Tax Credits

TAX CREDITS ×

South Carolina Department of Revenue
PO Box 125
Columbia, SC 29214-0825

General tax credit questions: TaxCredits@dor.sc.gov

Tax Credit Tips

Need help figuring out which tax credits might be for you? Check out some of our past articles for more help!

Please note the amount of some credits and deductions covered in these articles varies from year-to-year. Visit the Tax Credits page for updated amounts.

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Summary

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
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 Fee, 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. You may be able to carry unused nonrefundable credits forward to claim in future years. Use forms beginning with TC- to claim nonrefundable credits
Refundable credits can reduce your tax liability to zero. Unused refundable credits are refunded to the taxpayer. Use forms beginning with I- 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.

FAQs

How do I calculate credit limits?

Calculation example
Calculation example Tax liability	Calculation example $10,000
Calculation example New Jobs Credit	Calculation example ($5,000) Limited to 50% of the tax liability
Calculation example Remaining tax liability	Calculation example $5,000
Calculation example Child Care Credit	Calculation example ($2,500) Limited to 50% of the tax liability remaining after taking the first credit
Calculation example Tax liability	Calculation example $2,500

If I qualify for more than one tax credit, in what order do I use them?

Unless the SC Code Section allowing a credit says otherwise, you can use the credits in any order. Some credits, such as the Research Expenses Credit, specifically limit the credit to the remaining tax liability after all other credits have been applied.

Example
Taxpayer Y has a $10,000 Income Tax liability and qualifies for a $6,000 New Jobs Credit and a $7,000 Conservation Credit. Taxpayer Y has two options for how to order the credits:

Option 1: Take the Conservation Credit first, then the New Jobs Credit
Option 1: Take the Conservation Credit first, then the New Jobs CreditTax liability	Option 1: Take the Conservation Credit first, then the New Jobs Credit$10,000
Option 1: Take the Conservation Credit first, then the New Jobs CreditConservation Credit	Option 1: Take the Conservation Credit first, then the New Jobs Credit($7,000) Not limited to a percentage of tax liability
Option 1: Take the Conservation Credit first, then the New Jobs CreditRemaining tax liability	Option 1: Take the Conservation Credit first, then the New Jobs Credit$3,000
Option 1: Take the Conservation Credit first, then the New Jobs CreditNew Jobs Credit	Option 1: Take the Conservation Credit first, then the New Jobs Credit($1,500) Limited to 50% of the remaining tax liability
Option 1: Take the Conservation Credit first, then the New Jobs Credit Tax liability	Option 1: Take the Conservation Credit first, then the New Jobs Credit $1,500
Option 1: Take the Conservation Credit first, then the New Jobs Credit Taxpayer Y will have a New Jobs Credit carryforward of $4,500 ($6,000 credit - $1,500 used).

Option 2: Take the New Jobs Credit first, then the Conservation Credit
Option 2: Take the New Jobs Credit first, then the Conservation Credit Tax liability	Option 2: Take the New Jobs Credit first, then the Conservation Credit $10,000
Option 2: Take the New Jobs Credit first, then the Conservation Credit New Jobs Credit	Option 2: Take the New Jobs Credit first, then the Conservation Credit ($5,000) Limited to 50% of the remaining tax liability
Option 2: Take the New Jobs Credit first, then the Conservation Credit Remaining tax liability	Option 2: Take the New Jobs Credit first, then the Conservation Credit $5,000
Option 2: Take the New Jobs Credit first, then the Conservation Credit Conservation Credits	Option 2: Take the New Jobs Credit first, then the Conservation Credit ($5,000) Not limited to a percentage of tax liability
Option 2: Take the New Jobs Credit first, then the Conservation Credit Tax liability	Option 2: Take the New Jobs Credit first, then the Conservation Credit $0
Option 2: Take the New Jobs Credit first, then the Conservation Credit Taxpayer Y will have a New Jobs Credit carryforward of $1,000 ($6,000 credit - $5,000 used) and a Conservation Credit carry forward of $2,000 ($7,000 credit - $5,000 used).

If I can't use my credit in a year, do I lose it?

How do I calculate a credit carryforward?

Corporate Headquarters Credit
Corporate Headquarters Credit Year 1 credit earned	Corporate Headquarters Credit $50,000
Corporate Headquarters Credit Year 1 credit used	Corporate Headquarters Credit ($5,000)
Corporate Headquarters Credit Credit carryforward	Corporate Headquarters Credit $45,000

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...

PARTNERSHIP

For nonrefundable credits (schedules begin with TC-), complete the schedule for the credit you are claiming and attach it to your SC1065 along with the SC1040TC.
Partnerships electing to pay active trade or business income tax can take nonrefundable tax credits earned by the partnership, and not yet passed through to partners, against their partnership level tax. Nonrefundable credits cannot be taken against the nonresident withholding tax due.
Credits not used by the partnership are passed through to the partners.
Provide each partner with an SC1065 K-1 showing the amount of credit allocated to them. Partners will use the credit amounts reported on the SC1065 K-1 to claim the credit on their returns.
The amount of credit you can pass through to a partner is usually equal to the partner’s percentage ownership in the partnership. However, there are exceptions to this rule, so refer to the specific SC Code Section for the credit you are claiming to determine the percentage you are able to allocate to each partner.

S CORPORATION

If you owe corporate-level Income Tax, you must first use any credit at the entity level. You can then pass through any remaining credit to your shareholders. Once the credit has been passed through to shareholders, you cannot use it later against any entity-level tax.
For nonrefundable credits (schedules begin with TC-), complete the schedule for the credit you are claiming and attach it to your SC1120S with the SC1120TC.
Provide each shareholder with an SC1120S K-1 showing the amount of credit allocated to them. Shareholders will use the credit amounts reported on the SC1120 K-1 to claim the credit on their returns.
For refundable credits (forms begin with I-), complete the form for the credit you are claiming and attach it to your SC1120S. Include the credit amount on the SC1120S.
The amount of credit you can pass through to a shareholder is usually equal to the shareholder’s percentage of stock ownership. However, there are exceptions to this rule, so refer to the specific SC Code Section for the credit you are claiming to determine the percentage of the credit you are able to allocate to each shareholder.

PARTNER OF A PARTNERSHIP OR THE SHAREHOLDER OF AN S CORPORATION

The amount of credit passed to you will be reported on the SC1065 K-1 (partnership) or SC1120S K-1 (S Corporation) that was issued to you by the partnership or S Corporation.
Complete the appropriate schedule (begins with TC-) for the credit, using the amount of credit passed through to you from the partnership or S Corporation. It is important to complete the schedules to calculate any credit limitations.
If you are an individual, fiduciary, or partnership, attach the schedule to your return along with the SC1040TC.
If you are a corporation, attach the schedule to your return along with the SC1120TC.

LIMITED LIABILITY COMPANY (LLC)

See SC Code Section 12-6-3310(C) for special provisions on the qualification and use of credits by LLCs.
In general…

LLCs taxed as partnerships can earn and pass through most credits to their individual and corporate members.
LLCs taxed as corporations can earn and use credits applicable to corporations.
Disregarded single-member LLCs with an individual member can claim credits available to be used against Individual Income Tax.
Disregarded single-member LLCs with a corporate member can claim credits available to be used against Corporate Taxes.
LLCs owned by LLCs or other pass through entities will continue to pass through the credits until they are received by a member who can use them against Individual Income Tax or Corporate Taxes

CORPORATION INCLUDED IN A CONSOLIDATED RETURN

Any tax credits you earn are used and applied against the consolidated tax.
On a consolidated return, the South Carolina taxable income or loss is computed separately for each corporation included in the return. The income or loss is then added together and reported on one return for the consolidated group.
The use of tax credits, and any carryover of unused credits, is determined on a combined basis. Credits reduce the consolidated group’s tax liability, whether or not the corporation earning the credit had any tax liability. Limitations on credits are based on the income or tax liability of the consolidated group.
Use the SC1120TC to report credits earned, used, lost due to statute, and carried forward by the group.
The corporation entitled to the credit must complete the schedule for the credit it is claiming and attach it to their SC1120TC along with the SC1120.

Tax Credit Tips Need help figuring out which tax credits might be for you? Check out some of our past articles for more ​help!