South Carolina cut its income tax for 2026, but your paycheck didn't get the memo

If you work in South Carolina, your state income tax for 2026 went down in March. Your paychecks didn’t. Employers are still withholding with the formula the Department of Revenue published in November 2025, before the new law existed, so most South Carolina workers are having more state tax taken out than they will owe. A single person earning $50,000 is overpaying about $445 this year; a married couple living on one $80,000 salary, about $1,155. The money isn’t lost. It comes back as a refund when you file in 2027, but only if you file.

What the new law changed

Act 110 of 2026 was signed on March 30, 2026 and applies to tax years beginning after December 31, 2025, so to the whole of 2026. The Department of Revenue explains it in Information Letter #26-20, published on August 31. Three changes matter for a paycheck:

• A new starting point. South Carolina used to start from your federal taxable income, after the federal standard deduction. From 2026 it starts from your federal adjusted gross income instead. For someone whose only income is a W-2 salary, that is simply your wages (less pre-tax deductions like a 401(k)).
• Its own deduction, which shrinks as you earn more. The new South Carolina Income Adjusted Deduction (SCIAD) is $15,000 for single filers and $30,000 for married couples filing jointly. It starts to shrink above $40,000 of income ($80,000 joint) and is gone at $95,000 ($190,000 joint).
• Two brackets instead of three. Taxable income is taxed at 1.99% up to $30,000 and 5.21% above that. The old schedule went 0%, 3% and 6%.

Put together, a single filer earning $80,000 gets a SCIAD of $4,100, has $75,900 of taxable income and owes $2,988.39 for the year. The same salary for a married couple with one earner owes $1,639.00.

What your employer is still using

South Carolina employers work out withholding with form WH-1603F, the official formula. The 2026 version is dated November 4, 2025, five months before Act 110 was signed. It annualizes your pay, subtracts $5,000 for every allowance you claimed on your SC W-4 plus a standard deduction of 10% of wages (up to $7,500), and applies the old rates: 0% up to $3,640, 3% up to $18,230 and 6% above.

Notice what’s missing. The formula doesn’t know about the SCIAD, doesn’t know about 1.99% or 5.21%, and doesn’t even ask whether you are married: only the number of allowances changes the result. When we checked the Department’s withholding page on October 4, 2026, it still linked this same formula. Information Letter #26-20 says only that the Department “will consult” with the Revenue and Fiscal Affairs Office to adjust the tables, and gives no date.

The 2026 SC W-4 has the same problem. It was revised in December 2025, and its worksheet for extra allowances still asks for “the 2026 federal standard deduction”, a deduction South Carolina no longer uses.

What it means at real salaries

The number of allowances you claim drives everything, so we used the count the SC W-4’s own worksheet gives: 2 for a single person with one job (1 for yourself, 1 for having only one job) and 3 for a married couple filing jointly where only one spouse works. No dependents, no other income. “Withheld” is what the 2026 WH-1603F formula takes out over the year, “Owed” is the 2026 tax under Act 110, and “Extra” is the difference that comes back when you file.

Single, one job, 2 allowances

Salary	Withheld	Owed	Extra
$40,000	$903.90	$497.50	$406.40
$50,000	$1,443.90	$999.21	$444.69
$60,000	$1,983.90	$1,662.45	$321.45
$80,000	$3,093.90	$2,988.39	$105.51
$100,000	$4,293.90	$4,244.00	$49.90
$150,000	$7,293.90	$6,849.00	$444.90

Married filing jointly, one earner, 3 allowances

Salary	Withheld	Owed	Extra
$40,000	$603.90	$199.00	$404.90
$50,000	$1,143.90	$398.00	$745.90
$60,000	$1,683.90	$597.00	$1,086.90
$80,000	$2,793.90	$1,639.00	$1,154.90
$100,000	$3,993.90	$2,964.95	$1,028.95
$150,000	$6,993.90	$6,280.59	$713.31

Here is the $80,000 single row worked out, so you can check it against your own pay stub: $80,000 − 2 × $5,000 − $7,500 = $62,500 of “withholding income”; 6% of that is $3,750, minus the formula’s $656.10 = $3,093.90 a year, or $119.00 on each of 26 biweekly paychecks. Under the new law that person owes $2,988.39, so each paycheck takes out about $4 more than it needs to.

What we found

The gap is not the same for everyone, and it doesn’t simply grow with income:

• Married couples with one paycheck are hit hardest. The new $30,000 joint deduction is far more generous than the $22,500 the old formula gives three allowances, and the rate is lower too. From about $60,000 to $100,000 the household is overpaying more than $1,000 a year, roughly $40 to $45 every two weeks.
• For single filers the gap is largest around $45,000 to $50,000, then almost closes near $95,000 to $100,000, where the SCIAD has run out and the old formula’s allowances happen to land close to the new tax. Above that it opens again, because the old top rate is 6% and the new one is 5.21%.
• If you claim fewer allowances than the worksheet gives, the gap is bigger. A single person at $80,000 who put “1” on the SC W-4 has $3,393.90 withheld, $405.51 more than they owe.

This also means the 2026 tax cut is real, but you won’t feel it in your take-home pay this year. You’ll see it as a larger refund in 2027.

Louisiana: a smaller gap, and this one is on purpose

Louisiana also withholds more than it taxes in 2026, for a different reason. Louisiana has taxed income at a flat 3% since 2025, after a standard deduction that the Department of Revenue’s 2026 withholding tables set at $12,875 single and $25,750 joint. Those tables are explicitly “based on a 3.09% withholding rate”, not 3%. Nothing is out of date: the formula was built to take out slightly more than the tax. For a single filer, “Withheld” is at 3.09% and “Owed” at 3%:

Salary	Withheld	Owed	Extra
$50,000	$1,147.16	$1,113.75	$33.41
$80,000	$2,074.16	$2,013.75	$60.41
$150,000	$4,237.16	$4,113.75	$123.41

One more Louisiana detail: Bulletin 26-005 says the $12,875 deduction was calculated on inflation data available in December 2025 and that the official 2026 amount “may be slightly different”. On an $80,000 salary that is a difference of a dollar or two of tax.

What to do about it

1. Check how many allowances you claim. It’s line 5 of your SC W-4, and most payroll portals show it. That number tells you which row of the tables above is closest to you.

2. Plan to file a 2026 South Carolina return. The extra withholding only comes back if you file. Returns for 2026 are due April 15, 2027. Under the new rules a single filer under 65 must file with South Carolina gross income over $15,000 (over $30,000 for a married couple filing jointly, both under 65), but even if you’re under the threshold, filing is how you get withheld tax back.

3. Think twice before adding allowances now. Each extra allowance cuts your yearly withholding by up to $300 ($5,000 at the 6% rate), about $11.54 per biweekly paycheck. With the year mostly gone, that recovers little: five or six paychecks’ worth. The SC W-4 worksheet also gives no extra allowances for the new deduction, and the form warns that the Department “may review any allowances and exemptions claimed”. For 2026, the refund is the clean fix.

4. Fill in a new SC W-4 once the formula changes. When the Department publishes a WH-1603F that reflects Act 110, your allowances will mean something different, and the right number for 2027 may not be the one you have now. We’ll update this guide and our South Carolina calculator when that happens.

5. Two earners? Your numbers will differ. The tables assume one paycheck in the household. The SC W-4 itself suggests that working couples claim allowances only on the higher-paying job, which raises withholding, so the overpayment for two-earner households is usually smaller than the married rows above.

To see your own figures under the new law, try the South Carolina take-home pay calculator or a specific salary, such as $50,000 or $80,000. The state tax it shows is what you owe for 2026, not what your employer withholds.