The South Carolina Department of Revenue has released the 2019 income tax withholding computer formula and wage-bracket tables to its website. The 2019 employer withholding guide, last updated in 2017, is not yet updated for 2019. The Department has not yet updated its withholding tax guide for 2019.

As we reported previously, the Department announced it now has updated its income tax withholding tables every year. (EY Payroll NewsFlash Vol. 17, #125, 8-3-2017.)

Supplemental withholding rate

The supplemental withholding rate will remain at 7.0% for 2019, the highest rate on the computer formula tables. (Telephone conversation, withholding tax section representative, December 14, 2018.)

Legislation makes changes to South Carolina income tax law

The South Carolina Taxpayer Protection and Relief Act (HB 5341, Act No. 266, signed into law by the governor on October 3, 2018) makes the following changes to the state's income tax law. (South Carolina Information Letter 18-15, Tax legislative update for 2018 — subsequent legislation, October 16, 2018.)

South Carolina income tax law has been amended to provide the following:

• Income tax brackets will be adjusted for inflation each year, beginning on December 15, 2018 for tax year 2019, and each December 15 thereafter, using the Chained Consumer Price Index for All Consumers (C-CPI-U), as published by the US Bureau of Labor and Statistics. However, the adjustment may not exceed 4% per year and the rounding amount is $10.
• A provision is added to South Carolina law to provide for a new dependent exemption equal to $4,110 for each eligible dependent of the taxpayer (including both qualifying children and qualifying relatives). To qualify, each dependent must meet the eligibility requirements of IRC Section 151 and 152 for a qualifying child or relative, as those sections applied on January 1, 2017.

• The exemption amount will be adjusted each December 15 using the C-CPI-U, rounding at $10. Note that the Department did not adjust the exemption amount for tax year 2018. Note also that South Carolina otherwise conforms to the suspension of personal exemptions by the TCJA and does not allow a personal exemption for the taxpayer or the taxpayer's spouse.

• A provision is added, effective for the 2018 tax year, to allow a resident individual taxpayer an additional deduction for each dependent who has not reached age six during the tax year. The additional deduction amount is equal to the South Carolina dependent exemption in South Carolina Code Section 12-6-1140(13), rather than the federal personal exemption amount because the federal personal exemption amount is zero for tax years 2018 through 2025.

Calculating 2019 taxable income for withholding purposes

The 2019 computer formula provides that employers should deduct the following from gross wages to arrive at taxable income subject to withholding:

• A yearly personal exemption equal to $2,510 per personal exemption claimed on federal Form W-4 ($0.00 if zero exemptions claimed)
• A yearly standard deduction amount equal to 10% of gross wages up to $3,470 if claiming one or more exemptions ($0.00 if zero exemptions claimed)

For example, an employee earning $28,600 per year with three exemptions has $7,530 deducted from gross income as personal exemptions (three exemptions x $2,510) and $2,860 deducted from gross income as the standard deduction (gross wages x 10%, which is less than $3,470), resulting in $18,210 that is subject to South Carolina income tax withholding in 2019

2018 Forms W-2 filing reminder

Form WH-1606, South Carolina Withholding Fourth Quarter 2018 and Annual Reconciliation Return and calendar year 2018 Forms W-2 are due by January 31, 2019.

Employers submitting 250 or more Forms W-2 must file electronically over the Department's MyDORWAY system. Employers filing fewer than 250 Forms W-2 may file on CD-ROM or paper with Form WH-1612, Transmittal Form for W-2s. Electronic filing specifications for 2018 can be found here.

For more information about South Carolina withholding tax, see the Department's website, call +1 844 898 8542 or send an email to withholdtax@dor.sc.gov.

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