McMaster Oks Tax Breaks on Income, Boat Property Rates

Skylar Laird/S.C. Daily Gazette

COLUMBIA — Many South Carolina taxpayers will pay less income taxes next year, while boat owners will pay less in property taxes after Gov. Henry McMaster signed two tax-cutting bills into law Monday.

The income tax law is expected to give almost 43 percent of filers a break on their taxes filed in April 2027, cutting state revenues by nearly $309 million in its first year. The top income tax rate will continue to drop based on the state’s growth, until it eventually reaches zero at some point in the future.

Initially touted by Republican supporters as a tax cut, the law will result in about 23 percent of filers paying more next year, while 35% should see no change, according to the latest estimate by the state Revenue and Fiscal Affairs Office.

The law creates winners and losers across all income levels, depending on their situations and applicable adjustments.

Supporters have said many of the people who will see an increase in taxes paid nothing previously. The goal was to broaden the tax base and lower the rates, with more people contributing.

Under the law, an estimated 35 percent of filers will still pay zero state income taxes, compared to 45 percent under the current tax code.

The boat tax cut simplifies the way boaters pay their taxes, creating a single bill for both the boat and motor and reducing the effective tax rate from 10.5 percent to 6 percent. That won’t affect the state’s coffers. Counties, which collect property taxes, could lose about $40 million in revenue at the end of the break’s three-year phase-in.

Several more tax-cutting could still pass this year.

The income tax law signed Monday wouldn’t affect the tax season that started in January. But a bill the House passed would allow taxpayers to claim breaks included in the federal One Big Beautiful Bill Act, with a one-year cost of $288.5 million to the state. With that bill yet to come up on the Senate floor, the state Department of Revenue extended the deadline to file from April 15 to Oct. 15.

The Senate passed a bill that would cut home property taxes for seniors and cover the cost to counties, which would mean a drop of about $247.7 million. The bill has yet to get a hearing in the House.