South Carolina 2026 Income Tax Rates: Two-Tier Brackets and SCIAD

(SOUTH CAROLINA) South Carolina lawmakers are weighing a new two-tier Income Tax system for tax year 2026 that would set rates at 1.99% on taxable income up to $30,000 and 5.39% on taxable income of $30,000 and over. For immigrants and other newcomers who are still learning the U.S. tax system, the proposal matters because it changes both the rate schedule and the way taxable income is calculated.

The plan is in South Carolina House Bill 4216, as amended by the House Ways and Means Committee on April 30, 2025, and it is framed as a reset of how the state taxes wages, self-employment earnings, and other taxable income. It passed the South Carolina House, and Senate budget writers planned to take it up in January 2026, which leaves many families and employers watching closely before they finalize 2026 payroll settings and household budgets.

Proposed 2026 South Carolina income tax rates and bracket design

Under the bill summary, the proposed structure uses two rates and a single break point:

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

The summary also states that the brackets apply regardless of filing status, meaning the same income ranges apply without separate bands for single filers, married filing jointly, or other filing categories. That detail is easy to miss, but it shapes planning for couples where one spouse recently arrived in the United States and both are now reporting income on a combined return.

Quick comparison: current vs proposed brackets

The proposed 2026 model would replace the current multi-band structure with the 1.99% / 5.39% structure and a much higher breakpoint at $30,000. For many wage earners, the significance lies not only in the top rate number but in where the higher rate begins.

SCIAD: the new deduction that replaces standard and itemized deductions

The bill does more than change rates. It would eliminate standard or itemized deductions and replace them with a new South Carolina Income Adjusted Deduction (SCIAD).

Key features described in the bill summary:

• SCIAD phases out based on federal adjusted gross income (AGI).
• Examples in the bill summary include $15,000 for single filers and a $40,000 phase-out start.
• All other current state adjustments to income, exemptions, and credits remain in place.

This design matters for immigrants because many households see income change quickly after a move, a new work permit, a first U.S. job, or a change in employer. A deduction that phases out based on federal AGI can shrink faster than people expect when overtime, a mid-year raise, or a second household earner enters the picture. SCIAD is positioned as the replacement for the standard/itemized deduction piece, not a full rewrite of every South Carolina adjustment.

What “tax year 2026” means for filing, withholding, and cash flow

• The proposal is aimed at tax year 2026, meaning income earned in 2026 would generally be reported on returns filed in 2027.
• For immigrants who arrived in late 2025 or early 2026, the first full year of South Carolina earnings may fall under the new rules if the bill becomes law.
• Payroll withholding and household cash flow operate on a calendar-year basis; money is withheld during 2026 even though filing happens in 2027.

Many workers therefore focus first on withholding tables rather than the April filing deadline because under-withholding during the year can produce a surprise balance due at filing time.

Withholding tables and the SC W-4 update employers are already seeing

The South Carolina Department of Revenue has already posted updated 2026 withholding tables and SC W-4 forms, marked effective January 1, 2026, to reflect anticipated changes. Those materials are published at the department’s official page, SCDOR withholding guidance.

For immigrants on work visas, refugees starting a first job, or international students moving into authorized employment, withholding is often their main contact with the tax system. A mismatch between withholding and final liability can create a surprise balance due at filing time, which hits hardest for households also paying immigration fees, legal bills, and relocation costs.

How the SCIAD phase-out can hit mobile households

Because SCIAD phases out using federal AGI, households should pay attention to income items that raise AGI even when take-home pay feels unchanged. Common income changes that can affect AGI include:

• Starting a first U.S. job
• Receiving a mid-year raise or overtime
• A spouse entering the workforce
• A second job during relocation or credential transitions

According to analysis by VisaVerge.com, state-level tax shifts often land unevenly on newly arrived workers because they are more likely to change employers and wage levels mid-year, making payroll withholding less predictive of final filing outcomes.

Who is most exposed to these changes

While the bill is not targeted only at immigrants, several groups tend to feel these changes quickly:

• New South Carolina residents who start work mid-year and rely on payroll defaults
• Mixed-status or mixed-document households where one spouse has a longer U.S. filing history and the other is filing in the state for the first time
• Employers hiring globally who need clear withholding instructions for onboarding
• Workers with multiple jobs in one year, common during relocation and credential transitions

Even when a rate change sounds simple, the shift from standard/itemized deductions to SCIAD changes how people estimate taxable income, often the hardest part for first-time filers.

Legislative status and where to track the bill

As of late 2025, the proposal had passed the South Carolina House, and Senate budget writers planned to discuss it in January 2026. The bill still needs Senate approval and the governor’s signature before it becomes law.

For the most direct legislative trail, consult the state’s official legislative website: scstatehouse.gov. That site posts bill text, actions, and calendars and is the cleanest way to confirm whether the proposed 2026 rates and SCIAD are enacted, amended, or delayed.

Revenue-triggered path toward lower rates

The bill summary also describes a revenue-triggered path toward lower rates:

• If state revenue growth is strong, the rates could collapse to a flat 1.99%, and potentially phase out entirely in the longer term.

That concept affects long-term planning for workers deciding whether to settle in South Carolina, especially families balancing housing, childcare, and the costs tied to maintaining immigration status.

Key takeaways:
– Watch 2026 withholding tables and update payroll settings promptly if you are an employer or new resident.
– Keep records that support federal AGI calculations to track SCIAD phase-out impacts.
– Monitor final legislative action on House Bill 4216 to confirm whether the 1.99% / 5.39% structure and SCIAD will govern tax year 2026.

For now, the near-term compliance reality is simple: employers and workers should watch updated withholding guidance, track federal AGI closely, and stay alert for final legislative action that confirms whether SCIAD and the 1.99% / 5.39% structure will apply to 2026 income.