COLUMBIA, S.C. – Governor Henry McMaster was joined today by members of the South Carolina General Assembly and other state leaders for a ceremonial bill signing of H. 4216, the Income Tax bill. The new legislation simplifies South Carolina’s individual income tax structure and establishes a framework to continue reducing income taxes over time.
"Cutting the personal income tax in South Carolina has long been a top priority, and today we are continuing to deliver," said Governor Henry McMaster. "This is another major step forward that builds on years of hard work and keeps more money in the pockets of hardworking South Carolinians. It puts us on a clear path to continue reducing and ultimately eliminating the personal income tax."
Beginning in tax year 2026, H.4216 replaces South Carolina’s current three-bracket individual income tax system with a simplified two-rate structure. Under the new law, taxpayers will be subject to a 1.99% rate on taxable income up to $30,000 and a 5.21% rate on taxable income above $30,000, down from 6.0%. These changes will save South Carolina taxpayers an additional $325 million.
"For too long, South Carolina has had one of the highest income tax rates in the country. Today, that is no more," said Speaker of the House Murrell Smith. "This reform makes us more competitive, more attractive to businesses, and better positioned for job creation across our state. I’m proud of the work we have done and excited about what this means for South Carolina’s future."
The legislation also decouples South Carolina from certain federal deductions by starting with federal adjusted gross income (AGI) rather than federal taxable income. The bill removes the federal standard and itemized deductions from the state calculation, but it preserves existing South Carolina-specific deductions. To provide additional relief, the bill creates the South Carolina Income Adjusted Deduction (SCIAD). The SCIAD is designed to phase out as income increases, ensuring that the largest benefit is directed to lower-earning households.
"South Carolina is moving forward with a lower, fairer income tax rate that ensures our citizens pay no more than is absolutely necessary," said Representative Bruce Bannister. "This historic income tax relief bill is the result of strong leadership and a commitment to the people of South Carolina."
According to the Office of Revenue and Fiscal Affairs, approximately 42.8% of South Carolina taxpayers are projected to see a reduction in their tax liability under the new structure.
Additionally, H.4216 establishes a long-term framework for continued income tax reductions. Beginning in tax year 2027, if individual income tax revenues increase by at least 5% in the following fiscal year, tax rates will be automatically reduced. The law directs that reductions continue until the top rate reaches 1.99%, and then continues downward toward elimination of the income tax over time.
This legislation builds on a series of historic tax cuts signed into law by Governor McMaster, including the largest income tax cut in state history in 2022, which has allowed South Carolina taxpayers to keep an additional $1.275 billion of their hard-earned money.