South Carolina Enacts Major Income Tax Relief

New law simplifies tax structure and sets path for further reductions

Apr. 16, 2026 at 9:22am

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A serene, realistic painting of a stately government building in South Carolina, with warm sunlight casting long shadows across the facade, conceptually representing the passage of the state's new income tax relief legislation.The signing of South Carolina's historic income tax relief bill into law marks a milestone in the state's ongoing efforts to reduce the tax burden on residents.Columbia Today

South Carolina Governor Henry McMaster has signed into law a bill that replaces the state's current three-bracket individual income tax system with a simplified two-rate structure. Beginning in 2026, taxpayers will pay a 1.99% rate on taxable income up to $30,000 and a 5.21% rate on income above $30,000, down from the current 6% top rate. The new law is projected to save South Carolina taxpayers an additional $325 million annually.

Why it matters

This income tax relief bill is part of a broader effort by South Carolina's leadership to reduce the tax burden on residents and make the state more economically competitive. The simplified tax structure and automatic future rate reductions are designed to put the state on a path toward eventually eliminating the personal income tax altogether.

The details

The new law, H.4216, removes the federal standard and itemized deductions from the state tax calculation but preserves existing South Carolina-specific deductions. It also creates a new South Carolina Income Adjusted Deduction that phases out as income increases, ensuring the largest benefit goes to lower-earning households. Around 42.8% of South Carolina taxpayers are projected to see a reduction in their tax liability under the new structure.

  • The new two-rate income tax structure will take effect starting in tax year 2026.
  • Beginning in 2027, if individual income tax revenues increase by at least 5% in the following fiscal year, tax rates will be automatically reduced until the top rate reaches 1.99% and then continue downward toward elimination of the income tax over time.

The players

Gov. Henry McMaster

The Governor of South Carolina who signed the income tax relief bill into law.

Rep. Bruce Bannister

A South Carolina state representative who said the bill ensures citizens "pay no more than is absolutely necessary" in income taxes.

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What they’re saying

“Cutting the personal income tax in South Carolina has long been a top priority, and today we are continuing to deliver. 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.”

— Gov. Henry McMaster

“South Carolina is moving forward with a lower, fairer income tax rate that ensures our citizens pay no more than is absolutely necessary. This historic income tax relief bill is the result of strong leadership and a commitment to the people of South Carolina.”

— Rep. Bruce Bannister, State Representative

What’s next

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. Reductions will continue until the top rate reaches 1.99% and then continue downward toward elimination of the income tax over time.

The takeaway

This income tax relief bill is a significant step in South Carolina's efforts to reduce the tax burden on residents and make the state more economically competitive. The simplified tax structure and automatic future rate reductions demonstrate the state's commitment to eventually eliminating the personal income tax altogether.