South Carolina Withholding Tax tables updated for the FIRST time in 25 YEARS on January 1, 2017. Make sure your business is using the appropriate tables!
The federal government and South Carolina update Withholding tables every year.
2017 Tables:
2017 SC Withholding Tables
2017 SC Withholding Tax Formula
2018 Tables:
2018 SC Withholding Tables
2018 SC Withholding Tax Formula
Outdated Withholding Tables Were a Problem for South Carolina
Outdated Withholding tax tables lead to over-withholding, which amounted to $1.5 billion in 2015.
Over-withholding is all the money taken out of taxpayers' wages that was not needed to pay their state income taxes. In other words, the government took more money than it should have and must return it to taxpayers through Individual Income Tax refunds. That $1.5 billion in over-withholding has created a number of issues for the State:
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Unreliable General Fund Budgeting: A big portion of the money collected throughout the year ($1.5 billion) has to be refunded back to taxpayers.
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Unnecessary Administrative Costs: Generating, regulating, and protecting refunds is expensive.
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Undeniable Risk: Big tax refunds make South Carolina a target for income tax refund fraud and theft.
By addressing over-withholding, these problems begin to correct themselves over time, helping to create a healthier State.
How Does This Change Impact Me?
Individuals
No action is necessary for individual taxpayers related to updating Withholding tables.
Beginning January 2017, you may notice a very small increase in your paychecks throughout the year which will result in a slightly smaller South Carolina Individual Income Tax refund in 2018.
Why will you see a decrease in your South Carolina individual income tax refund?
Your individual income tax refund is the amount of money that was taken out of your paycheck that was not actually needed to pay your income tax obligation. Because South Carolina will be taking less money out of your paycheck, less will need to be refunded.
Employers/Accountants/Payroll Providers
Timeline
What is South Carolina Withholding Tax?
Withholding Tax is taken out of taxpayer wages to go towards the taxpayers' total yearly income tax liability. Every employer/withholding agent that has an employee earning wages in South Carolina (and who is required to file a return or deposit with the IRS) must make a return or deposit to the SCDOR for any taxes that have been withheld for state purposes.
South Carolina requires withholding from:
- wages
- prizes
- royalties
- winnings
- nonresident contractors (contracts exceeding $10,000)
- rental payments made to nonresidents who own five or more residential units or one or more commercial properties in South Carolina
- net proceeds going to nonresident sellers of real estate and associated tangible personal property located in South Carolina. Wages are taxed in the state in which they are earned unless the employee is working in a state that does not withhold state income tax.
If the employee is working in South Carolina, regardless of where he/she is a resident, the income earned in South Carolina is taxed by South Carolina. If a South Carolina resident is earning wages in a state that does not have a state income tax, the withholding should be for South Carolina.