South Carolina’s 44% deduction and new 2026 rates
South Carolina deducts 44% of net long-term capital gain before applying its rates, so only 56% of an eligible long-term gain is taxed. For 2026 the state also restarts its computation from federal AGI with a new income-adjusted deduction, and taxes income at 1.99% below $30,000 and 5.21% at or above it, less $966.
Together that puts the effective rate on a long-term gain at about 2.9% for most sellers. For a single filer whose taxable income, after the 44% deduction, goes from $60,000 to $110,000, tax rises from $2,160 to $4,765. Short-term gains get no deduction.
South Carolina’s new 2026 base and net-gain deduction
South Carolina’s enacted 2026 reform starts the state income calculation from federal AGI rather than federal taxable income. The actual current agency letter publishes 1.99% below $30,000 and 5.21% at or above $30,000 minus $966. Both formulas meet at $597. An older FAQ referring to the 2025 top rate does not supply a current 2026 calculation.
Prepare the new South Carolina Income Adjusted Deduction before entering taxable income. Single / separate deduction starts at $15,000 and phases out over federal AGI $40,000 to $95,000; head uses $22,500 over $60,000 to $142,500; joint / surviving uses $30,000 over $80,000 to $190,000. The reduction is rounded down to a $10 increment, then subtracted from the initial deduction. Federal standard or itemized deductions are not silently carried into this new base.
South Carolina also retains its eligible 44% net long-term capital-gain deduction after required short-term loss netting. Prepare that subtraction and all state adjustments in both annual scenarios. The model takes approved post-SCIAD taxable balances and usable nonrefundable credits, including only approved 2026 EITC within the new $200 cap. It calculates whole-dollar annual estimates; residency allocation, other taxes and final return effects use prepared final liabilities.
South Carolina preparation checklist
- Post-SCIAD taxable bases and eligible 44% net long-term subtraction
- SCIAD reduction floored to $10 increments
- 2026 nonrefundable EITC capped at $200