South Carolina Payroll Taxes: 2025

For small businesses in the Palmetto State, understanding the intricacies of payroll taxes is not just a matter of compliance—it's a cornerstone of financial strategy. The South Carolina payroll tax landscape in 2025 is a blend of stable, ongoing requirements and significant legislative proposals that could reshape the future. This guide provides a detailed examination of your obligations for 2025 and a forward-looking analysis to help you prepare for what lies on the horizon.

South Carolina State-Level Payroll Taxes for 2025

Employers in South Carolina are primarily responsible for two key state-level payroll taxes: State Income Tax (SIT) withholding and State Unemployment Insurance (SUI) contributions. Mastering the details of each is essential for seamless compliance.

State Income Tax (SIT) Withholding

South Carolina utilizes a progressive income tax system, where the tax rate increases as an employee's income grows. For 2025, employers must use the state's official tax brackets and rates to accurately calculate and withhold the correct amount of SIT from employee wages.

2025 Tax Rates and Brackets

The top marginal income tax rate for 2025 is 6.2%. The withholding brackets for single filers are detailed below. Employers should use these brackets to ensure payroll systems are correctly configured.

Taxable Income (Single Filers)	2025 Income Tax Rate	Calculation Method
$0 - $3,560	0.0%	0% of taxable income
$3,560 - $17,830	3.0%	3.0% of excess over $3,560
$17,830 or greater	6.2%	$428.10 + 6.2% of excess over $17,830

Withholding Calculations and Form SC W-4

To determine the exact withholding amount, employers should use the official WH-1603 Withholding Tax Tables. These tables are based on an employee's pay frequency and the number of allowances they claim on their Form SC W-4, "South Carolina Employee's Withholding Allowance Certificate". It is crucial for employers to remember that the SC W-4 is separate from the federal Form W-4 and uses an allowance-based system, which the federal form has moved away from. This divergence requires careful employee instruction to ensure accurate state withholding.

For supplemental wages like bonuses, South Carolina mandates a withholding rate of 6.4%.

State Unemployment Insurance (SUI) Tax

Administered by the SC Department of Employment and Workforce (DEW), SUI is an employer-paid tax that funds temporary benefits for unemployed workers. Employees do not contribute to this fund.

2025 Taxable Wage Base and Rates

Key details for SUI tax in 2025 include a stable taxable wage base and varying rates based on employer experience.

Feature	Detail
Taxable Wage Base (per employee)	$14,000
New Employer Rate	0.41%
Experienced Employer Rate Range	0.06% - 5.46%
Administrative Contingency Assessment	0.06% (on taxable wage base)
Who Pays	Employer Only

An employer's specific rate is determined by their "experience rating," which is based on their history of unemployment claims. A lower claims history leads to a lower tax rate. Employers can manage their accounts through the DEW's online portals.

Other State-Specific Considerations

South Carolina simplifies the payroll process in several ways:

• Minimum Wage: The state adheres to the federal minimum wage of $7.25 per hour.
• Absence of Certain Taxes: South Carolina does not mandate State Disability Insurance (SDI), Paid Sick Leave (PSL), or Paid Family and Medical Leave (PFML) payroll taxes, reducing the direct tax burden compared to many other states.
• Interstate Workers: For employees working across state lines, the state where the work is physically performed generally has the primary right to tax the income, with credits applied by the home state to prevent double taxation.

Federal Payroll Tax Obligations for South Carolina Employers

Beyond state taxes, all employers must manage federal payroll obligations.

Tax Type	Employee Rate	Employer Rate	2025 Wage Base/Limit
Federal Income Tax Withholding	Varies	N/A	Based on Form W-4 and tax tables
Social Security (FICA)	6.2%	6.2%	$176,100
Medicare (FICA)	1.45%	1.45%	No Limit
Additional Medicare Tax	0.9%	No Match	On employee wages over $200,000
FUTA (Federal Unemployment)	No	6.0% (gross)	$7,000 (Net rate typically 0.6% after SUI credit)

Employer Compliance: Registration, Reporting, and Key Deadlines

Proper registration and timely filing are critical to avoid penalties.

Registering with State Agencies

New employers must register with two state agencies:

1. South Carolina Department of Revenue (SCDOR): For a Withholding Tax Account Number, required for SIT. This is done via the MyDORWAY portal.
2. SC Department of Employment and Workforce (DEW): To establish an unemployment insurance account. Registration and account management are available on the DEW website.

Filing Frequencies and Deadlines

Deposit schedules depend on the tax type and liability amount.

Tax Type	Filing/Payment Frequency	General Due Dates
SIT Withholding (SCDOR)	Quarterly: (Withholding ≤ $500/quarter) Monthly: (Withholding >$500/quarter but <$12,000/year) Semiweekly: (Withholding >$12,000/year)	Quarterly: Last day of month after quarter ends. Monthly: 15th of month after payroll month. Semiweekly: Wed after Fri payday / Fri after Tue payday.
SUI Tax & Wage Report (DEW)	Quarterly	Last day of month after quarter ends: Q1: April 30 Q2: July 31 Q3: October 31 Q4: January 31

The Future Landscape: South Carolina Payroll Taxes Beyond 2025

While 2025 rules are set, major changes are being debated for future years.

Legislative Spotlight: H. 4216 and Potential Income Tax Overhauls

House Bill 4216 proposes a significant restructuring of the state's income tax system for tax years after 2025. If enacted, it would move away from the current progressive brackets toward a flatter system and decouple from federal deductions.

Feature	Current System (2025)	Proposed under H. 4216 (Amended Version)
Tax Structure	Progressive, 3 brackets (0%, 3%, 6.2%)	Two-tiered: 1.99% up to $30,000; 5.39% above $30,000. Path to flat 1.99% then 0%.
Top Marginal Rate	6.2%	Initially 5.39%, with a goal to reduce to 0%.
Standard/Itemized Deductions	Conforms to federal concepts.	Decouples from federal. Introduces a new "South Carolina Income Adjusted Deduction (SCIAD)".

These changes are not yet law and are contingent on future state revenue growth. Businesses should monitor this legislation closely as it would require significant adjustments to payroll processing and tax planning.

Outlook for State Unemployment Insurance

The SUI system's future appears stable. The state's UI Trust Fund is well-funded, with a balance of approximately $1.554 billion as of mid-2023, which is above the adequate level. This solvency means widespread SUI tax hikes are unlikely in the near future, providing a stable cost environment for employers.

Strategic Payroll Management and Recommendations for Employers

Proactive management is key to navigating payroll tax obligations effectively.

• Stay Updated: Regularly check the official websites of the SCDOR and the DEW for the latest rates, forms, and alerts.
• Accurate Employee Setup: Ensure all employees correctly complete both the federal Form W-4 and the unique South Carolina Form SC W-4.
• Payroll System Configuration: Verify your payroll software is updated with the correct 2025 rates for SIT and SUI, and be prepared for potential future changes from legislation like H. 4216.
• Manage SUI Costs: Implement HR practices that minimize employee turnover to improve your experience rating. Review and contest any incorrect unemployment claims.

Conclusion: Key Takeaways for Proactive Payroll Planning

For 2025, South Carolina employers must manage established state income tax withholding and unemployment insurance obligations alongside federal requirements. The stability of the SUI fund is a positive factor. However, the potential for a complete overhaul of the state income tax system looms large with H. 4216. Businesses that stay informed, maintain accurate records, and plan strategically will be best positioned to navigate the evolving tax landscape of the Palmetto State.