Starting in tax year 2026, South Carolina uses a two-bracket income tax system with rates of 1.99% and 5.21%. Governor McMaster signed H.4216 into law, replacing the previous three-bracket structure with a simpler setup: you pay 1.99% on taxable income up to $30,000 and 5.21% on everything above that. No counties or cities in South Carolina add their own income tax on top.
The Two Tax Brackets for 2026
The new rate structure is straightforward. If your South Carolina taxable income is $30,000 or less, every dollar is taxed at 1.99%. Once you cross that $30,000 threshold, only the income above it gets taxed at 5.21%. This is a marginal system, meaning the higher rate never applies to your first $30,000.
To put that in practical terms: a single filer with $60,000 in South Carolina taxable income would owe $597 on the first $30,000 (at 1.99%) plus $1,563 on the remaining $30,000 (at 5.21%), for a total state income tax bill of $2,160. That works out to an effective rate of about 3.6%.
The previous system had three brackets and a top rate of 6.0%, so the 2026 change represents a meaningful cut, especially for higher earners. The drop from 6.0% to 5.21% on income above $30,000 saves roughly $790 for every $100,000 of taxable income in that range.
Automatic Rate Reductions After 2027
The law includes a built-in mechanism to keep lowering taxes over time. Beginning in tax year 2027, if the state’s Board of Economic Advisors projects that individual income tax revenues will grow by at least 5% from the prior fiscal year, the top rate drops automatically. The Board makes this determination by February 15 each year.
There is a cap: no single reduction can decrease state revenue by more than $200 million. The law directs these reductions to continue until the top rate falls to 1.99%, matching the lower bracket, which would effectively create a flat tax. After that, the rate is intended to keep declining toward eventual elimination of the state income tax entirely. How quickly this happens depends on South Carolina’s revenue growth in any given year.
Tax Breaks for Retirees
South Carolina is notably generous to retirees. Social Security benefits that are taxable on your federal return are completely exempt from state income tax. Railroad retirement benefits get the same treatment.
Military retirement pay is fully exempt regardless of your age. If you’re a surviving spouse receiving military retirement income from a deceased spouse, you can also claim this exemption.
For private pensions, 401(k) distributions, IRA withdrawals, and other qualifying retirement account income, the deduction depends on your age. If you’re under 65, you can deduct up to $3,000 per year. Once you turn 65, that jumps to $10,000 per year. These deductions apply per individual taxpayer, so a married couple both over 65 could each claim up to $10,000.
How South Carolina Taxable Income Works
South Carolina starts with your federal taxable income as the baseline, then applies its own adjustments. You don’t need to recalculate everything from scratch. The state allows a standard deduction, and it also has its own set of additions and subtractions (like the retirement income deductions described above) that can change your final taxable number.
Because the state piggybacks on federal definitions, changes you make on your federal return, such as contributing to a traditional IRA or claiming above-the-line deductions, automatically flow through to reduce your South Carolina taxable income as well.
Filing and Payment Basics
South Carolina income tax returns are due April 15, matching the federal deadline. The state Department of Revenue accepts electronic filing and offers free filing options through its website. If you owe tax, you can pay electronically when you file.
If you earn income in South Carolina but live in another state, or vice versa, you may need to file a part-year or nonresident return. South Carolina does not have reciprocity agreements that would let you skip filing entirely, so if you work across state lines, expect to file in both states and claim a credit for taxes paid to the other.
Estimated tax payments follow the same quarterly schedule as federal estimates. If you’re self-employed or have significant income not subject to withholding, making quarterly payments helps you avoid underpayment penalties at filing time.