South Carolina LLC Taxes Explained: New 2026 Rates
South Carolina just changed how it taxes personal income, starting with the 2026 tax year — a simpler, lower two-rate system replacing the old graduated brackets. Here's every layer your LLC touches, with an estimator built around the new structure.
A default South Carolina LLC is a pass-through: profits land on your personal return, taxed under South Carolina’s new two-rate system, effective the 2026 tax year: 1.99% on the first $30,000 of taxable income, and 5.21% on income above that (minus a $966 adjustment) — down from the prior graduated brackets that topped out at 6.0%. Add 15.3% federal self-employment tax on 92.35% of net profit. The LLC owes no franchise tax. Sellers collect 6% state sales tax plus local option taxes up to 3%.
- State income tax (2026+)
- 1.99% / 5.21% two-rate
- First-bracket threshold
- $30,000 taxable income
- Prior top rate (2025)
- 6.0%
- Entity-level tax (default)
- None
- Sales tax
- 6% + local up to 3%
- S-corp filing trigger
- Form CL-1, $25
The Tax Layers in South Carolina
Federal: income + self-employment tax
Pass-through profits hit your 1040 at your federal bracket, plus 15.3% SE tax on 92.35% of net profit — usually the largest line for most LLC owners.
South Carolina state income tax: new two-rate system for 2026
1.99% on the first $30,000 of taxable income, 5.21% above that (minus a $966 adjustment) — a simplification from the prior multi-bracket structure.
Entity level: nothing
No franchise tax on a standard pass-through LLC. Form CL-1 ($25) only applies if you elect S-corp taxation.
Sales tax: 6% + local (if applicable)
State rate plus local option taxes up to 3%. See Step 7.
Estimate Your Combined Bill
South Carolina LLC Tax Estimator
Single-member default taxation · new 2026 two-rate system · educational estimate
The New 2026 Two-Rate System
This is a genuinely new change worth understanding clearly. Starting with the 2026 tax year, South Carolina replaced its prior graduated bracket structure (which topped out at 6.0% for 2025) with a simpler two-rate system: 1.99% on the first $30,000 of South Carolina taxable income, and 5.21% on income above that threshold, reduced by a $966 adjustment. For most small LLC owners, this represents a meaningful simplification — and for many, a real reduction — compared to the prior system.
The S-Corp Question (~$60–80K Profit)
An S-Corp election changes federal taxation: reasonable salary (payroll-taxed) plus distributions that escape the 15.3% SE tax. File Form 2553 — never Form 8832, which is the C-Corp election. South Carolina recognizes S-Corp elections, but remember: this election also triggers the $25 Form CL-1 filing discussed in Step 6. Break-even on the SE-tax savings themselves typically lands around $60–80K of consistent profit after payroll and accounting costs. Distributions still face South Carolina's income tax under the new two-rate system — the election shields SE tax, not state income tax. Run your numbers in the S-Corp election guide.
Your South Carolina Tax Calendar
| Date | What's Due |
|---|---|
| Apr 15 / Jun 15 / Sep 15 / Jan 15 | Quarterly estimated taxes — federal and South Carolina, on pass-through profit |
| Mar 15 | Form 1065 (multi-member LLCs) + K-1s |
| Apr 15 | Form 1040 + South Carolina SC1040 |
| If S-corp elected | Form CL-1 Initial Annual Report ($25) to the Department of Revenue |
| Monthly/Quarterly | Sales tax returns via MyDORWAY, if applicable |
Ahmad Adil's Take: South Carolina's new two-rate income tax system is a genuinely favorable, timely change for small LLC owners — the first $30,000 taxed at just 1.99% helps disproportionately in exactly the income range where most new businesses actually operate in their early years. Combined with no franchise tax and no annual report for most LLCs, South Carolina's overall state-level tax burden is genuinely light. Just don't let that lightness make you complacent about the local business license layer — that's where South Carolina's real ongoing compliance obligation actually lives, not in anything covered on this page.
- ✓Forms your South Carolina LLC for $39 + the $110 state fee
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- ✓Free South Carolina registered agent the first year
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South Carolina LLC — FAQ
Ahmad Adil is the founder and CEO of LLC School. The figures here — the $110 Articles of Organization, the fact that most South Carolina LLCs never file an annual report, and the new 2026 two-rate income tax — reflect current South Carolina Secretary of State and Department of Revenue guidance. This is educational content, not legal or tax advice.
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