The South Carolina Senate Finance Committee voted 17 to 2 on Tuesday to advance H.3368, a bill that would align the state’s income tax code with recent federal tax changes.
The measure would allow South Carolina taxpayers to claim deductions and exemptions included in the federal One Big Beautiful Bill Act, which became law last July. Those provisions include tax treatment for tips and overtime pay and expanded deductions for seniors age 65 and older.
Senate Finance Chairman Harvey Peeler said lawmakers were working against the April 15 tax filing deadline.
“April 15 is coming up,” Peeler said during Tuesday’s hearing. “Taxpayers in this state don’t have time for squabbling between the House and the Senate.”
The House passed the bill unanimously last week. The measure now moves to the full Senate.
Under the federal changes, seniors can claim an additional $6,000 deduction. The standard deduction also increased by $750 for single filers and $1,500 for married couples filing jointly.
Legislative estimates show that adopting the federal provisions would reduce South Carolina revenue by $288.5 million in the fiscal year beginning July 1.
That amount comes in addition to an estimated $309 million revenue reduction from separate legislation that would lower the state’s top income tax rate from 6% to 5.21%.
Another bill moving through the legislature would provide property tax relief for senior homeowners and reduce revenue by an estimated $259 million. The state would reimburse counties for that amount.
Combined, the three measures would total about $860 million in tax cuts for fiscal year 2026 to 2027.
Fiscal impact projections show that 42.8% of South Carolina tax returns would see a decrease in tax liability under the combined tax changes, while 22.6% would see an increase. Another 34.6% would see no change.
The changes are tied in part to a new two tier rate structure that would apply a 1.99% rate to taxable income up to $30,000 and a 5.21% rate to income above that amount.
Tax professionals have said that without state conformity, South Carolina taxpayers would need to add back federal deductions for items such as tip income and overtime pay when calculating state tax liability.
Senate President Thomas Alexander said he had already visited his tax preparer and might need to return if the bill becomes law.
“A second trip might cost another hundred dollars or so,” Alexander said. “Other taxpayers are likely to face similar costs.”
Lawmakers said tax software providers had already programmed systems to treat South Carolina as a nonconforming state for 2025.
The two votes against the bill came from Republican Sens. Greg Hembree of Little River and Sean Bennett of Summerville.
Bennett said he opposed conforming for 2025 and then separating from federal tax rules in later years.
“I think this is a bad idea,” Bennett said during the hearing.
Sen. Wes Climer, a Rock Hill Republican who is running for Congress, said he did not view tax conformity and property tax cuts as incompatible.
“I don’t think that it’s necessarily the case that tax conformity and property tax cuts are mutually exclusive propositions,” Climer said. “They’re only mutually exclusive insofar as the Legislature chooses to spend money that could otherwise go back to the people of South Carolina.”
If the Senate passes the bill without changes, it would go to Gov. Henry McMaster for his signature. If the Senate amends the bill, it would return to the House.
Lawmakers have said South Carolina plans to stop automatically adopting federal tax changes after 2025 and instead set its own tax rules through future legislation.
Source: Plan to use federal tax breaks for 1 year advances in SC Senate | South Carolina Daily Gazette