South Carolina taxpayers may soon see a significant reduction in their state tax liabilities as the House Ways and Means Committee moves to align state law with recent federal changes.
On Tuesday, the committee advanced a tax conformity bill designed to bring the South Carolina tax code in line with the federal provisions of the recently passed congressional “One Big Beautiful Bill.” If enacted, the measure would integrate eight new federal deductions into the state’s tax system.
Impact on State Revenue and Taxpayers
An analysis by the State Revenue and Fiscal Affairs Office indicates that adopting these federal changes would result in a $279 million reduction in state revenue for the 2025 tax year. Despite the fiscal impact, lawmakers expressed a need to address public confusion regarding differing state and federal tax liabilities.
The committee voted to send the measure to the full House for consideration next week. Should the bill pass:
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Amended Returns: Taxpayers who have already filed their 2025 state returns would need to file an amendment to claim the new deductions.
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Notification: The South Carolina Department of Revenue would be responsible for notifying affected residents about the necessary changes to their filings.
Proposed Tax Breaks for Overtime and Bonuses
In addition to the conformity measure, the Revenue Policy Legislative Subcommittee discussed H.3368, a separate proposal aimed at providing direct relief to hourly and salaried workers.
This legislation seeks to amend Section 12-6-1120 of the state code to specifically exclude certain types of compensation from an individual’s gross income. Under the proposed changes, all overtime pay and up to $2,500 in bonus pay would be exempt from state income tax.
Next Steps in the Legislative Process
Both measures are now headed to the House floor. Lawmakers highlighted these initiatives as a priority for the current session to ensure South Carolina remains competitive and provides clear financial relief to its workforce.
The Department of Revenue is expected to provide further guidance on filing procedures if the conformity bill receives final approval from the General Assembly and the Governor.
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