Governor McMaster Ceremonially Signs Income Tax Bill Into Law

Gov. Henry McMaster was joined April 15, 2026, 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," McMaster said. "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 percent rate on taxable income up to $30,000 and a 5.21 percent rate on taxable income above $30,000, down from 6.0 percent. 

McMaster’s office said 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.  

According to the Office of Revenue and Fiscal Affairs, approximately 42.8 percent 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 percent in the following fiscal year, tax rates will be automatically reduced. The law directs that reductions continue until the top rate reaches 1.99 percent and then continues downward toward elimination of the income tax over time.

However, the Institute on Taxation and Economic Policy (ITEP), a 501 (c) (3) non-profit, non-partisan research organization that works on federal, state, and local tax policy issues, earlier this year said H.4216 is a regressive tax cut that will disproportionately benefit the state’s highest-income residents while simultaneously jeopardizing the state’s ability to pay for basic public services in the years to come.

“At a time when state budgets will be forced to take on more responsibility for programs such as SNAP and Medicaid, as the economy becomes increasingly fragile, and as everyday South Carolinians struggle to get ahead, paving a path for the wealthiest residents to receive tens of thousands of dollars in annual tax cuts on top of the giveaway provided by Congress last year is irresponsible and short-sighted,” ITEP senior analysts Neva Butkus and Dylan Grundman O’Neill said.

This legislation builds on a series of historic tax cuts signed into law by 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 money.