Why SC taxpayers will see more money in their paychecks next year

South Carolina taxpayers will have more money in their paychecks next year after a payroll change following the state Legislature’s 2022 tax cut.

The state Department of Revenue on Thursday released new lower income tax withholding tables that employers use to determine how much state income tax needs to be taken out of workers’ paychecks. The lower withholdings mean that taxpayers will get more money in their paychecks next year because employers will shave off up to 6.5% to account for the new income tax rate.

The withholding adjustments do not affect federal, local, or other state taxes.

South Carolina lawmakers passed an income tax cut earlier this year to bring the top rate from 7% to 6.5%, after the state’s budget surplus grew as the economy rebounded during the COVID-19 pandemic.

The tax cut will reach $1 billion in 2027 after lawmakers also agreed to gradually reduce the top tax rate to 6% over at least five years, as long as revenue grows.

A taxpayer, for example, who currently earns $39,000 a year and has three exemptions — the individual taxpayer, their spouse and their child — would have $1,379 in state income taxes withheld from their paychecks in the current 2022 tax year.

Next year, when the tax cut is implemented, the amount withheld will drop to $757, letting the worker keep more than $620 in their paychecks spread through the year.

The size of a person’s paycheck will depend on how much a person earns, how often they are paid or if they choose to have more taxes taken out, among other factors.

“People can ask to change their withholding because their circumstances change or because they want a bigger refund” when they file their tax return, said Tim Smith, a spokesman for the state revenue department.