Category: South Carolina
South Carolina Subtractions from Income
Certain Nontaxable National Guard or Reserve Pay
Income received from National Guard or Reserve members for customary annual training, weekend drills and other inactive duty training is generally exempt from South Carolina income tax.
Members of the National Guard or Reserves may:
- Deduct all inactive duty pay from the United States or any state for weekend drills and other inactive duty training actually attended.
- Deduct up to 15 days of customary annual training pay, also referred to as "active duty training" or "ADT".
- Inactive duty Reserve members may also deduct up to 14 days of customary annual training pay, also referred to as "active duty training" or "ADT" plus up to 2 days of travel time listed on official orders.
- Full time Active Guard and Reserve (AGR) employees may deduct up to 15 days of annual training actually attended and up to 24 days of weekend drills (a maximum of 39 days) at the daily rate of pay.
Total and Permanent Disability Retirement Income
If disability retirement income was taxed on your federal income tax return and you are totally and permanently disabled, you may be able to deduct this income from your South Carolina taxable income.
You must be totally and permanently disabled, unable to be gainfully employed in any capacity, receiving income from a disability retirement plan, and eligible for the homestead exemption under Section 12-37-250 to qualify. You do not qualify if you are receiving disability income from one job while able to perform another job. You must attach a copy of the physician's statement establishing that you are permanently and totally disabled.
Note: The deduction is limited to payments received from retirement plans. Payments from disability plans which are not retirement plans are not eligible for the deduction. Third party sick pay reported on a W-2 does not qualify for the total and permanent disability retirement deduction.
A surviving spouse may take a disability retirement deduction for amounts received in the year the disabled spouse died. For subsequent years, a surviving spouse is only eligible for the retirement deduction on line p and not the disability deduction.
Social Security and/or Railroad Retirement Benefits
If you are taxed on any Social Security under Title 2 of the Social Security Act or railroad retirement income on your federal return, enter the amount that was taxed on your federal return.
Out-of-State Rental/Business or Real Estate Income Not Taxable to South Carolina
If you have income from out-of-state rental property; a business located outside South Carolina; or gain from real property located out of state, as reported on your federal return, enter this amount on this line and check the appropriate box. However, personal service income (W-2 or business wages) is taxable to South Carolina no matter where it is earned.
Net Capital Gain Deduction
Net capital gains which have been held for a period of more than one year and have been included in the SC taxable income are reduced by 44% for SC income tax purposes.
The term "net capital gain" means the excess of the net long-term capital gain for the taxable year over the net short-term capital loss for such year. Income received from installment sales as well as capital gain distribution qualifies for this deduction provided the more than one year holding period has been met. (SC Capital Gains holding period is the same as the federal.) Multiply the net gain which meets the above guidelines by 44% (.44) and enter the results here.
Police and all commissioned law enforcement officers paid by South Carolina municipal, county, state governments or the federal government, full-time firefighters, and full-time emergency medical service personnel are entitled to subsistence allowances of $8.00 per regular workday. Your employer should provide you with the number of work days.
Volunteer firefighters, rescue squad workers, volunteer hazardous material HAZMAT team members, reserve police officers, Department of Natural Resource (DNR) deputy enforcement officers, and members of the State Guard are allowed to deduct $3,000.
Volunteer firefighters, rescue squad workers and HAZMAT members qualify only if their employer provides them with a form stating that they have earned the minimum number of points established by the State Fire Marshal during the year. Reserve police officers, DNR deputy enforcement officer, and the State Guard members qualify only if the appropriate authority provides them with an I-332 certification form certifying their eligibility for this deduction. An individual is limited to one deduction of $3,000. If a taxpayer and spouse both qualify, enter $6,000.
An individual who is under age 65 may claim a retirement deduction up to $3,000 of qualified retirement income from his or her own plan. An individual who is age 65 or older during the tax year may claim a retirement deduction up to $10,000 of qualified retirement income from his or her own plan.
"QUALIFIED RETIREMENT INCOME" is income from plans defined in I.R.C. 401, 403, 408 and 457, and all public employee retirement plans of the federal, state and local governments, including individual retirement plans, Keogh plans, and military retirement.
Note: Social Security income, railroad retirement income, and disability retirement income due to permanent and total disability do NOT qualify because these items are not taxed by South Carolina.
Any portion of qualified retirement income received this tax year that resulted in a federal premature withdrawal penalty does NOT qualify for a retirement deduction.
A surviving spouse receiving qualified retirement income attributable to the deceased spouse may deduct up to $3,000 or $10,000 of the qualified retirement income, based on the age the deceased spouse would have been had he or she lived. To claim the deduction on line p-3 and p-4 (if needed), a surviving spouse must receive the decedent's qualified retirement income as a surviving spouse. The surviving spouse retirement deduction is in addition to the individual retirement deduction from his or her own plan.
Contributions to the SC College Investment Program or to the SC Tuition Prepayment Program
You may deduct 100% of any contributions to the SC College Investment Program ("Future Scholar") made between January 1, 2011 and through April 15, 2012. You may deduct 100% of any contribution to the SC Tuition Prepayment Program made between January 1, 2011 and December 31, 2011.
Active Trade or Business Income Deduction
Enter the amount from I-335, line 5.
Other Subtractions from South Carolina Income
Include an explanation of your entry on this line. Some examples of items which may be subtracted on this line are:
- South Carolina does not recognize bonus depreciation in IRC Section 168(k). With or without bonus depreciation, the depreciable life of the property is the same for federal and state purposes. For the tax year in which the property is placed in service, a taxpayer must add back the difference, in the line for other additions, between the depreciation deduction allowed for federal purposes and the deduction that would have been allowed without bonus depreciation. Therefore, the South Carolina adjusted basis is greater than the federal adjusted basis. For all other years of the depreciable life of the property, an additional depreciation deduction is available for South Carolina purposes.
- If you itemized and claimed a federal tax credit for qualified mortgage credit certificates (MCC), you may subtract the amount of the tax credit as interest.
- South Carolina net operating loss. In no event is the same loss to be deducted more than once. (Keep your worksheet for your records.) No carryback losses are allowed.
- Capital expenses amortized under federal statutes will be the same for state purposes. At the end of the federal amortization, the balance of capital expense amortized will continue until fully amortized for state purposes. The amortized amount is a subtraction from your income.
- Legislators within a 50-mile radius of the State House are allowed to subtract travel expenses.
- Retirement income paid by the U.S. government for service in the Reserves or National Guard is not taxed for South Carolina purposes.
- If you have adopted a "special needs child", you may subtract $2,000 per year per child as long as the adopted child qualifies as a dependent on your federal return. Attach a copy of the letter you received at the time of adoption from the SC Dept. of Social Services which certified the person as a "special needs child." A "special needs child" means a person under the age of 18 at the time of adoption, who is a dependent of a public or private non-profit adoptoin agency, is legally free for adoption and has been determined by the agency to have specific conditions.
- Include amounts contributed to a Catastrophe Savings Account and interest income earned by the account. If your legal residence is insured against hurricane, rising floodwaters, or other catastrophic windstorm event damage, you are allowed to contribute: 1) $2,000 if the qualified deductible is $1,000 or less, 2) twice the qualified deductible if it is between $1,000 and $7,500; or 3) $15,000 if the qualified is more than $7,500. If your legal residence is not insured against hurricane, rising floodwaters, or other catastrophic wind event damage, the limit is $250,000 or the value of your legal residence, whichever is less.
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