If you are a resident of South Carolina and are under age 65, you have to file a South Carolina state income tax return if you are required to file a federal return and you had income in South Carolina. If you are a South Carolina resident age 65 or older, you have to file a South Carolina return if your gross income is more than the federal gross income filing requirement plus $30,000 if you are married filing jointly or more than the federal limit plus $15,000 if you are filing under another status.
If you are not a resident or are a part-year resident of South Carolina, you have to file a South Carolina return if your gross income in South Carolina is more than the federal exemption amount. You should file a South Carolina return if South Carolina state income tax was withheld from your pay and you are due a refund.
Your South Carolina state income tax is based on your federal taxable income. But there are certain adjustments you must make, and there are deductions and credits you can take on your South Carolina return that are different than those on your federal return.
South Carolina deductions
The following are some of the deductions you can claim on your South Carolina state tax return.
Retirement deduction
If you are under age 65 you can deduct up to $3,000 of income you receive from a qualified retirement account, and if you are 65 or older you can deduct up to $10,000. Qualified retirement accounts include 401(k) plans, IRAs, Keogh plans, federal, state and local government retirement plans and military retirement plans. Amounts you receive from a retirement plan that are subject to an early withdrawal penalty on your federal return do not qualify for this deduction on your South Carolina return.
Surviving spouses can claim the deduction for retirement income attributable to the deceased spouse. The limit depends on the age the deceased spouse would have been if he or she were still living. In addition, the surviving spouse can claim the deduction for his or her own retirement income.
65 and older deduction
If you are 65 or older, you can claim a $15,000 deduction against any South Carolina income. This deduction is reduced by the amount you claim as a retirement income deduction. But a surviving spouse does not have to reduce this 65 and older deduction by the amount claimed as a retirement income deduction attributable to his or her deceased spouse.
If you are disabled and had to include disability retirement income on your federal tax return, you may be able to subtract that income on your South Carolina return. To qualify for this deduction you must be totally and permanently disabled and unable to be gainfully employed. You must be eligible for the South Carolina homestead exemption. The amount you can deduct is disability retirement income and not payments from other disability plans. A surviving spouse can claim this disability retirement deduction the year the spouse dies.
Out-of-state rental, business or real estate income
If your federal taxable income includes rental income, income from a business, or a gain on real estate outside of South Carolina, you can subtract that income on your South Carolina return. Income from personal services outside of South Carolina would be subject to South Carolina income tax.
Net capital gain
If you have a net capital gain on the sale or exchange of South Carolina assets, you can deduct 44% of the gain on your South Carolina return. The net capital gain is your long-term capital gain less any short-term capital loss. Capital gain distributions from a mutual fund can also qualify for this deduction.
Interest on federal obligations
On your South Carolina tax return you can deduct any interest on U.S. Government obligations that you included as income on your federal tax return. This includes interest income from mutual funds that invest in U.S. Government obligations.
College investment or tuition prepayment
You can claim a deduction for the contributions you make to the South Carolina College Investment Program and the Tuition Prepayment Program.
Dependents under age six
If you have dependents under age six, you can claim an additional deduction on your South Carolina return. You can claim $3,650 (for 2010) for each dependent.
Adoption
If you adopt a special needs child you can claim a deduction of $2,000 on your South Carolina return. You need to attach a copy of the letter you receive from the South Carolina Department of Social Services certifying the child as a special needs child.
You can claim a deduction for amounts you contribute to a catastrophe savings account against damages from hurricanes, floods or windstorms. If you have insurance, the amount you can deduct depends on your deductible. You can contribute $2,000 if your deductible is $1,000 or less, twice the deductible if it is between $1,000 and $7,500, and $15,000 if your deductible is more than $7,500.
Spouses of military service members
If you are the spouse of a military service member who is stationed in South Carolina and you are in South Carolina only to be with your service member spouse, you may be able to exclude the income you earn in South Carolina from South Carolina state income tax.
If you are a member of the National Guard or Reserve, your pay for annual training, weekend drills and other inactive duty training is generally exempt from South Carolina income tax. If you included this income on your federal tax return, you can subtract it on your South Carolina return.
If you received retirement income from the U.S. government for service in the National Guard or Reserves, that income is not taxable in South Carolina.
Volunteer deduction
Volunteer firefighters, rescue squad workers, hazardous material team members, reserve police officers, Department of Natural Resources deputy enforcement officers and members of the South Carolina State Guard can claim a $3,000 deduction on their South Carolina tax returns.
Subsistence allowance
Police and law enforcement officers paid by a South Carolina local or state government, or the federal government, and full-time firefighters, and emergency medical service personnel can claim a tax credit for a subsistence allowance of $8.00 per workday.
South Carolina credits
The following are some of the credits you may qualify to claim on your South Carolina state income tax return.
If you claimed the credit for child and dependent care expenses on your federal return, you can claim a credit for 7% of that amount on your South Carolina return. Part-year residents of South Carolina need to prorate the credit.
If you are married filing jointly and both you and your spouse have earned income subject to South Carolina income tax, you can claim a credit. The credit is 7% of the lesser of your earned income or your spouse’s earned income, up to a maximum credit of $210.
Tuition tax credit
You can claim a credit for tuition you paid for post-secondary education. The credit is 25% of the tuition, up to a maximum credit of $850 for attending a 4-year institution or $350 for a 2-year institution. The tuition can be for you, your spouse, or for a student you can claim as a dependent on your return. To claim the credit, you need to file Form I-319 – Tuition Tax Credit.
If your South Carolina income tax return includes income on which you paid income taxes to another state, you can claim a credit for those taxes on your South Carolina return. This credit is claimed on Form SC1040TC.
Nursing home credit
If you pay expenses for your own care or the care of another person in a nursing home or you pay to provide in-home or community care, you can claim a credit for 20% of the expenses, up to a maximum credit of $300.
Other credits
There are various credits that business owners and others may qualify to claim on their individual South Carolina income tax returns. These credits are claimed on Form SC1040TC.
Sources: Form I-319 – Tuition Tax Credit – South Carolina Department of Revenue
Form SC1040 – Individual Income Tax Return – South Carolina Department of Revenue
Form SC1040TC – Tax Credits – South Carolina Department of Revenue
South Carolina Individual Income Tax Forms and Instructions – South Carolina Department of Revenue
