South Carolina Subtractions

Article ID: 60072  

Question
South Carolina Subtractions

Answer

 State tax refund

If you included your state tax refund on your federal 1040, enter that amount on this line.

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 substantially gainfully employed, receiving income from a disability retirement plan, and eligible for the homestead exemption under SC Code Section 12-37-250. Attach a copy of the physician's statement establishing that you are permanently and totally disabled.

The deduction is limited to payments received from retirement plans. 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 following years, a surviving spouse is only eligible for the retirement deduction on line p and not the disability deduction.

Out-of-state income/gain

Enter income from out-of-state rental property; income from a business located outside South Carolina; or gain from real property

located in another state, as reported on your federal return. Check the appropriate box to indicate the type of income or gain. 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 included in taxable income are reduced by 44% for South Carolina Income Tax purposes.

Net capital gain means the excess of the net long-term capital gain for the tax year over the net short-term capital loss for the tax year. The South Carolina holding period for long-term capital gains is the same as the federal holding period. Income received from installment sales and capital gain distribution qualifies for this deduction if the more than one year holding period has been met. Multiply the net capital gain by 44% and enter the result.

Volunteer deduction

Qualifying volunteer firefighters, rescue squad workers, volunteer hazardous material (HAZMAT) team members, reserve police officers, Department of Natural Resource (DNR) deputy enforcement officers, members of the State Guard, and state constables 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 they have earned the minimum number of points established by the State Fire Marshal during the year.

 • Reserve police officers, DNR deputy enforcement officers, and State Guard members qualify only if the appropriate authority provides them with an I-332 form certifying their eligibility.

 • Volunteer state constables qualify if they complete at least 240 logged service time hours per year. They must be designated as a state constable, by the State Law Enforcement Division (SLED), prior to the tax year the deduction is first claimed. SLED must provide the volunteer state constable with documentation supporting they have completed the required annual training required for the recently completed fiscal year.

An individual is limited to one deduction of $3,000. If a taxpayer and spouse both qualify, enter $6,000. Enter the type and amount of deduction.

Contributions to the SC College Investment Program (Future Scholar) or to the SC Tuition Prepayment Program.

You may deduct 100% of any contributions to the SC College Investment Program made between January 1, 2019 and April 15, 2020.

You may deduct 100% of any contribution to the SC Tuition Prepayment Program made between January 1, 2019 and December 31, 2019.

Active trade or business income deduction

Enter the amount from I-335, line 5. Find forms at dor.sc.gov/forms.

Interest from US obligations

Enter the interest income from US obligations that you reported as income on your federal Income Tax return. US obligations include savings bonds, treasury notes, and treasury bills. For more information see South Carolina Revenue Ruling #16-2 at dor.sc.gov/policy.

Interest income from the following obligations are taxable for state purposes:

 • Federal Home Loan Mortgage Corporation (Freddie Mac)

 • Federal National Mortgage Association (Fannie Mae)

 • Government National Mortgage Association (Ginnie Mae)

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 they attended.

 • Members of the National Guard and active duty Reserve members may also deduct up to 15 days of customary annual training pay, referred to as “active duty training” or “ADT”.

 • Inactive duty Reserve members may also deduct up to 14 days of customary annual training pay, referred to as “active duty training” or “ADT”, plus up to two 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 they attended and up to 24 days of weekend drills (a maximum of 39 days) at the daily rate of pay.

For more information see South Carolina Revenue Ruling #09-16 at dor.sc.gov/policy. Do not include Military Reserve and National Guard pay which is included in retirement income. For other subtractions, see instructions for line v.

Social Security and/or railroad retirement if taxed on your federal return

Enter the amount of Social Security from Title 2 of the Social Security Act or railroad retirement that was taxed on your federal return.

Retirement deduction

The deduction is allowed for an individual taxpayer who is the original owner of a qualified retirement account. An individual who is under age 65 may claim a retirement deduction up to $3,000 on qualified retirement income from their own plan.

An individual who is age 65 or older during the tax year may claim a retirement deduction up to $10,000 on qualified retirement income from their own plan.

Line p-1: Include only qualified withdrawals from the taxpayer’s own qualified retirement plan.

Line p-2: Include only qualified withdrawals from the spouse’s own qualified retirement plan.

Line p-3: A surviving spouse receiving qualified retirement income on behalf of a deceased spouse may deduct up to $3,000 or $10,000 of the qualified retirement income, based on the age of the deceased spouse had they lived. The 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 claimed from the taxpayer's own retirement plan.

Qualified retirement income is income from plans defined in IRC 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.

Disability retirement income due to permanent and total disability, Social Security income, and railroad retirement income, 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.

Reduce the retirement deduction by any military retirement deduction taken.

Military retirement deduction

An individual with military retirement income included in their South Carolina taxable income may make a deduction up to the amount of military retirement income. Taxpayers filing a joint return must calculate the deduction separately for each spouse based on each individual's age, retirement income, and earned income. Reduce the retirement deduction (line p-1 through line p-3) and the age 65 and older deduction (line q-1 and q-2) by the amount of the military retirement deduction taken.

Retirement income means taxable income received by the taxpayer or the taxpayer's surviving spouse from a qualified military retirement plan. Income that is subject to a penalty for premature distribution does not qualify as retirement income. For a surviving spouse, retirement income includes a retirement benefit plan and dependent indemnity compensation received due to the deceased spouse's military services.

Retirement benefits received for service in the National Guard or Reserves, due to inactive time, are subtracted on line v and are not included in taxable income. Do not include these amounts in the deduction on line p.

Line p-4: Include military retirement income related to the taxpayer's military service.

Line p-5: Include military retirement income related to the spouse's military service.

Line p-6: Include military retirement income received on behalf of a deceased spouse's military service. Apply the deduction in the same manner that it applied to the deceased spouse.

The surviving spouse military retirement deduction is in addition to any retirement deductions claimed on the taxpayer's own retirement income.

Military retirement deduction: Under age 65

For 2019, the military retirement deduction is limited to $14,600 for taxpayers under the age of 65. Taxpayers must have other earned income in addition to the military retirement. South Carolina earned income is income you receive from services you provide.

Taxpayers under the age of 65 with military retirement income but no earned income are only eligible for the retirement deduction on line p-1 or p-2.

Military retirement deduction: Age 65 and older

For 2019 the deduction is limited to $27,000 for individual taxpayers age 65 and older. There is no requirement for other earned income. See examples in the instructions for line q (age 65 and older deduction).

Line q: Age 65 and older deduction

Beginning in the tax year a resident taxpayer reaches age 65, they are entitled to a deduction of $15,000 against any South Carolina income.

Line q-1 applies to the taxpayer whose name appears first on the return.

Line q-2 applies to the spouse whose name appears second on the return.

Reduce the age 65 and older deduction claimed on line q-1 and line q-2 by:

 • any individual retirement deduction claimed on line p-1 and line p-2, and

 • any military retirement deduction claimed on line p-4 and line p-5.

Claiming a surviving spouse retirement deduction on line p-3 or p-6 does not reduce the age 65 and over deduction for a taxpayer on line q-1 or q-2.

Negative amount of federal taxable income

Because the South Carolina return begins with the federal taxable income, it is important that you get the benefit of the negative amount from the federal taxable income line of the federal return. On the SC1040, start with zero on line 1. Do not enter a negative amount. On line r of the SC1040, enter the negative amount from the federal taxable income line of the federal return. Enter as a positive number.

Subsistence allowance

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 per regular workday. Your employer should provide you with the number of work days.

Dependents under six years of age

A deduction is allowed for each dependent claimed on your federal Income Tax return who had not reached the age of six by December 31 of the tax year. Birthdates and Social Security Numbers are required.

Consumer protection services

An individual may deduct the costs of a monthly or annual contract or subscription for identity theft protection and resolution services.

The deduction is only for individuals who filed a return with the SCDOR for a tax year between 1998 and 2012 or whose personal identifiable information was included on another's return. The deduction may not be claimed for an individual who deducted the same actual costs as a business expense.

The deduction is limited to:

 • $300 for an individual taxpayer

 • $1,000 for a married filing joint return

 • $1,000 for a return claiming dependents

Identity theft protection includes products and services designed to prevent an incident of identify fraud or identity theft. It protects the disclosure of a person's personal identifying information (for example your SSN) by preventing a third party from gaining unauthorized acquisition of another's personal identifying information to obtain financial resources or other products, benefits, or services.

Identity theft resolution services include products and services designed to assist persons whose personal identifying information was obtained by a third party. This results in minimizing the effects of the identity fraud or identity theft incident and restoring the person's identity to pre-theft status.

 

 

Other subtractions from income

Attach an explanation of your entry on this line. Some examples of items which may be subtracted on this line are:

 • You may deduct 100% of any contributions made to a Palmetto ABLE Account Expense Fund, subject to program limitations, between January 1, 2019 and December 31, 2019. For more information, visit treasurer.sc.gov.

• 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 the property is placed in service, a taxpayer must add back, on line e of the SC1040, the difference between the depreciation deduction allowed for federal purposes and the deduction that would have been allowed without bonus depreciation. The South Carolina adjusted basis will then be 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.

 • South Carolina net operating loss that is larger than the federal amount is a subtraction. The same loss can only be deducted once. Attach your own worksheet or keep with your tax records. No carryback losses are allowed.

 • Legislators within a 50-mile radius of the State House are allowed to subtract travel expenses.

 • Retirement income paid by the US government for service in the Reserves or National Guard is not taxed for South Carolina purposes. You may deduct the entire amount of any stipend paid by the state of South Carolina for National Guard service.

Determine the percentage of your military retirement income which is excludable by dividing the length of time you served in the Reserves and/or National Guard (not full time) by the length of time of your total military service as follows:

Inactive Reserve time

+Inactive National Guard time/Total Military time (active and inactive) =% exclusion

Determine the excludable amount of your military retirement income by multiplying it by the percentage of the exclusion as follows:

% exclusion    X total taxable military retirement income from federal 1040= excludable military retirement income to be entered on line v.

-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.

A special needs child is:

 1. a person under the age of 18 at the time of adoption

 2. a dependent of a public or private non-profit adoption agency

 3. legally free for adoption

 4. determined by the agency to have specific conditions

Attach a copy of the letter you received at the time of adoption from the SC Department of Social Services which certified the person as a special needs child.

-Subtract 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:

 o $2,000 if the qualified deductible is $1,000 or less

 o twice the qualified deductible if it is between $1,000 and $7,500

 o $15,000 if the qualified deductible 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.

Depending upon how a particular item was reported or deducted, the following items may be an addition or subtraction.

-A change in accounting method to conform in the same manner and same amount as federal. At the end of the federal adjustment, any balance will continue until fully adjusted.

-Adjust the installment method of reporting if :

 o the entire sale was reported for state purposes or

 o the entire sale was reported for federal purposes and you wish to continue on an installment basis for state purposes

-Adjust the federal gain or loss to reflect any difference in the South Carolina basis and federal basis.

 

 

 

 

 

 

 


Article Details
Views: 768 Created on: Jun 15, 2013