Does South Carolina have a state income tax? Yes: 1.99% and 5.21% for 2026

South Carolina has a state income tax, and the South Carolina Department of Revenue (SCDOR) puts it plainly: “South Carolina taxes income earned here.” Residents are taxed on all their income, wherever it is earned, unless the law exempts it. Nonresidents are taxed on income from South Carolina, such as pay for work done in the state or rent from property there.

Act 110 of 2026 gives South Carolina two brackets 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. The subtraction keeps the first $30,000 at 1.99%: 5.21% of $30,000 is $1,563, and taking away $966 leaves $597, which is 1.99% of $30,000. In practice you pay 1.99% on the first $30,000 and 5.21% on each dollar above it, whatever your filing status.

For 2025 the rates were 0%, 3% and 6%. So the top rate falls from 6% to 5.21%, and the 0% bracket is gone: tax now starts at 1.99% on the first dollar of taxable income, which is what is left after the new deduction described below. SCDOR says the $30,000 line will be adjusted for inflation each year.

From 2026, the federal standard deduction and federal itemized deductions no longer count in South Carolina. Act 110 took the state out of Internal Revenue Code Section 63(b) through (g), so the South Carolina return starts from federal adjusted gross income (AGI) instead of federal taxable income, and itemized deductions such as mortgage interest and charitable gifts no longer lower South Carolina tax. In their place is the South Carolina Income Adjusted Deduction (SCIAD): $15,000 for single filers and married people filing separately, $22,500 for heads of household, and $30,000 for married couples filing jointly and surviving spouses.

The SCIAD shrinks as federal AGI rises, and it is gone at $95,000 for single filers, $142,500 for heads of household and $190,000 for joint filers. In between, it is cut by a fraction, and the cut is rounded down to the next $10. A single filer with $60,000 of federal AGI is $20,000 over the $40,000 starting point, and $20,000 divided by $55,000 is about 36.4%, so the cut is 36.4% of $15,000, or $5,454.55, rounded down to $5,450, leaving a SCIAD of $9,550. With no other adjustments, South Carolina taxable income is $50,450 and the tax is about $1,662, roughly 2.8% of AGI.

Nonresidents get a share of the SCIAD in proportion to the part of their federal AGI that is South Carolina AGI. SCDOR says it will add a SCIAD calculator to MyDORWAY, its online tax portal, later in 2026; until then, Information Letter #26-20 has the formulas, summarized in the table.

Governor Henry McMaster signed Act 110 of 2026 (House Bill 4216) on March 30, 2026. It applies to tax years beginning after December 31, 2025, so 2025 returns are not affected. Besides the new rates and the SCIAD, it capped the South Carolina earned income tax credit at $200 and rewrote who has to file. It left the Social Security exclusion, the retirement and age-65 deductions, the dependent exemption and the two-wage-earner credit as they were.

More cuts are written into the law. Starting with tax year 2027, the top rate falls in any year when the state’s Board of Economic Advisors projects individual income tax revenue, less amounts credited to the Trust Fund for Tax Relief, to grow at least 5% in the fiscal year that begins during the tax year. Each cut is sized to lower revenue by $200 million or by 25% of the recurring income tax surplus, whichever is greater; if the growth is projected to bring in less than $200 million, the cut is limited to that amount. Each cut is rounded up to the nearest hundredth of a percent, and the forecast in effect on February 15 is final, so the 2027 rate turns on the forecast in effect on February 15, 2027.

The cuts continue until the top rate reaches 1.99%. After that, one rate applies to all South Carolina taxable income, and it keeps falling the same way until it reaches 0%. Whether the rate drops in a given year depends on that revenue forecast.

Some of it. South Carolina does not tax Social Security benefits or railroad retirement: if part of your benefits is taxable on your federal return, you subtract that amount on the South Carolina return. Military retirement pay is fully deductible at any age, and so is military retirement income a surviving spouse receives.

Other retirement income, such as pensions and IRA and 401(k) withdrawals, is taxed after the two deductions below. Act 110 did not change them, and for 2026 they come on top of the SCIAD. A single resident 65 or older with federal AGI of $40,000 or less gets the full $15,000 SCIAD plus up to $15,000 of retirement and age-65 deductions, and Social Security is not counted at all. That $30,000 is also the 2026 filing threshold for single filers 65 and older.

The July 2025 tax law (Public Law 119-21) created federal deductions for qualified tips, overtime pay and interest on car loans for personal vehicles, and an extra $6,000 deduction for people 65 and older. As SCDOR describes the 2025 versions, the tips deduction tops out at $25,000, the overtime deduction at $12,500 ($25,000 on a joint return) and the car loan interest deduction at $10,000, and each phases out at higher incomes. South Carolina allows none of them, for 2025 or for 2026.

For 2026, Act 110 adds Internal Revenue Code Section 63(b) through (g) to the federal provisions South Carolina does not adopt. SCDOR lists what that covers: the standard deduction, itemized deductions, the senior deduction, the tips, overtime and car loan interest deductions, the qualified business income deduction and the charitable deduction for people who do not itemize. Since the return now starts from federal AGI, none of them reaches it, and tips and overtime pay are taxed at the regular 1.99% and 5.21% rates.

For 2025, SCDOR says South Carolina follows the Internal Revenue Code as amended through December 31, 2024. If you claimed the new deductions or the larger federal standard deduction on a 2025 federal return, you reverse them on the South Carolina return; Information Letter #26-4 lists the items. A bill to adopt the federal changes, H. 3368, failed in the state Senate on March 31, 2026, and SCDOR says it will issue updated guidance once the legislature addresses conformity.

Act 110 changed one South Carolina credit, the earned income tax credit, and left the others, including the two-wage-earner credit for married couples, as they were. The figures below are the latest SCDOR has published.

Two older South Carolina deductions also still apply alongside the SCIAD. The dependent exemption, $4,930 for each dependent claimed on your federal return for 2025 and adjusted for inflation each year, comes with the same amount again for each dependent under age 6. And for 2025 and 2026, 44% of net capital gain, meaning long-term gains after short-term losses, is deducted.

Act 110 also rewrote who has to file. For 2026, you need a South Carolina return if your South Carolina gross income is more than $15,000 as a single filer or married person filing separately, $22,500 as a head of household, or $30,000 as a married couple filing jointly, when everyone on the return is under 65. Each person 65 or older adds $15,000, so the thresholds become $30,000 and $37,500, and $45,000 or $60,000 for a joint return with one or both spouses 65 or older. Below them, a return is still how you get back South Carolina tax withheld from your pay.

Everyone files the SC1040, with the same filing status as on the federal return. Nonresidents, and part-year residents who choose nonresident treatment, attach Schedule NR, and credits go on the SC1040TC; with either schedule, attach a copy of your federal return.

A 2026 return is due April 15, 2027. Paying on MyDORWAY or filing Form SC4868 by then gives you six more months to file, and if you owe nothing and have a federal extension, SCDOR accepts that instead. An extension is not more time to pay: unless at least 90% of the tax is paid by April 15, a penalty of 0.5% a month applies to the unpaid amount, plus interest. Estimated payments are due if you expect to owe $100 or more for 2026 after withholding and credits, and paying 100% of your 2025 South Carolina tax on time, or 110% if your 2025 South Carolina AGI was over $150,000, generally avoids the underpayment penalty. SCDOR’s 2026 estimated tax worksheet was printed in October 2025, before Act 110, and SCDOR tells estimated payers to read Information Letter #26-20 for the changes.

SCDOR treats you as a resident, even while you live elsewhere, if you intend South Carolina to be your permanent home, it is the center of your financial, social and family life, and it is where you intend to return when you are away. Nonresidents who work in South Carolina or have rental, business or other investment income there file the SC1040 with Schedule NR. They are taxed only on that income, with deductions prorated, and for 2026 that includes the SCIAD.

If you move in or out during the year, you are a part-year resident and can choose the better of two methods for that year. You can file as a full-year resident, reporting all your income and claiming a credit for tax another state charged on the same income. Or you can file with Schedule NR and pay South Carolina tax only on income from your months as a resident and on South Carolina-source income, such as pay for work done in the state.

Living in South Carolina and working in North Carolina or Georgia usually means two returns. South Carolina taxes residents on all their income, wherever it is earned, and gives a credit on the SC1040TC for tax paid to the other state on the same income. Attach a copy of the other state’s return, and of your federal return, to the SC1040.