Business taxes
South Carolina Unemployment Insurance Tax: 2026 Rates, Wage Base and Quarterly Filing
South 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.
- You become liable once you pay $1,500 in wages in any calendar quarter, or have at least one employee in 20 different weeks, in the current or preceding year (S.C. Code 41-27-210).
- Only the first $14,000 of each employee's annual wages is taxable (S.C. Code 41-27-380).
- 2026 total rates run from 0.06% (class 1) to 5.46% (class 20). New employers pay 1.06%. There is no solvency surcharge for 2026.
- Quarterly reports and payments are due April 30, July 31, October 31 and January 31, including quarters with no payroll while the account is open.
- Act 243 of 2026 lengthens the claims history used to set rates to 16 quarters for 2027 and 20 quarters from 2028, and removes the $1,000 cap on late-filing and late-payment penalties.
Who this applies to
- Employers that paid $1,500 or more in wages in any calendar quarter this year or last year
- Employers that had at least one employee on some part of a day in 20 different weeks this year or last year
- Household employers paying $1,000 or more in cash wages for domestic work in a calendar quarter (a separate test)
Who this may not apply to
- Businesses with no employees, whose owners take draws or distributions rather than wages
- Payments to genuine independent contractors (whether someone is an employee is decided by the facts of the relationship, not the label)
When a business becomes liable
South Carolina's employer definition in S.C. Code 41-27-210 has two tests, and meeting either one is enough. The wage test is met if you paid $1,500 or more in wages for employment in any calendar quarter of the current or preceding calendar year. The duration test is met if you had at least one individual in employment for some portion of a day in each of 20 different calendar weeks, consecutive or not, in the current or preceding year. Because both tests look back to the preceding year, crossing one of them makes you an employer for the rest of that year and for the next one.
Household and farm employers have their own thresholds under S.C. Code 41-27-230: $1,000 in cash wages for domestic service in a quarter, and either $20,000 in cash wages in a quarter or 10 agricultural workers in 20 weeks for farm labor.
Registration is with DEW through the State Unemployment Insurance Tax System (SUITS) at uitax.dew.sc.gov. It is a different agency and a different account from the withholding account you open with the SC Department of Revenue, and registering for one does not register you for the other.
The wage base and how the tax is figured
The taxable wage base has been $14,000 per employee per calendar year since January 1, 2015. Wages above that are excess wages and carry no South Carolina UI tax. Each quarter, the tax is your assigned rate multiplied by the taxable wages paid in that quarter, so most of the cost for a given employee lands early in the year and stops once their wages pass $14,000.
| Rate class | Base rate | Admin assessment (DACA) | Total rate | Maximum cost per employee |
|---|---|---|---|---|
| 1 | 0.000% | 0.060% | 0.060% | $8.40 |
| 2 | 0.052% | 0.060% | 0.112% | $15.68 |
| 7 | 0.089% | 0.060% | 0.149% | $20.86 |
| 12 | 0.150% | 0.060% | 0.210% | $29.40 |
| 13 | 0.180% | 0.060% | 0.240% | $33.60 |
| 14 | 0.581% | 0.060% | 0.641% | $89.74 |
| 19 | 0.985% | 0.060% | 1.045% | $146.30 |
| 20 | 5.400% | 0.060% | 5.460% | $764.40 |
| 30 (new employer) | 1.000% | 0.060% | 1.060% | $148.40 |
How your rate class is set
Your class follows your benefit ratio: the unemployment benefits charged to your account divided by your taxable payroll over the same period. Through tax year 2026 the period is the 12 calendar quarters before the calculation date, using quarters filed through June 30 (S.C. Code 41-31-5). For 2026, an employer with no benefit charges from July 1, 2022 through June 30, 2025 is in class 1. The class on your tax rate notice applies for the whole calendar year, and you can see it in SUITS.
A newly liable employer that has not taken over another employer's experience pays the class 12 rate or 1%, whichever is higher. For 2026 that is 1%, shown as class 30 with a 1.06% total. After 12 months of liability, your own history sets the rate at the next annual computation.
DEW states that South Carolina law has no appeal process for the rate assignment itself. What you can contest is the charges behind it: employers with charges receive a quarterly charge statement and have 30 days to protest a charge they believe is wrong. That 30-day window is the practical control you have over next year's rate.
Filing and paying each quarter
- Due dates: January to March by April 30, April to June by July 31, July to September by October 31, and October to December by January 31.
- File every quarter while the account is active, including a quarter with no wages.
- Employers with 10 or more employees must file wage reports electronically (S.C. Code 41-31-160). SUITS allows corrections for the most recent 16 quarters.
- Unpaid contributions bear interest at 1% per month (S.C. Code 41-31-370).
- A report not filed within 15 days of DEW's demand carries a penalty of 10% of the contributions due, at least $25. Contributions unpaid 10 days after an assessment carry a separate 10% penalty. Act 243 removed the former $1,000 cap on both, so DEW help pages that still mention it are out of date.
- If any report is delinquent on the date rates are computed, DEW assigns the class 20 rate until the next computation or until all reports are filed (S.C. Code 41-31-60).
What changes in 2027 under Act 243
S.688, signed May 22, 2026 as Act 243, rewrote several parts of the UI tax law. The changes that matter most to small employers:
- Longer lookback: the benefit ratio uses 16 quarters for tax year 2027 and 20 quarters from tax year 2028. An employer in class 1 for 2026 stays on the 12-quarter calculation until it no longer qualifies for class 1.
- DEW's estimate in the state's fiscal impact statement is that the longer lookback moves roughly 38,000 employers out of class 1 into higher classes, while the rates are adjusted so total trust fund revenue does not change.
- Delinquent employers: for a tax execution issued on or after January 1, 2027, the employer pays its own rate plus 2 percentage points instead of the class 20 rate. Executions issued before 2027 still carry class 20 until paid.
The federal side
Federal unemployment tax (FUTA) is 6.0% on the first $7,000 of each employee's wages, reported annually on Form 940. Employers can receive a credit of up to 5.4% for state unemployment tax, which brings the federal rate to 0.6%, but the IRS ties the maximum credit to having paid the state tax in full by the Form 940 due date. A late South Carolina payment can therefore cost you twice.
We do not process payroll. What we do is reconcile what your payroll provider reports to DEW and the IRS against your books, and look at a rate notice or charge statement while there is still time to protest a charge.
Want this worked out for your situation?
The rules above are general. Bring your numbers to a free consultation, in person on James Island or by video, and we will tell you how they apply to you.
Bookkeeping Services — Clean books, reconciled monthly, ready for tax time.
Sources
- DEW — Tax rate information (2026 rate table)
- DEW — 2026 unemployment insurance tax rates announcement
- DEW — File a wage report
- DEW SUITS — Employer FAQs (wage base, interest)
- S.C. Code Title 41, Chapter 27 (employer definition, wage base)
- S.688, Act 243 of 2026 (UI tax changes)
- Revenue and Fiscal Affairs — S.688 fiscal impact statement
- IRS — Topic 759, Form 940 and FUTA
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 South Carolina unemployment tax taken out of employee paychecks?
No. South Carolina UI tax is paid entirely by the employer on the first $14,000 of each employee's wages each year. Nothing is withheld from the employee for it.
Can I appeal my South Carolina UI tax rate?
DEW states there is no appeal process for the rate assignment itself. You can protest individual benefit charges within 30 days of the quarterly charge statement, and those charges are what drive your future rate. Questions about a rate notice go through the SUITS employer portal.
What rate do I pay after my first year as an employer?
New employers pay the class 12 rate or 1%, whichever is higher, which is 1.06% in total for 2026. Once you have 12 months of liability, DEW computes your rate from your own benefit charges and taxable payroll at the next annual computation.
Will the 2027 rate calculation change my rate if I have never had a claim?
If you are in class 1 for 2026, Act 243 keeps you on the 12-quarter calculation until you no longer qualify for class 1. Other employers move to a 16-quarter lookback for 2027, so older claims stay in the calculation longer.
Keep reading
- Payroll Setup for Your First EmployeeThe first employee changes the shape of a business more than the second through the twentieth put together, because it is the point at which you start holding other people's money and answering to three agencies about it.
- 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 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.
- 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.
- 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 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.
- 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.
Talk to a tax expert
Tell us what you are dealing with and we will tell you how we would handle it.