South Carolina did not promise to cut its income tax. It legislated a mechanism that cuts it automatically, year after year, until the tax is gone. This page keeps the running ledger: the rates as they stand, the trigger that moves them, and the bills in Washington and Raleigh that change the math for anyone moving Southeast.
On March 30, 2026, Governor McMaster signed H.4216 into law, effective for the 2026 tax year. It replaced South Carolina's old graduated schedule with two numbers: 1.99 percent on taxable income up to $30,000, and 5.21 percent above it. The bill also moved the state to federal adjusted gross income as the starting point for the return, a quieter change that simplifies the arithmetic for most filers.
The rates were the headline. The mechanism is the story. Beginning with tax year 2027, whenever the state Board of Economic Advisors projects general fund revenue growth of 5 percent or more, the top rate steps down automatically. Each step is capped at $200 million in revenue. No new bill, no vote, no press conference required. The cut is the default. The statute directs the reductions to continue until the top rate reaches 1.99 percent, and then onward until the income tax is eliminated.
North Carolina runs a different play toward a similar goal: a flat 3.99 percent for 2026, with a schedule of further cuts rewritten into the budget signed July 7, 2026, beginning at 3.49 percent in 2027. Two states, two mechanisms, one direction.
Top marginal state income tax rates, tax year 2026. One column is falling by statute.
Legislation moves slowly, then all at once. These are the live items that change the arithmetic for anyone weighing a move Southeast, each marked by where it actually stands, not where a headline put it.
Updated October 23, 2026 · Reviewed weekly
Each February the Board of Economic Advisors makes the call, no later than February 15. The first reading that can move the rate arrives in February 2027 and would apply to tax year 2027. If the BEA projects revenue growth of 5 percent or more, the top rate steps down without a vote, by no more than $200 million a year in lost revenue. The current arithmetic argues for patience: at its May 19 meeting the BEA projected general fund growth of 1.1 percent for the fiscal year that began July 1, well short of the trigger, and no revision has been posted since. Its next full forecast usually lands in November. On today's numbers, the first cut waits.
What it changesEvery step widens the spread against the high-tax states, and the annual dividend of the move compounds. We will publish the certification the week it lands.
SC Department of Revenue on H.4216The More Homes on the Market Act (H.R. 1340) would double the capital gains exclusion on a primary residence to $500,000 for single filers and $1 million for married couples, then index it to inflation. It would be the first change since 1997. Congress’s own record shows no action on the House bill since it was referred to Ways and Means on February 13, 2025, and none on the bipartisan Senate companion (S.3332) since it went to the Finance Committee on December 3, 2025. July’s 21st Century ROAD to Housing Act, the first major federal housing package in years, became law without it, and a coalition began pressing the Senate in September. The calendar now matters more than the politics: a bill still sitting in committee when the 119th Congress ends on January 3, 2027 dies there and has to be filed again. Treat it as a weather pattern, not a forecast.
What it changesThe tax cost of selling a long-held home in a feeder state falls, in some cases to zero, and one of the last practical reasons to delay a move goes with it. Worth knowing while it waits: documented improvements and selling costs already shelter most long-tenure sellers well past the current caps. Run the basis math before the fear.
H.R. 1340 at Congress.govThe budget Governor Stein signed on July 7, 2026 rewrote the schedule: 3.99 percent for 2026, then 3.49 percent for 2027 through 2029, 3.24 percent from 2030, and 2.99 percent from 2033, with two further quarter-point cuts tied to revenue triggers that could carry the rate to 2.49 percent as soon as 2036. On November 3, voters decide a constitutional amendment that would lower the ceiling in the state constitution from 7 percent to 3.5 percent. Early voting runs through October 31.
What it changesThe 2027 cut to 3.49 percent is now locked in rather than trigger-dependent, and the path below it is written down. The steadier of the two Carolina tax stories keeps getting quietly cheaper, with none of the drama.
EY Tax News on S.B. 257