A tax credit is an amount of money that can be used to offset your tax liability. South Carolina's tax credits may be earned by individuals, C corporations, S corporations, partnerships, sole proprietors, and limited liability companies. Credits are usually used to offset Corporate Income Tax or Individual Income Tax. Some credits can also be applied against Corporate License Fees, Bank Tax, Savings and Loan Tax, or Insurance Premium Tax. See the
specific credit form and instructions to determine who can earn the credit and which taxes it can offset.
Tax credits fall into one of two categories:
Nonrefundable credits cannot reduce your tax liability below zero. Unused nonrefundable credits are carried forward and claimed in future tax years. Forms beginning with
TC- are used to claim nonrefundable credits.
Refundable credits can reduce your tax liability to zero. Unused refundable credits are refunded to the taxpayer. Forms beginning with
I- are used to claim refundable credits.
Most tax credits may not be sold, exchanged, or otherwise transferred. Refer to the specific credit to see if it is transferable.
Most tax credit forms are not year-specific, but check to make sure you are using the correct and most current version of the form for the credit you are claiming. Include the SC1040TC or the SC1120TC with your return to claim nonrefundable tax credits. Use the correct three digit code for the credit you are claiming on the SC1040TC or SC1120TC.
General Rules for Tax Credits
These rules apply to tax credits in general:
- Credits must be used in the year they are earned, as much as possible based on your tax liability.
- Credits can generally be applied in any order the taxpayer chooses. However, there are some credits (for example, the Research Expenses Credit) that limit the credit to the remaining tax liability after all other credits have been applied.
- Credits that may be claimed against both Corporate Income Tax 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 a year are 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 to claim a credit that can be carried forward 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 these rules. For more information, see the
Tax Incentives for Economic Development publication and the
specific form or application used to claim the credit.
How do I calculate credit limits?
If I qualify for more than one tax credit, in what order do I use them?
If I can't use my credit in a year, do I lose it?
How do I calculate a credit carryforward?
How do I claim a nonrefundable tax credit on my tax return?
How do I claim a refundable credit on my tax return?
How do I report a credit if I am a...