Does South Carolina follow the federal no-tax-on-tips and overtime deductions?
DOES NOT CONFORM
South Carolina does not follow the federal deductions for state income tax. You can still claim the tips and overtime deductions on your federal return (Schedule 1-A) — they simply do not reduce your South Carolina state tax. Do not assume your state return treats this income the way your federal return does.
Verified against the official state source below — last verified October 26, 2026
| Deduction | South Carolina position |
|---|---|
| Federal tips deduction (IRC §224) | Does not conform |
| Federal overtime deduction (IRC §225) | Does not conform |
What the state itself says
IL #26-20 — "South Carolina did not adopt the following sections in IRC §63(b) through (g) for tax years after 2025" (the non-adopted list includes "4. Qualified tip deduction" and "5. Overtime deduction"). IL #26-4, for 2025 — "South Carolina has conformed with the Internal Revenue Code as amended through December 31, 2024."
- Official source
- SCDOR Information Letter #26-20 (Aug. 31, 2026) ; Information Letter #26-4 (Revised) (Jan. 30, 2026)
- Tax years covered
- 2025 (fixed conformity date Dec. 31, 2024 — taxpayers must back out any OBBBA tips/overtime claims) and 2026 onward (Act 110 of 2026).
South Carolina historically used fixed-date conformity starting from federal taxable income — which is why action was needed: Act 110 (signed Mar. 30, 2026, effective for TYs beginning after Dec. 31, 2025) amended §12-6-50 to exclude IRC §63(b)–(g) and switched the starting point to federal AGI with a new state standard deduction. SCDOR's IL #26-4 lists "Tips" and "Overtime" among provisions requiring adjustment on 2025 returns. (The broader conformity bill H.3368 failed in the Senate on Mar. 31, 2026.)
Your federal deduction is separate
Whatever your state does, the federal deductions run on their own rules: check your W-2 codes with the W-2 Code Checker, estimate with the Tips Calculator and Overtime Calculator, and see the glossary for any term. All state positions: the state-by-state index.
State position verified October 26, 2026 from the official source above. State guidance changes; confirm on the source before filing. This page is general information, not tax advice.