Most South Carolina workers will see less state taxes withheld from their paychecks in 2023 as the result of adjustments in the state Withholding Tax Tables by the South Carolina Department of Revenue (SCDOR). These updates follow this summer's tax cuts by state lawmakers.
Legislators voted to reduce the top Income Tax rate from 7% to 6.5% beginning in 2022. The rate of 6.5% could be reduced in the future if certain general fund growth tests are met. In November, the SCDOR updated its Withholding Tax Tables for 2023, taking the tax cut into account. The tables are used by employers to determine how much South Carolina Income Tax is to be taken out of workers' paychecks.
What taxpayers should keep in mind:
- Most workers should notice less state taxes withheld from their 2023 paychecks. The size of the change will depend on a variety of factors, including how much each worker makes and how often they are paid.
- If a worker chooses to have more taxes taken out, this will affect the amount withheld.
- The withholding adjustments only affect state Income Taxes, not federal, local, or other state taxes.
To learn more about the impact of both the Income Tax cuts and the Withholding Tax Tables updates, view the 2022 and 2023 SC Withholding Tax Formulas, which provide example calculations for a taxpayer who makes an annual salary of $39,000 and takes three allowances. Using 2022 tax rates and Withholding tables, this taxpayer would have $1,378.86 in Withholding. But using 2023 tax rates and Withholding tables, the Withholding would be $757.35, which equates to an additional $621.51 total in their paychecks throughout the year.
Taxpayers should check their withholding early each year, when the tax law has changed, or if they have experienced significant life changes. These can include:
- The birth of a child
- A new job or raise
- New taxable income not subject to withholding
- Changes in itemized deductions or tax credits.
For those who owed money on their returns in 2022, changing withholding can head off a tax bill in 2023.
The newly adjusted Withholding Tax Tables take effect January 1, 2023, so they won't have an effect on the coming tax season, when taxpayers will file their 2022 Individual Income Tax returns. Taxpayers should see the impact of the new Withholding Tax tables when they receive their paychecks starting January 1, and when they file their 2023 Individual Income Tax returns in 2024.
The SCDOR expects to begin accepting 2022 returns in January 2023. As you prepare to file your return this season, here are some reminders to help set you up for success:
- Renew your IRS-issued Preparer Tax Identification Number (PTIN) – If you plan to serve as a tax preparer in 2023, you are required to obtain your PTIN from the IRS by December 31, 2022. Get started at irs.gov/PTIN.
- Wait until you have the right documents before filing – Wait until you have your employer-issued W-2s, 1099s, and other Withholding information before you file your return. Don't file using a year-end pay stub, which may not match what your employer reports to us. If that happens, it will slow down return processing, which will delay your refund.
- Know when the IRS and SCDOR will begin accepting returns – The SCDOR will announce the first day to submit state returns once the IRS announces the date for federal returns. Even if you file before we begin accepting returns, we won't begin processing your return and refund until the season-opening date.
- Organize your records – Take time to gather your important documents before you start the filing process, including W-2s, 1099s, receipts, medical bills, and any other document that will affect your return.
- Review electronic filing and refund options – Filing your return electronically and receiving your refund by direct deposit saves you time, increases security, helps you avoid errors, saves tax dollars, and gets your refund in your bank account as quickly as possible. During the 2022 tax season, 94% of returns were filed electronically, and 87% of taxpayers who received a refund got it through direct deposit. If you use a tax preparer, make sure you ask to receive your refund through direct deposit before your preparer submits your return.
For more information about South Carolina Withholding Tax, visit the SCDOR's withholding webpage.
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