South Carolina Tax Guide 2026

Personal income tax — the 2026 flat-tax reform

South Carolina HB 4216 of 2025 (signed by Gov. McMaster, June 2025) made TWO MAJOR CHANGES effective tax year 2026: 1. COLLAPSED brackets: the prior 3-bracket structure (0% / 3% / 6.0% in 2025) becomes a SINGLE 3.99% flat rate on ALL South Carolina taxable income 2. CONFORMED to FEDERAL standard deduction starting 2026: SD jumps from prior ~$15,000 SC-specific to federal $15,000 single / $30,000 MFJ (effectively the same for single but doubles MFJ) Future trigger reductions: if General Fund revenue grows ≥ 4.5% year-over-year, the rate steps down 0.1%/year toward a long-term target of 3.0%. Reduction NOT automatic — depends on revenue performance. Social Security: 100% EXEMPT regardless of income (§12-6-1110(7)). Retirement income exclusion: $15,000 per person age 65+ for qualifying retirement income (pensions, IRAs, 401(k)) (§12-6-1170). Military retirement: 100% EXEMPT for all ages. Federal QBI conformity: SC conforms — federal §199A deduction flows through to SC taxable income.

Capital gains 44% deduction

S.C. Code §12-6-1150 allows individuals to DEDUCT 44% of net long-term capital gain from South Carolina taxable income. Effective rate on qualifying LTCG: 3.99% × 56% = 2.23% — one of the lowest effective state LTCG rates among income-tax-imposing states. SC's 44% deduction has been in place since 1980s and is one of the most generous of any state LTCG preference (only Arkansas at 50% is higher). Short-term gains: no preference; taxed at flat 3.99%. The combination of 3.99% flat rate + 44% LTCG deduction makes SC particularly attractive for retirees with significant investment-account distributions and founders selling SC-based businesses.

Sales tax

State rate 6% (S.C. Code §12-36-910). Counties can impose up to 3% local-option sales tax — combined averages 7.50% (slightly above national average). Notable counties: • Charleston: 9.0% combined (city) — highest in SC • Greenville: 6% (no local) • Columbia (Richland): 8.0% • Myrtle Beach (Horry): 9.0% (includes hospitality fee) • Hilton Head (Beaufort): 7.0% • Greenwood: 8.0% Max cap: SC limits combined sales tax to 9.0% in most counties. Groceries: EXEMPT from state 6% sales tax (Local Option sales tax may still apply at 1%–3%). Prescription drugs: exempt. Clothing: TAXABLE (no clothing exemption). Max sales tax on a vehicle purchase: $500 (capped) — known as the 'Maximum Sales Tax' provision (S.C. Code §12-36-2110), making SC very attractive for high-value vehicle purchases (e.g., $80,000 car = $500 tax instead of $4,800). Economic nexus (S.C. Code §12-36-2691): $100,000 in cumulative sales.

Property tax — among the lowest in the US

Statewide average effective ~0.52% — one of the lowest in the US (only Hawaii, Alabama, Colorado, Wyoming, and Utah are reliably lower). Counties: Charleston ~0.56%, Greenville ~0.61%, Richland (Columbia) ~0.71%, Horry (Myrtle Beach) ~0.41%, Beaufort (Hilton Head) ~0.51%. SC uses fractional assessment varying by class: • Class 4 (primary residence / owner-occupied): 4% of fair market value • Class 6 (non-residential, including non-owner-occupied homes): 6% • Other classes: 9.5% commercial, 10.5% manufacturing The 4% vs 6% PRIMARY RESIDENCE benefit is significant — a $400,000 primary residence is assessed at $16,000, while the same house as a second/rental is assessed at $24,000 (50% higher tax bill). Requires affirmative homestead application. Homestead Exemption Program (S.C. Code §12-37-220): age 65+ or disabled receive additional $50,000 reduction from fair market value (significant on modest-value homes). Property tax 'cap' (Act 388 of 2006): primary residences are EXEMPT from school operating millage (a large portion of the property tax bill), and assessment increases are capped at 15% per 5-year reassessment cycle — significantly limiting growth. No car personal property tax beyond the $500 max-sales-tax (cars are taxed annually for registration but rate is moderate; treated as personal property by counties).

Business considerations

Corporate income tax: 5% flat (S.C. Code §12-6-530). LLC fee: $0 annual report — SC LLCs are NOT required to file annual reports (S.C. Code §33-44-211). Significant simplicity benefit. Apportionment: single-sales factor for most industries (post-2014 reform). PTET: SC enacted PTET via Act 61 of 2021 — entity-level election at the flat individual rate (3.99% for 2026); refundable credit to owners. Unemployment tax: 0.06%–5.46% on $14,000 wage base. LLC Franchise Tax / License Fee: NONE for LLCs (no minimum tax on LLCs). Corporation License Fee: $25 + 1 mill ($1 per $1,000) of capital stock and paid-in surplus (modest). No estate, inheritance, or gift tax. The combination of: 3.99% flat income tax (going to 3.0% potentially), 44% LTCG deduction, 100% SS exemption, $15k retirement exclusion, military pension exemption, 0.52% property tax, $500 vehicle tax cap, $0 LLC annual fee — makes South Carolina one of the most tax-favored states in the US for retirees and self-employed workers, particularly post-2026 reform.

Worked example: Eleanor Habersham, Charleston-based retiree (single, age 68, 2026)

Eleanor receives $28,000 Social Security, $42,000 from a former corporate pension, $35,000 of Traditional IRA distributions, and realizes a $180,000 long-term capital gain from selling appreciated stock. Owns a $475,000 Charleston home (primary residence).

Federal: SS partially taxable, IRA/pension fully ordinary, LTCG at 15%/20% + possible NIIT. South Carolina: Social Security: $0 SC tax (100% exempt) Pension $42,000: $15,000 excluded (age 65+ retirement income exclusion) → $27,000 taxable IRA $35,000: counts toward $15,000 exclusion (already used) → $35,000 fully taxable Actually, exclusion applies ONCE per person across all retirement income → $15,000 excludes either pension or IRA → assume applied to pension first, $27,000 pension taxable + $35,000 IRA taxable = $62,000 ordinary retirement income LTCG $180,000 × 56% (after 44% deduction) = $100,800 SC taxable LTCG SC AGI: $62,000 + $100,800 = $162,800 Less SC standard deduction: $15,000 SC taxable: $147,800 Tax: $147,800 × 3.99% = $5,897 Property tax on $475k Charleston primary residence: Assessed at 4% × $475,000 = $19,000 Less $50,000 homestead exemption (age 65+) → assessed reduction ~$2,000 (capped at $50k FMV reduction = $50,000 × 4% = $2,000 of assessment reduction) Net assessment: $17,000 Less school operating millage exemption (Act 388, primary residence exempt from school operating) → very low effective rate ~$1,400/yr typical South Carolina total state income tax: $5,897 (vs ~$0 in FL/TX, but vs ~$11,000+ in similar-AGI scenario in NC pre-2026 reform).

Statute references

• Personal income tax 3.99% flat (effective 2026) — S.C. Code §12-6-510 (HB 4216 of 2025)
• Social Security exemption — S.C. Code §12-6-1110(7)
• Retirement income exclusion (age 65+) — S.C. Code §12-6-1170
• Capital gains 44% deduction — S.C. Code §12-6-1150
• Sales tax 6% — S.C. Code §12-36-910
• Maximum sales tax on vehicles ($500) — S.C. Code §12-36-2110
• Economic nexus (Wayfair) — S.C. Code §12-36-2691
• Corporate income tax 5% — S.C. Code §12-6-530
• LLC no annual report — S.C. Code §33-44-211
• Homestead Exemption (age 65+) — S.C. Code §12-37-220
• PTET election (Act 61 of 2021) — S.C. Code §12-6-545

Related pages

• State Tax Comparison →
• Retirement Planner →
• Capital Gains Tax →