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South Carolina State Income Tax: 2026 Rates, Brackets, and the H.4216 Reform

By The Ledgerism Editorial Team · The Ledgerism Brief Editorial Team produces original, methodology-disclosed accounting and tax research—data trackers, databases, and reference guides built to be the most-cited source in the field. Every figure is verified against primary sources including FASB, the IRS, the PCAOB, NASBA, the AICPA, and state boards of accountancy.

South Carolina state income tax is in transition for 2026. A graduated structure with a 0% bottom bracket and a top marginal rate of about 6.2% applied through tax year 2025, and a new law, H.4216 (Act 110), signed March 30, 2026, replaced it for tax year 2026 with a two-rate system built on federal adjusted gross income (AGI). Returns for the 2026 tax year are due April 15, 2027. The state also fully exempts Social Security benefits and offers a retirement income deduction.

How South Carolina state income tax works in 2026

South Carolina taxes the income of residents on a graduated basis and taxes nonresidents on South Carolina-source income. For tax year 2025, the state used federal taxable income as its starting point and applied a 0% / 3% / 6.2% bracket schedule. For tax year 2026, H.4216 switches the starting point to federal AGI and collapses the schedule into two rates. Both regimes are described below because taxpayers filing in early 2026 used the old system, while the 2026 return (filed in 2027) uses the new one.

The reform is part of a multi-year push. South Carolina began cutting its top rate from 7% in 2021, with the stated goal of reaching a 6% floor, and H.4216 restructures the system further with automatic reductions that may continue when revenue targets are met.

South Carolina income tax rates and brackets

For tax year 2025, South Carolina applied three brackets to federal taxable income, topping out near 6.2% and reducing toward 6%. For tax year 2026, H.4216 applies two rates to federal AGI: 1.99% on income under $30,000 and 5.21% above that threshold. The table below shows both structures. Bracket thresholds in the graduated system were indexed for inflation each year, so exact figures vary by year.

Graduated brackets (tax year 2025, before H.4216)

The 0% bottom bracket meant lower-income filers often owed no South Carolina income tax. The top rate had been reduced in steps from 7% (2021) toward a 6% target, reaching roughly 6.2% for 2025 depending on the year’s revenue-based adjustment.

H.4216 two-rate system (tax year 2026 onward)

H.4216 also builds in future automatic cuts: if the Board of Economic Advisors projects that revenue collections will rise 5% or more year over year, the top rate may be reduced further, with each cut capped so it does not exceed $200 million in lost revenue and a determination made by February 15 of each year. Supporters describe a long-run path toward eliminating the income tax, though any future reduction depends on the revenue triggers being met.

What South Carolina taxes: the AGI base and the SCIAD deduction

South Carolina income tax starts from a federal figure, then applies state-specific adjustments. Through tax year 2025 that figure was federal taxable income, so the federal standard or itemized deduction already reduced the South Carolina base. For tax year 2026, H.4216 decouples the state from federal deductions and uses federal AGI instead, replacing the old flow-through with a new South Carolina Income Adjusted Deduction (SCIAD).

Under H.4216, the SCIAD amounts are $15,000 for single or married filing separately, $22,500 for head of household, and $30,000 for married filing jointly or a surviving spouse. Because the base and the deduction both changed, comparing a 2025 return to a 2026 return line by line can be misleading. The rate looks lower, but the income it applies to is defined differently. Your actual liability depends on filing status, deductions, and income mix. For background on the federal starting figure, see what adjusted gross income (AGI) is and how to calculate it.

Retirement income and Social Security in South Carolina

South Carolina is often treated as retiree-friendly because it fully exempts Social Security benefits and lets residents deduct a portion of other retirement income. There is no income limit or AGI phaseout on the Social Security exemption, so benefits are removed from the South Carolina base regardless of total income.

For other retirement income, such as 401(k), IRA, and pension distributions, a resident may generally deduct up to $3,000 per taxpayer if under age 65 and up to $10,000 per taxpayer at age 65 or older. Beginning in the year a resident turns 65, a broader deduction of up to $15,000 may apply against income from any source, reduced by any retirement deduction already claimed. Military retirement income may be treated more favorably still, and the interaction of these deductions can depend on age, filing status, and income type, so the amounts above are ceilings rather than guarantees.

Who must file: residents, part-year residents, and nonresidents

Whether you owe South Carolina income tax depends on residency and the source of your income. Full-year residents report all income; nonresidents and part-year residents are taxed only on South Carolina-source income and prorate their deductions accordingly. The core form is the SC1040, with Schedule NR added for anyone who was not a resident for the full year.

1. Full-year residents file the SC1040 and report all income as if resident the entire year.
2. Nonresidents file the SC1040 with Schedule NR and are taxed only on income earned while in South Carolina and on South Carolina-source income.
3. Part-year residents file the SC1040 with Schedule NR, report income earned while a resident plus South Carolina-source income, and prorate deductions.

Residency turns on domicile and physical presence, and rules can vary for people who move, work remotely, or keep ties to more than one state. If you split a year between states, see how the systems interact in state vs federal income tax, and if you are weighing a move, compare it against states with no income tax in 2026.

FAQ

What is South Carolina’s income tax rate in 2026?
For tax year 2026, H.4216 applies two rates to federal AGI: 1.99% on income under $30,000 and 5.21% on income of $30,000 and above, with a $966 offset that smooths the bracket. For tax year 2025, the state used a graduated 0% / 3% / roughly 6.2% schedule on federal taxable income. The exact result depends on filing status and deductions.

Does South Carolina have a 0% tax bracket?
The graduated system that applied through tax year 2025 included a 0% bottom bracket, so income up to roughly $3,640 was taxed at 0% and many lower-income filers owed no state income tax. The H.4216 system effective for tax year 2026 replaces that schedule with a 1.99% first rate on federal AGI, applied after the new SCIAD deduction reduces taxable income.

Does South Carolina tax Social Security or retirement income?
South Carolina fully exempts Social Security benefits with no income limit or phaseout. Other retirement income, such as pensions, 401(k), and IRA distributions, may qualify for a deduction of up to $3,000 per taxpayer under age 65 or up to $10,000 at 65 or older, plus a broader $15,000 age-65 deduction that can apply against any income, subject to how the deductions interact.

What is the SCIAD deduction under H.4216?
The South Carolina Income Adjusted Deduction replaces the flow-through of the federal standard deduction after H.4216 decoupled the state from federal deductions. For 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 a surviving spouse, subtracted from federal AGI before the 1.99% and 5.21% rates apply.

Is South Carolina eliminating its income tax?
H.4216 builds in automatic rate cuts that may occur when the Board of Economic Advisors projects revenue growth of 5% or more, with each reduction capped so it does not exceed $200 million in lost revenue. Supporters describe a long-run goal of eliminating the income tax, but any future cut depends on those revenue triggers being met, so full elimination is not guaranteed.

Who has to file a South Carolina income tax return?
Full-year residents generally file the SC1040 and report all income. Nonresidents and part-year residents file the SC1040 with Schedule NR and are taxed only on South Carolina-source income, prorating their deductions. Filing obligations can also depend on gross income thresholds and whether South Carolina tax was withheld, so check current SC1040 instructions for your situation.

When is the South Carolina income tax return due?
The South Carolina individual income tax return generally follows the federal calendar. For the 2026 tax year, returns are due April 15, 2027. Extensions and estimated payment rules can shift specific dates, and deadlines may move when the 15th falls on a weekend or holiday, so confirm the current-year date before filing.

Reviewed by The Ledgerism Editorial Team. Last reviewed: July 2026.