federal AGI, at every filing status.
- The reduction is rounded down to the next $10, which slightly favors the taxpayer.
- Nonresidents prorate the SCIAD by the share of federal AGI that is South Carolina AGI.
- Age 65 and older taxpayers keep the separate age 65 deduction on top.
Who this applies to
- Every individual filing a 2026 South Carolina return, resident or not
- Households with federal AGI in or near the phase-out ranges
- Former itemizers whose mortgage interest or charitable gifts no longer reduce South Carolina income
Who this may not apply to
- Tax year 2025 and earlier, which used the federal standard or itemized deduction
- Estates and trusts; the SCIAD is a deduction for individuals
Why South Carolina created its own deduction
Until 2025, the SC1040 began with federal taxable income, so South Carolina simply inherited whatever standard or itemized deduction you took federally. H.4216 ended that. It added Internal Revenue Code Section 63(b) through (g) to the list of federal provisions South Carolina does not adopt, so the state return now begins with federal adjusted gross income. The SCIAD fills the gap. SCDOR describes it as replacing the federal standard deduction, and because itemizing is gone too, it is the only general deduction most people will have on the state return.
The amounts and phase-out ranges
| Filing status | Full SCIAD if federal AGI is | Reduced if federal AGI is | No SCIAD at federal AGI of |
|---|---|---|---|
| Single or married filing separately ($15,000) | $40,000 or less | $40,001 to $94,999 | $95,000 or more |
| Head of household ($22,500) | $60,000 or less | $60,001 to $142,499 | $142,500 or more |
| Married filing jointly or surviving spouse ($30,000) | $80,000 or less | $80,001 to $189,999 | $190,000 or more |
How the reduction is calculated
The statute reduces the deduction by a fraction. The top of the fraction is the amount your federal AGI exceeds the starting point for your filing status. The bottom is a fixed width: $55,000 for single and married filing separately, $82,500 for head of household and $110,000 for joint filers. Multiply the full SCIAD by that fraction to get the reduction, round the reduction down to the next lowest $10, and subtract. If the fraction reaches one, there is no SCIAD.
- Single or married filing separately: $15,000 minus [$15,000 x (federal AGI minus $40,000) / $55,000]
- Head of household: $22,500 minus [$22,500 x (federal AGI minus $60,000) / $82,500]
- Married filing jointly or surviving spouse: $30,000 minus [$30,000 x (federal AGI minus $80,000) / $110,000]
| Filing status | Federal AGI | Reduction (rounded down to $10) | SCIAD |
|---|---|---|---|
| Single | $38,000 | $0 | $15,000 |
| Single | $60,000 | $5,450 | $9,550 |
| Head of household | $100,000 | $10,900 | $11,600 |
| Married filing jointly | $120,000 | $10,900 | $19,100 |
| Married filing jointly | $150,000 | $19,090 | $10,910 |
| Married filing jointly | $195,000 | Full | $0 |
The hidden marginal rate in the phase-out
Each phase-out width is set so the deduction disappears at the same pace for every filing status: $15,000 over $55,000, $22,500 over $82,500 and $30,000 over $110,000 all equal about 27.3 cents of lost deduction per dollar of extra federal AGI. For a taxpayer already in the 5.21% bracket, an extra dollar of federal AGI in the phase-out range therefore raises South Carolina taxable income by about $1.27, for an effective state rate of roughly 6.6% on that dollar until the SCIAD is gone. This matters when deciding the timing of a bonus, an IRA distribution, a Roth conversion or an asset sale.
Federal AGI includes income South Carolina later subtracts
The statute measures the phase-out on federal adjusted gross income, the same figure on your 1040. That figure includes items South Carolina takes back out later in its own calculation, such as the taxable part of Social Security, retirement distributions covered by the retirement deduction, military retired pay and the full amount of a long-term capital gain before the 44% deduction. Under the statute's wording, all of these count toward the phase-out even though South Carolina does not tax them, or taxes only part. Federal adjustments that lower AGI itself work the other way and can preserve SCIAD.
Deductions that come after AGI on the federal return do not help. SCDOR lists the standard deduction, Schedule A itemized deductions, the senior deduction, tips, overtime, car loan interest, the QBI deduction and the non-itemizer charitable deduction as federal items South Carolina no longer uses.
Married filing separately and nonresidents
Married filing separately uses the single amounts: $15,000, reduced once that spouse's federal AGI passes $40,000. SCDOR bases the SCIAD on your federal filing status. Couples who are weighing separate returns for other reasons should model both statuses, because two separate SCIADs with single-level thresholds can come out differently from one joint SCIAD.
Nonresidents reduce the SCIAD in the same proportion as South Carolina adjusted gross income bears to federal adjusted gross income (amended Section 12-6-1720). A nonresident with $200,000 of federal AGI, $50,000 of it from South Carolina, keeps a quarter of whatever SCIAD the filing status and AGI allow, which at that income level is nothing for any filing status.
How the SCIAD sits with the other South Carolina deductions
The SCIAD is one item in Section 12-6-1140; it does not replace the state's other subtractions. The age 65 and older deduction remains, and SCDOR's 2026 filing thresholds add it to the SCIAD: a single filer 65 or older does not have to file until South Carolina gross income passes $30,000, which is the $15,000 SCIAD plus the $15,000 age 65 deduction. The dependent exemption, retirement deduction, military retirement deduction and capital gains deduction sit in Code sections Act 110 did not amend. SCDOR had not released the 2026 SC1040 or its instructions as of 25 October 2026, so the order of lines on the form is not yet published.
Planning points before 31 December 2026
- If you used to itemize, mortgage interest and charitable gifts no longer cut your South Carolina tax. Charitable bunching strategies may still help federally but not on the state return.
- If your federal AGI sits inside a phase-out range, contributions that lower federal AGI, such as pre-tax workplace retirement deferrals, and restore SCIAD at the 27-cent rate on top of their federal effect.
- If you plan a large one-time income event, such as a property sale, consider whether it lands in a year when you would be in the phase-out anyway.
- Check withholding: SCDOR's posted 2026 withholding formula predates the act.
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Sources
- SC General Assembly — H.4216 (Act No. 110 of 2026), ratified text
- SCDOR — Information Letter #26-20, Individual Income Tax Reform (31 Aug 2026)
- SCDOR — Information Letter #26-23, Tax Legislative Update for 2026 (1 Oct 2026)
- SC Code of Laws, Title 12, Chapter 6 (Income Tax Act)
- SCDOR — Individual Income Tax
- SCDOR — Information about H.4216
South Carolina publishes new guidance and local governments change their rates, so check the source pages for anything that has moved since the date above. 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.
Questions people ask about this
Is the SCIAD the same as the federal standard deduction?
No. It is a separate South Carolina deduction with its own amounts and an income phase-out that the federal standard deduction does not have. It is based on your federal filing status and your federal AGI, and from 2026 it is the general deduction on the state return in place of both the federal standard deduction and itemized deductions.
Can I deduct mortgage interest on my 2026 South Carolina return?
Not as an itemized deduction. South Carolina stopped adopting the federal itemized deduction rules for tax year 2026, so Schedule A items such as mortgage interest, property taxes and charitable gifts do not reduce South Carolina income. You take the SCIAD instead, if your federal AGI allows it.
Do people 65 and older get the SCIAD?
Yes. Age does not change the SCIAD. Residents 65 and older also keep the separate age 65 and older deduction of up to $15,000 each, and SCDOR's 2026 filing thresholds add the two together.
Why did I lose part of the SCIAD when most of my income is Social Security?
The phase-out uses federal AGI, which includes the federally taxable part of Social Security. South Carolina does not tax Social Security, but under the statute's wording that income still counts when measuring whether your SCIAD is reduced.
Keep reading
- 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.
- 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.
- 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.
- 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 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.
- 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.
- South Carolina tax guideHow South Carolina taxes income, businesses and property, and what the Charleston area adds on top, with the state or local source beside every rule.
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