SC
Does South Carolina tax tips and overtime?
The federal deduction and the South Carolina deduction are separate questions. Here is where South Carolina actually lands, and why.
How South Carolina builds its tax base
South Carolina starts from your federal adjusted gross income. Both deductions are below-the-line — they reduce federal taxable income but leave AGI untouched — so neither reaches this state's return automatically. Anything you get here had to be legislated separately.
Tips in South Carolina
Still taxedTwo independent blocks. (1) TY2025: SC's IRC conformity date is still December 31, 2024 (S.C. Code Sec. 12-6-40(A)(1)(a)), which predates OBBBA, so IRC Sec. 224 does not exist for SC purposes; the conformity-update bill H.3368 (which would have advanced the date to 12/31/2025 and adopted OBBBA) failed second reading in the Senate 16-27 on 3/31/2026, and SCDOR responded by extending all 2025 SC individual returns to October 15, 2026. (2) TY2026 forward: H.4216, signed 3/30/2026, adds S.C. Code Sec. 12-6-50(21) refusing to adopt 'Section 63(b) through (g) relating to standard deductions and the itemized deduction,' moves the starting point to federal AGI, and replaces the federal standard deduction with the new SC Income Adjusted Deduction (SCIAD). Because Sec. 224 rides on Sec. 63(b)(5), it cannot reach SC taxable income either way.
Source: SC Department of Revenue, 'Information about H. 4216' (Apr 15, 2026); H.4216 SECTION 2 (new S.C. Code Sec. 12-6-50(21)); SCDOR conformity statement (Mar 26, 2026) · last reviewed
Overtime in South Carolina
Still taxedSame conformity-date and Sec. 63(b)-(g) non-adoption mechanism blocks IRC Sec. 225. Separately, SC considered its own standalone overtime exclusion: H.3368 would have amended S.C. Code Sec. 12-6-1120 to exclude overtime pay and certain bonus pay from SC gross income while also advancing the IRC conformity date to 12/31/2025. It passed the House 121-0 on 3/10/2026, but the Senate amended it and its second reading FAILED 16-27 on 3/31/2026. It remains in the Senate and never became law, so no SC overtime exclusion exists.
Source: South Carolina Legislature Online, Bill 3368 status and history, 126th Session (2025-2026) — 'Second Reading Failed', Ayes-16 Nays-27, 3/31/2026 · last reviewed
Whatever your state does, your payroll taxes do not change
Both deductions reduce income tax only. Social Security and Medicare are still charged on the same wages, in every state.