Tax Changes and Their Implications for South Carolina Residents
Taxpayers aged 65 and older, those who rely on tips or overtime income, and individuals taking out new car loans in 2025 are facing significant risks associated with the Big Beautiful Bill deduction. Interestingly, nearly 90 percent of taxpayers opt for the standard federal deduction, but this choice will lead to higher tax bills in South Carolina because the state doesn’t adhere to federal regulations.
Some experts contend that the core issue lies with the dollar itself. Janet Holt, an accountant from Mount Pleasant, mentioned, “I’ve seen firsthand the impact this nonconformity has had. SC’s substantial addition to taxable income greatly affects both individuals and businesses. It’s not just about tips and overtime; it also includes the increased standard deduction and more deductions available to many seniors.”
When the federal deduction isn’t accepted by the state, additional deductions come into play. For instance, an older couple might deduct an extra $12,000 from their federal taxable income for 2025, but they’d have to add that same amount when calculating their South Carolina taxable income.
Republican lawmakers have asserted that the proposed changes in income and property taxes could lead to hundreds of millions of dollars in tax savings compared to adhering to federal rules. Although the Big Beautiful Bill deduction would particularly help those earning tips or overtime, the new 2026 income tax plan appears to benefit higher-income taxpayers more heavily.
Take, for example, the “tip tax-free” federal deduction. A bartender could potentially lower their taxable income by $25,000, which might have reduced their South Carolina tax bill by as much as $1,500. Unfortunately, this is not the scenario currently.
Senator Grooms expressed that it seems odd to align with federal tax modifications in 2025 while simultaneously diverging from federal laws in 2026. Rather than adopting federal deductions, individual states will create their own. “I think we need to do a better job of communicating that we’re not going to comply this year, because if we do, people will see a significant tax increase next year,” noted Senate Majority Leader Shane Massie (R-Edgefield). “We don’t want to do that.”
