When preparing your South Carolina return, the state starts with your federal taxable income and then requires certain adjustments. Some items that receive favorable treatment on your federal return may need to be added back when calculating your South Carolina taxable income.
Many additions transfer automatically from your federal return. However, you should review each section carefully to make sure all required additions have been reported correctly.
Out-of-State Losses Included in Federal Taxable Income
South Carolina generally doesn't allow deductions for losses generated outside the state.
If your federal taxable income includes losses from:
- Businesses operating outside South Carolina,
- Rental properties located outside South Carolina, or
- Other income-producing activities conducted outside South Carolina,
you may be required to add those losses back to your South Carolina income.
Select Begin next to Out-of-State Losses Included in Your Federal Taxable Income and enter the applicable information.
National Guard and Military Reserve Expenses
South Carolina allows a deduction for qualifying inactive-duty military reserve pay. Because this income may be excluded or deducted for South Carolina tax purposes, related expenses deducted on your federal return must generally be added back.
Enter any unreimbursed military reserve expenses claimed on Federal Form 2106 that relate to income receiving favorable South Carolina tax treatment.
Review your federal return and supporting records to determine the amount that should be added back, if applicable.
Interest Income From Other States and Political Subdivisions
Interest from municipal bonds issued by states and local governments is often exempt from federal income tax. However, South Carolina generally taxes interest earned from obligations issued by:
- Other states,
- U.S. territories,
- Municipalities outside South Carolina, and
- Political subdivisions outside South Carolina.
Enter any tax-exempt interest from these sources that was excluded from your federal taxable income.
Do not include interest from obligations issued by South Carolina or its political subdivisions if that interest qualifies for exemption under South Carolina law.
Other Additions to Federal Taxable Income
Select Begin next to Other Additions to Federal Taxable Income to report additions not covered elsewhere on the return.
You may be asked to enter:
- The amount of the adjustment, and
- A description explaining the addition.
Only enter amounts that are specifically required to be added back under South Carolina tax law.
Research and Experimental Expenditures
South Carolina may require adjustments for certain research and experimental (R&E) expenditures when state and federal tax treatment differ.
Most applicable adjustments are calculated automatically by the software. If an entry is required, enter the amount associated with qualifying research expenditures that must be added back for South Carolina purposes.
Consult your business tax records if you're unsure whether this adjustment applies.
Business Assets and Section 179 Expense
Federal and South Carolina depreciation rules don't always match. As a result, taxpayers may need to make an adjustment when claiming an expense deduction for business property under Internal Revenue Code Section 179.
Most Section 179 adjustments are transferred automatically from your federal return. If prompted, enter any additional adjustment amounts required by your records or supporting tax documents.
Other Common South Carolina Additions
Depending on your situation, South Carolina may require additions for other income or deduction items that received different federal tax treatment.
Examples may include:
- Certain business-related adjustments,
- Recovery deductions claimed in prior years,
- State-specific conformity adjustments,
- Other additions required by South Carolina law.
If a required addition applies to your return, TaxSlayer will generally guide you to the appropriate entry screen.
Do I Need to Enter Every Addition Manually?
Usually not.
TaxSlayer automatically transfers much of the information needed to calculate South Carolina additions to income. In many cases, the software calculates these adjustments without requiring additional input.
You should only enter amounts manually when:
- The program requests the information,
- The adjustment wasn't transferred automatically, or
- You have documentation showing an additional South Carolina adjustment is required.
How Do I Enter South Carolina Additions to Income in TaxSlayer?
To enter additions to income in your South Carolina return:
- Open your South Carolina return.
- Navigate to Additions to Income.
- Review each adjustment category presented.
- Enter any required amounts that weren't automatically transferred from your federal return.
- Complete any supplemental screens that appear.
- Continue through the remainder of your South Carolina interview.
Carefully reviewing your additions to income helps ensure your South Carolina taxable income is calculated correctly and may help prevent delays in processing your return.