Income tax for individuals
South Carolina Income Tax in 2026: What H.4216 Changed
For 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.
- H.4216 became Act No. 110 of 2026, signed 30 March 2026, and first applies to tax years beginning after 2025.
- Two rates replace three brackets: 1.99% below $30,000, and 5.21% minus $966 at $30,000 and above.
- The SC calculation begins with federal AGI. Federal standard, itemized, senior, tips, overtime, car loan interest and QBI deductions do not carry over.
- The new SCIAD is $15,000, $22,500 or $30,000 by filing status, and phases out as federal AGI rises.
- The SC earned income tax credit is capped at $200.
- Your 2025 return is unaffected.
Who this applies to
- South Carolina residents filing a 2026 SC1040
- Part-year residents and nonresidents with South Carolina income (the SCIAD is prorated for nonresidents)
- Anyone who itemized or relied on the new federal deductions for tips, overtime, car loan interest or seniors
- People projecting 2026 estimated payments or checking 2026 withholding
Who this may not apply to
- Tax year 2025 and earlier returns, which use the old rules
- C corporations, which pay the separate 5% corporate rate
- Estates and trusts for the SCIAD, which is an individual deduction (the new rates do apply to them)
What H.4216 did, in one list
H.4216 passed the General Assembly in March 2026, was signed on 30 March 2026 and became Act No. 110. Section 8 says it first applies to tax years beginning after 2025, so the first return it governs is the 2026 SC1040 due 15 April 2027. SCDOR summarized it in Information Letter #26-20 (31 August 2026).
In short, it replaces three brackets with two, decouples from the federal standard and itemized deductions, creates the SCIAD, rewrites the filing thresholds, prorates the SCIAD for nonresidents, orders new withholding tables and caps the South Carolina earned income tax credit at $200.
The 2026 rates
| SC taxable income | Tax |
|---|---|
| $0 to $29,999 | 1.99% of taxable income |
| $30,000 or more | 5.21% of taxable income, minus $966 |
The $966 subtraction is what makes the two rates behave like a bracket. 5.21% of $30,000 is $1,563; 1.99% of $30,000 is $597; the difference is $966. So the formula works out to 1.99% on the first $30,000 and 5.21% on everything above it, with no jump in tax at the line.
Example: SC taxable income of $50,000 produces 5.21% x $50,000 = $2,605, minus $966, for $1,639 of tax, an average rate of about 3.3%.
Further cuts are built in
Beginning with tax year 2027, the 5.21% top rate drops whenever the Board of Economic Advisors projects individual income tax revenue to grow at least 5% in the fiscal year. The forecast in effect on 15 February decides each year's cut. The cuts continue until the top rate reaches 1.99%; after that, the single 1.99% rate is reduced the same way toward zero. Whether a cut happens for 2027 will not be known until the 2027 forecast.
The return now starts from federal AGI
Before 2026, the SC1040 started from federal taxable income, so whatever deduction you took federally flowed into your state return. Act 110 removes Section 63(b) through (g) from South Carolina law. SCDOR lists the federal deductions that no longer count for South Carolina:
- The standard deduction
- Itemized deductions on Schedule A (mortgage interest, charitable gifts, medical and so on)
- The federal senior deduction
- The qualified tip deduction
- The overtime deduction
- The car loan interest deduction
- The qualified business income (QBI) deduction
- The charitable deduction for people who do not itemize
In their place, South Carolina gives the SCIAD: $15,000 for single or married filing separately, $22,500 for head of household and $30,000 for married filing jointly or surviving spouse. It shrinks once federal AGI passes $40,000, $60,000 or $80,000 respectively and is gone at $95,000, $142,500 or $190,000. The SCIAD guide on this site walks through the formula. SCDOR says it will put a SCIAD calculator on MyDORWAY.
The practical effect: a household that itemized large mortgage interest and charitable gifts federally loses that benefit on the state return, while a household with modest income may come out ahead because the SCIAD is larger than what it would have deducted before.
What Act 110 did not amend
Act 110 does not touch the Code sections that hold South Carolina's own subtractions, and the published SC Code still contains them as before. SCDOR's 2026 filing thresholds are built on the SCIAD plus the age 65 deduction, which confirms that deduction continues. For the others, SCDOR's information letters list no change. SCDOR had not published the 2026 SC1040 or its instructions as of 25 October 2026, so the form lines and worksheets for 2026 are not yet known.
| Subtraction | SC Code section | Amended by Act 110? |
|---|---|---|
| Social Security and Tier 1 railroad retirement excluded | 12-6-1120(4) | No |
| Retirement income deduction ($3,000, or $10,000 from age 65) | 12-6-1170(A) | No |
| Age 65 and older deduction (up to $15,000 per person) | 12-6-1170(B) | No; used in the 2026 filing thresholds |
| Military retirement income deduction (all of it) | 12-6-1171 | No |
| 44% net capital gain deduction | 12-6-1150 | No |
| SC dependent exemption and under-6 deduction | 12-6-1140(13), 12-6-1160 | No |
| 529 (Future Scholar) and tuition prepayment contributions | 12-6-1140(11) | No |
One interaction is new. The SCIAD phase-out is measured on federal AGI, and federal AGI includes taxable Social Security, retirement distributions, military retired pay and the full amount of capital gains, even though South Carolina later subtracts some or all of those. A retiree or an investor can therefore lose part of the SCIAD because of income South Carolina does not ultimately tax.
Who has to file for 2026
| Filing status and age | File if SC gross income is over |
|---|---|
| Single or married filing separately, under 65 | $15,000 |
| Head of household, under 65 | $22,500 |
| Married filing jointly, both under 65 | $30,000 |
| Single or married filing separately, 65 or older | $30,000 |
| Head of household, 65 or older | $37,500 |
| Married filing jointly, one spouse 65 or older | $45,000 |
| Married filing jointly, both 65 or older | $60,000 |
Withholding and estimates in 2026
Act 110 tells SCDOR to adjust withholding tables to reflect the new law. As of 25 October 2026, the 2026 withholding formula posted on SCDOR's withholding page (WH-1603F, revised 4 November 2025) and the 2026 SC1040ES worksheet (revised 13 October 2025) both predate the act and use the earlier rate structure. Withholding and estimates based on them may not line up with what you will owe for 2026, in either direction. A projection using the new rates and the SCIAD before the 15 January 2027 fourth-quarter estimate is the way to find out.
What about my 2025 return?
Nothing in Act 110 applies to 2025. SCDOR granted every individual an automatic extension for 2025 returns to 15 October 2026 while it worked through conformity, and those returns use the prior three-bracket rates and start from federal taxable income.
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Sources
- SCDOR — Information about H.4216
- 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 — Withholding (2026 tables and formula)
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
What are the South Carolina income tax rates for 2026?
Taxable income under $30,000 is taxed at 1.99%. Taxable income of $30,000 or more is taxed at 5.21% of the whole amount minus $966, which works out to 1.99% on the first $30,000 and 5.21% above it. The $30,000 line is adjusted for inflation in later years.
Can I still itemize deductions on my South Carolina return?
No, not for tax year 2026. South Carolina no longer adopts the federal standard or itemized deductions. Mortgage interest, charitable gifts and other Schedule A items do not reduce South Carolina income. The South Carolina Income Adjusted Deduction takes their place.
Do the federal tips, overtime and senior deductions reduce my South Carolina tax?
No. SCDOR lists the qualified tip deduction, the overtime deduction, the car loan interest deduction and the senior deduction among the federal deductions South Carolina does not use from 2026. They still reduce federal taxable income, but the state return starts from federal AGI, before those deductions.
Will the 5.21% top rate go down again?
It can. Starting with tax year 2027, the rate falls whenever the Board of Economic Advisors projects at least 5% growth in individual income tax revenue, with the 15 February forecast deciding each year. The reductions continue until the top rate reaches 1.99%.
Keep reading
- 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 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.
- 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.
- 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.
- 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.
- 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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