A tax credit is an amount of money that can be offset against a tax liability. Most of South Carolina’s income tax credits may be earned by C corporations, S corporations, partnerships, sole proprietors, and limited liability companies (regardless of how they are taxed). Credits must be used as much as possible in the year they are generated. The types of taxes a credit may be used to offset include corporate income tax, and individual income tax. Certain credits can also be applied against corporate license fees, bank tax, savings and loan tax, and/or insurance premium tax. The forms that begin with “TC-” are for claiming nonrefundable credits, meaning that they cannot reduce a taxpayer’s tax liability below zero. The forms that begin with “I-” are for claiming refundable credits.
The following rules usually apply to tax credits:
- Credits may be applied in any order the taxpayer chooses.
- Credits that may be claimed against both income taxes and corporate license fees may be used against either or both in the same year.
- No credit may be used more than once.
- Credits that limit the amount that may be used in one year must be computed one credit at a time before another credit is used to reduce the remaining tax liability.
- A taxpayer may file an amended tax return for a year that is out of statute in order to claim a credit that can be carried forward to one or more open years. The credits carried forward must be reduced by the amount that could have been used in the years out of statute.
There are exceptions to the rules listed above. For more information, see the Department’s publications page and the specific form or application used to claim the credit.