Personal Income Tax in South Carolina

April 13, 2006

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If you are a resident or nonresident of South Carolina and receive taxable income individually from property owned or business transacted in South Carolina, you are subject to tax on net income. Therefore, if you are operating your business as an S corporation, partnership, limited liability company, or sole proprietorship, you will be subject to a personal income tax on your business income that passes through to you.

The following individual tax rates apply for the 2006 tax year to the amount of income over the exempted amount:

Taxable Income	Amount of Tax
Over $0, not over $2,570	2.5%
Over $2,570, not over $5,140	3% times the amount less $13
Over $5,140, not over $7,710	4% times the amount less $65
Over $7,710, not over $10,280	5% times the amount less $142
Over $10,280, not over $12,850	6% times the amount less $244
Over $12,850	7% times the amount less $373

Active trade or business income tax rate. The tax rate on active trade or business income received by the owner of a pass-through business is reduced to 6.5% in 2006, 6% in 2007, 5.5% in 2008, and 5% thereafter. Active trade or business loss must first be deducted, dollar for dollar against active trade or business income. Any remaining active trade or business loss is multiplied by a fraction, the numerator of which is the rate of tax imposed at the active trade or business income tax rate, and the denominator of which is the highest individual income tax rate.