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In South Carolina, a wave of concern is sweeping through early tax filers, who are puzzled as to why the state legislature has yet to decide on aligning state tax codes with recent federal tax deductions. This delay has left taxpayers grappling with conflicting information from various tax preparation programs.
Determined to provide clarity before taxpayers submit their returns, 7NEWS Here to Help has delved into the issue to uncover the facts.
Taxpayer confusion
For Marjorie Halley and her husband Tim, who have been handling their tax returns for years without a hitch, a notice from TurboTax came as a surprise. The message read, “South Carolina has not conformed to recent federal law known as the One Big Beautiful Bill…If the state ends up conforming, you will need to amend your return to get the full deductions.”
Faced with this uncertainty, Marjorie expressed her confusion, asking herself, “What am I doing, should I, shouldn’t I?” In search of answers, she chose to pause her tax filing process and reached out to 7NEWS Here to Help for guidance.
“What am I doing, should I, shouldn’t I? Let’s just exit out and start asking questions,” Halley said when she saw that, and she reached out to 7NEWS Here to Help.
“Because no one else seems to have any answers. So if you can jumpstart this and clarify it for us people, wonderful!” she said.
Tax professional advice
First stop, IRS Enrolled Agent Dan Thomas with Jackson Hewitt in Forest City, NC.
He showed us this SC Department of Revenue notice listing the 8 new Federal deductions that won’t apply to your state taxes. Everything from the increased standard deduction to the $6,000 senior deduction and no tax on tips and overtime must be added back to your income when you file your state return.
To be clear, no matter what, if you qualify, you will see those deductions on your federal tax return.
“So when we finish the Federal return, it carries right into the SC return, and then SC is going to have to turn around at that point in time and add back in the things that were on the Federal return that they’re not going to conform to that they have not ruled on yet,” Thomas said.
So, should you wait to file your state taxes?
“I would advise them to go ahead and file their return,” Thomas, who said some money in your pocket now is better than waiting on lawmakers to do something they may never do, since both the SC State House and Senate have no conformity bill on the agenda for the foreseeable future, said.
Cost of conformity
If the SC legislature votes on conformity, lawmakers will have to consider the cost.
An analysis from the Revenue and Fiscal Affairs Office found the state would lose nearly $279 million for the 2025 tax year alone. Add another nearly $237 million for 2026, and the losses amount to well over $500 million for two years.
Lawmakers said likely “no”
7NEWS reached out to more than 30 state lawmakers representing 9 Upstate counties, and included a quote from TurboTax that said, “We are expecting SC to address this issue soon,” asking if that was true, with few responses.
Chandra Dillard, who has represented Greenville for 18 years and sits on the Ways and Means Committee, admits normally the state does vote to conform, but this year it is unlikely.
Here is her exchange with Here to Help’s Diane Lee:
“I think we haven’t addressed it because of the immense cost to the budget,” Dillard said.
“But don’t you feel taxpayers have a right to know either yes or no we are going to conform or we’re not, but just so they know how to proceed?” Lee said.
“Point well taken, yes,” Dillard said.
“And what would you advise taxpayers?” Lee said.
“Well, and in that instance, I want to play the devil’s advocate, because what if we’re at the beginning of our budget process. We have a long way to go. We really don’t get a budget until late April. What if hearts and minds change between now and April and I say no we’re not doin conformity, that’s why I’m using the language not at this time, and what if it changes when we get to April, maybe there’s an outcry from the public or maybe we see a way to make some of it happen and maybe not all of it, I think a message that is just infinite no no no we’re not going to do it, might not be correct,” Dillard said.
“So should people wait and see, maybe hold off on filing?” Lee said.
“I’m not saying that, what I’m saying to you is we’re in a process right now, and in this part of the process we’re saying, ‘no we can’t afford that.’” But we never know what may change,” Dillard said.
“But can you see why that may be confusing to people?” Lee said.
“I do, but that’s one of the joys of government,” Dillard said.
Taxpayers press for a vote
Bill Kendig, who also got the TurboTax notice, said lawmakers owe it to SC taxpayers to vote on the issue.
“Get it done. Get the conformity done and move on. I mean it should be a slam dunk, but it’s politics,” Kendig said.
He plans to wait to file, despite the recommendation.
Still, lawmakers told 7NEWS not bringing conformity up for a vote is essentially voting “no” at least for now.
Skeptical as to whether SC lawmakers will vote in time, the Halleys decided to file their state return.
“SC has had our money all year and we want it, now, period,” Mr. Halley said.
As for other states, there are several that are adopting the “wait and see approach” like South Carolina, including Georgia. However, most North Carolina tax programs are conforming to the federal law, for now, even though the Tarheel State has yet to approve legislation.
The South Carolina Department of Revenue said if lawmakers do vote to conform, they will issue an “Information Letter” to help make taxpayers aware of how the bill may affect them. This is not a mailing but rather a notice that will include instructions on how to amend their returns, if necessary.