South Carolina’s individual income tax is being rebuilt for the 2026 tax year, and the most visible piece is a new rate table. The first $30,000 of South Carolina taxable income is taxed at 1.99 percent, and the return no longer begins from federal taxable income. It begins from federal adjusted gross income, the number on the federal return before the standard or itemized deduction is subtracted.
What the Department of Revenue says changed in H. 4216
The South Carolina Department of Revenue (SCDOR) laid out the change in a notice dated April 15, 2026, titled “Information about H. 4216.” The notice says that federal adjusted gross income (AGI) “is now the starting point for the South Carolina Individual Income Tax return,” and that the tax rate for income less than $30,000 is 1.99 percent. Income from $30,000 and above is taxed at 5.21 percent, minus $966, according to the agency’s own notice. The changes apply beginning with the 2026 tax year, with returns due April 15, 2027.
The legislation behind the notice is H. 4216, which the General Assembly’s bill record lists as Act No. 110 of 2026, approved March 30, 2026. Governor Henry McMaster publicized the law with a news release dated April 15, the same day SCDOR posted its notice. “Cutting the personal income tax in South Carolina has long been a top priority, and today we are continuing to deliver,” McMaster said in the governor’s release.
Why the $30,000 line is taxable income, not AGI
The $30,000 figure is easy to misread, because the new return starts from AGI. The enacted rate table in Section 12-6-510 applies the 1.99 percent rate to the first $30,000 of “South Carolina taxable income,” and the 5.21 percent top rate to taxable income of $30,000 or more. The threshold sits after the state deduction is taken, not before it, and the table lists a single set of brackets rather than separate ones by filing status. A single filer with $40,000 of federal AGI is therefore not “under $30,000” in the sense that matters; the figure that counts is what remains after the new deduction.
The rate is also marginal. The $966 subtraction in the higher bracket is what keeps a larger income from being taxed at 5.21 percent on every dollar: 5.21 percent of $30,000 is $1,563.30, and subtracting $966 leaves $597.30, within about thirty cents of the $597 that 1.99 percent of $30,000 produces. Arithmetic on the statute’s own figures shows a single filer with $25,000 of taxable income owing $497.50, and a taxpayer with $50,000 of taxable income owing $1,639, which is 5.21 percent of $50,000 less $966.
The South Carolina Income Adjusted Deduction replaces the federal deductions
Starting from AGI is paired with a new deduction. The act declines to adopt the federal standard and itemized deductions and creates the South Carolina Income Adjusted Deduction, or SCIAD. According to SCDOR, the amounts are $15,000 for single filers and married couples filing separately, $22,500 for head of household, and $30,000 for married filing jointly or a surviving spouse. SCDOR adds that the amounts “may be reduced based on income as described in the bill.”
The bill text supplies that reduction. For a single filer, the deduction shrinks once federal AGI exceeds $40,000, using a denominator of $55,000. For head of household the starting point is $60,000 with a denominator of $82,500, and for joint filers it is $80,000 with a denominator of $110,000. The thresholds are written in federal AGI, so the phase-out is measured on the same line the return now starts from.
Joint filers show how the pieces fit. A married couple with $80,000 of federal AGI keeps the full $30,000 deduction under the thresholds above, which leaves $50,000 of South Carolina taxable income and the $1,639 result described earlier. Higher incomes lose part of the deduction, which is the mechanism the governor’s office describes as directing relief toward lower-earning households.
A $325 million cut, a two-rate table and a trigger that starts in 2027
The governor’s office describes the law as moving South Carolina from three brackets to two rates and reducing taxpayer liability by approximately $325 million. It lowers the top rate from 6 percent to 5.21 percent. The release also describes an automatic reduction mechanism that begins in tax year 2027: if individual income tax revenues grow at least 5 percent annually, the top rate steps down until it reaches 1.99 percent.
That trigger does not change anything for 2026. The 5.21 percent and 1.99 percent rates are the ones SCDOR describes for the return due April 15, 2027, and the later reductions depend on revenue growth that has not happened yet.
SCDOR’s own filing portal is free, and a calculator is promised
SCDOR describes MyDORWAY as its free and secure tax portal on its individual income tax page, and the same page points to a separate Free Online Filing Options listing. The state’s own route, filing through SCDOR, carries no charge. The page also says SCDOR will launch a SCIAD calculator on MyDORWAY later this year, which is the agency’s own answer to the new deduction arithmetic.
No filing deadline moves because of the change. SCDOR’s notice ties the new rates and the AGI starting point to the 2026 tax year, with returns due April 15, 2027, and publishes no earlier date.
SCDOR’s notice, dated April 15, 2026, remains the agency’s statement of the rate table and the starting point, and the enacted text of Act No. 110 is the authority for the $30,000 bracket and the SCIAD phase-out.
A federal return now sits underneath the South Carolina one
South Carolina’s 2026 return will begin with the federal adjusted gross income line, which ties the state filing to a federal return that has to be finished first. When the IRS holds, offsets or loses a federal refund, the paperwork trail is a separate job from the state rule change itself.
The IRS Refund Recovery Kit pairs a notice decoder with the Form 3911 refund-trace steps and a refund status tracker spreadsheet, so a stalled federal refund can be followed from notice to resolution.
Open The IRS Refund Recovery Kit before the 2027 filing season →
This piece was drafted with AI assistance; the rates, threshold and deduction figures were checked against the South Carolina Department of Revenue notice, the enacted text of H. 4216 and the governor’s release.
