SC 2025 Tax Update: 6.2% Top Rate and 2026 Reform Overview

(SOUTH CAROLINA) South Carolina lawmakers have moved a major state income tax rewrite that could matter for immigrants, temporary workers, and employers weighing a move, a job offer, or a long-term stay in the state. For tax year 2025, South Carolina still runs a three-bracket system with a top rate of 6.2%. But for tax year 2026, House Bill H.4216 would switch the state to two lower rates, 1.99% and 5.39%, and add a new deduction aimed at many lower- and middle-income filers. Supporters say the bill also sets South Carolina on a path to cut rates further over time, and eventually end the state income tax, if revenue growth targets are met.

For readers dealing with immigration plans, the timing is key. South Carolina’s 2025 tax rules apply to income earned January 1–December 31, 2025, and the state return is due April 15, 2026. If H.4216 becomes law as written, the new structure would apply to income earned January 1–December 31, 2026, with returns due April 15, 2027. That means a worker arriving on a visa in mid-2025 could face one set of brackets for part-year income, then a very different system in 2026 if the bill clears the Senate and is signed.

2025: Current system — three tiers (indexed for inflation)

Under current law for tax year 2025, South Carolina continues to calculate tax using a graduated structure. The top marginal rate is 6.2%, following recent reductions from the older 6.4–6.5% range.

The state starts from federal taxable income, then uses South Carolina “additions” and “subtractions” to get to South Carolina taxable income. This matters for immigrants because federal taxable income can change quickly after a status change, a move, or a change in work permission.

A person moving from F-1 Optional Practical Training to H-1B, for example, might see wage levels rise and cross brackets even if their living costs stay the same. Employers also care because payroll withholding has to match the year’s tables; the South Carolina Department of Revenue updates withholding tables each year and payroll systems typically follow those tables from the start of the year.

2025 tax brackets (single filers)

Note: The “fixed subtraction” prevents a cliff effect where earning one extra dollar would tax all income at the higher rate. Only the slice above the threshold is taxed at the higher rate.

H.4216: Two rates and a new deduction starting tax year 2026 (if enacted)

The South Carolina House has passed an amended version of H.4216 that would reshape the income tax starting tax year 2026, pending final Senate approval and enactment.

The bill would replace the current 0%/3%/6.2% approach with:

• 1.99% on taxable income up to $30,000
• 5.39% on taxable income of $30,000 and over

New deduction: South Carolina Income Adjusted Deduction (SCIAD)

H.4216 would also stop using federal standard and itemized deductions for state purposes. Instead, eligible taxpayers could claim a new South Carolina Income Adjusted Deduction (SCIAD) when their federal adjusted gross income (AGI) is below set levels.

For tax year 2026, the SCIAD limits and phase-outs in the source material are:

• The phase-out is proportional: below the lower AGI bound, taxpayers get the full deduction; above the upper bound, they get none; between those numbers they get a partial SCIAD.
• This swap from federal deductions to a state-specific SCIAD can create winners and losers that aren’t obvious if you only look at headline rates. Households that formerly benefited from itemized deductions may see different outcomes under the new design.

Automatic rate cuts after 2026: revenue trigger and path toward zero

H.4216 would do more than change rates for a single year. Beginning in tax year 2027, the 5.39% rate would automatically step down in years when individual income tax revenue (net of the Trust Fund for Tax Relief) is projected to grow by at least 5%.

• The mechanism is intended to reduce individual income tax revenue by about $200 million per year in a trigger year.
• Once the 5.39% rate reaches 1.99%, the bill would then start reducing the 1.99% rate each year until the income tax is fully eliminated — but again, only in years meeting the revenue-growth condition.

Important practical point for planning: the cuts are trigger-based, not on a set schedule. Households or employers signing multi-year leases or contracts should treat future cuts as possible rather than guaranteed.

Key takeaway: The bill creates a path for deep rate reductions and eventual elimination, but the pace depends on future revenue growth. That uncertainty affects long-term planning.

Who is most affected — immigrants, visa holders, and employers

State income tax is not an immigration benefit, but it influences real choices: whether a job offer is attractive after taxes, whether to move family members, and whether to remain after graduation. The groups most likely to feel the change include:

• New residents and immigrants moving to South Carolina in 2025 or 2026 with South Carolina-source income
• Non-residents earning South Carolina wages or business income who must file a non-resident return
• Students, temporary workers, and visa holders with South Carolina taxable income
• Employers responsible for withholding and advising employees about take-home pay

Context matters: moving from a higher-tax state can feel like a raise, while moving from a no-income-tax state can feel like a pay cut. Supporters say H.4216 helps South Carolina compete with no-tax states like Florida and Texas and low flat-tax states. Critics warn that tying cuts to revenue growth could squeeze funding for schools, roads, and services during downturns.

Dates, filing deadlines, and practical steps during a move

The most common tax mistake for newcomers is mixing up tax years and residency periods. The timeline in the source material is clear:

• Tax year 2025: income earned January 1–December 31, 2025; return due April 15, 2026
• Tax year 2026 (if H.4216 is enacted): income earned January 1–December 31, 2026; return due April 15, 2027

Practical items to note:

• USCIS address updates: many noncitizens must report a new address, typically within 10 days, using Form AR-11, Alien’s Change of Address Card. This update does not by itself change tax residency, but it helps keep immigration records current.
• ITINs: If you don’t have a Social Security number and need to file a return, you may need an ITIN via IRS Form W-7. Whether you need an ITIN depends on filing situation and immigration status; many seek professional help their first year to avoid delays or errors.
• State guidance: For withholding and bracket details, check official resources at the South Carolina Department of Revenue’s individual income tax resource pages.

Fiscal impact and final notes

The source material flags a statewide estimate: fiscal analysts expect the tax year 2026 changes in H.4216 would reduce individual income tax liability by about $400.3 million.

• This is a broad estimate for the state, not a guaranteed per-household benefit.
• Some higher-income filers who previously benefited from federal itemized deductions could see smaller reductions or modest increases, depending on how the SCIAD and rate changes interact.

Final practical checklist for newcomers and employers:
1. Verify which tax rules apply to your income year (2025 vs. 2026).
2. Confirm withholding tables with payroll or HR at the start of each year.
3. If moving, update USCIS address if required: Form AR-11.
4. If you lack an SSN and need to file, consider IRS Form W-7 and professional tax help.
5. Monitor South Carolina Department of Revenue updates: https://dor.sc.gov/tax/individual-income

This summary preserves the facts and timelines from the source material and highlights the decisions and deadlines most relevant to immigrants, temporary workers, and employers.