South Carolina’s flat tax took shape when Governor Henry McMaster signed H. 4216 on March 30, 2026, setting a top rate of 5.21% on taxable income above $30,000, replacing the state’s federal-based standard deduction with a new South Carolina deduction, and installing automatic triggers that are meant to collapse the brackets into a single rate and eventually drive that rate to zero.1South Carolina Department of Revenue. Information About H 4216 The “flat tax” label is forward-looking. For 2026 the structure still uses two brackets; the single rate arrives once the top bracket shrinks far enough to merge with the lower one.
What You Pay for 2026
Before H. 4216, South Carolina ran a three-bracket system under Section 12-6-510: 0% on the first $3,200 of taxable income, 3% from $3,200 to $16,040, and a top rate that had been phased down from 7% to 6% by 2025.2South Carolina Legislature. South Carolina Code of Laws Title 12 – Taxation The legislature had been trimming the top rate a tenth of a point at a time whenever general fund revenue grew by at least 5%.3South Carolina Department of Revenue. South Carolina Individual Income Taxes
The new law jumps ahead of that schedule. For 2026, the top rate is 5.21% on taxable income above $30,000. A lower rate of roughly 1.99% applies to the first $30,000. The tax tables express the combined calculation as a shorthand: 5.21% of your taxable income, minus $966. The subtraction accounts for the lower rate running under the first $30,000.1South Carolina Department of Revenue. Information About H 4216
So the system is not yet “flat” in the literal sense. It has two rates. The plan is to keep shrinking the top rate until it meets the lower one, producing a true single rate, and then keep cutting that single rate.
How the Rate Keeps Dropping
H. 4216 built an automatic ratchet into the law. Starting in 2027, the Board of Economic Advisors determines by February 15 each year whether projected general fund revenue will grow by at least 5% over the prior fiscal year. If it does, the top bracket rate drops again.1South Carolina Department of Revenue. Information About H 4216
Two guardrails limit each cut. A single year’s reduction cannot cost more than $200 million in income tax revenue. And if projected revenue growth is less than $200 million, the cut is capped at whatever growth is projected. Once the top bracket shrinks enough to collapse into the lower bracket, South Carolina has a true single-rate tax. The same trigger then continues pushing that flat rate toward zero. Every reduction is permanent and cumulative, so the rate does not climb back up in a later year when revenue dips.
The New South Carolina Income Adjusted Deduction
H. 4216 also ended South Carolina’s practice of borrowing the federal standard deduction. In its place is the South Carolina Income Adjusted Deduction, or SCIAD. For 2026 the amounts are:1South Carolina Department of Revenue. Information About H 4216
- Single or married filing separately: $15,000
- Head of household: $22,500
- Married filing jointly or surviving spouse: $30,000
These are generally higher than what the federal-conformity rules produced for many filers. If you itemize federally, you can still itemize for South Carolina, though the state has historically limited the benefit to the amount by which itemized deductions exceed what the standard deduction would have been.4South Carolina Legislature. South Carolina Code 12-6-1130 – Taxable Income Computation Modifications
What Did Not Change
The rate cut and the new deduction get the attention, but several longstanding rules carry straight through, and they can matter more to your bill than the headline rate.
South Carolina still does not let you deduct state and local income or sales taxes, even if you deduct them on your federal return.5South Carolina Department of Revenue. SC Revenue Ruling 19-1 – State Tax Deduction for Individuals Who Itemize Deductions
Your South Carolina tax still starts from your federal adjusted gross income, with state modifications layered on. Section 12-6-560 directs the state to follow the Internal Revenue Code for computing gross income, adjusted gross income, and taxable income, then apply South Carolina’s own adjustments.6South Carolina Legislature. South Carolina Code 12-6-560 – Computation of Taxable Income for Resident Individuals Common additions include interest on other states’ bonds. Common subtractions include state income tax refunds that showed up as federal income.
Retirees keep their generous treatment. Social Security benefits are fully excluded from South Carolina gross income under Section 12-6-1120, regardless of your other income, which differs from the federal rule that taxes up to 85% of benefits for higher earners. Under Section 12-6-1170, taxpayers under 65 can deduct up to $3,000 of qualifying retirement distributions they originally funded; at 65, the available deduction rises to $10,000, and a further deduction under 12-6-1170(B) brings the combined maximum to $15,000. A married couple filing jointly where both spouses are 65 or older can each claim it, for up to $30,000 combined.7South Carolina Legislature. South Carolina Code of Laws Title 12 – Taxation – Section 12-6-1170
Military retirement pay gets the most favorable treatment. Section 12-6-1171 allows a full deduction of all military retirement pay included in South Carolina taxable income, with no dollar cap. Surviving spouses receiving military retirement benefits based on a deceased spouse’s service qualify for the same treatment.8South Carolina Legislature. South Carolina Code of Laws Title 12 – Taxation – Section 12-6-1171
Filing Dates Are Not Affected
H. 4216 reshaped rates and deductions, not the filing calendar. South Carolina individual returns remain due April 15 for calendar-year filers, matching the federal deadline, with the date pushed to the next business day if it falls on a weekend or holiday.9Internal Revenue Service. When to File The automatic six-month extension still covers paperwork only. Any tax owed is still due by the original April deadline, and interest starts the day after if the balance is not paid in full.