The South Carolina R&D Tax Credit.
South Carolina offers a 5% R&D tax credit that can be coordinated alongside the federal benefit. Many qualifying SC businesses have never claimed it. Alexander & Blake can help you evaluate whether this credit applies to your business.
SC R&D Tax Credit — What You Need to Know
What is the SC R&D Tax Credit?
A state income tax credit equal to 5% of qualified research expenses incurred in South Carolina. It follows the same rules as the federal credit under IRC Section 41.
Who qualifies?
Any business operating in SC that incurs qualified research expenses — manufacturers, software developers, construction firms, biotech companies, and engineers — regardless of size.
How is it calculated?
The credit equals 5% of SC qualified research expenses that exceed the base amount, using the same methodology as the federal credit. Cannot exceed 50% of SC income tax liability.
Can I claim both federal and state?
Yes. SC businesses can claim both the federal R&D credit (up to 20% of QREs) AND the SC state credit (5% of SC QREs) for the same qualifying expenses.
What about unused credit?
Unused SC R&D credits carry forward for up to 10 years, allowing businesses to benefit even in lower-profit years.
How do I file?
File SC Schedule TC-18 (Research Expenses Credit) with your annual SC state tax return. You must also claim or be eligible for the federal credit under IRC Section 41.
SC Cities We Serve
SC Manufacturer Recovered Combined Credits
A Spartanburg-area manufacturing company had filed taxes for years without ever claiming R&D credits. After a free assessment, qualifying research expenses were identified and both federal and SC state credits were recovered.
This example is illustrative. Actual results depend on qualifying activities and expenses.
Explore Your Credit Potential
A brief estimate to help you understand what credits may be available — no obligation.
Frequently Asked Questions
Is the SC R&D credit refundable?
No, the SC R&D credit is non-refundable. However, unused credits can be carried forward for up to 10 years to offset future SC tax liability.
Do I need to claim the federal credit too?
Yes. South Carolina follows federal R&D credit rules, so you must claim or be eligible for the federal credit under IRC Section 41 to qualify for the SC state credit.
Can small businesses and startups claim the SC credit?
Yes. Any SC business that performs qualified research activities can claim the credit regardless of size. There is no minimum revenue or employee requirement.
Can I file amended returns to claim past credits?
Yes. If you did not originally claim the SC R&D credit, you can file an amended return within the statute of limitations — often going back 3 years.
What industries qualify in South Carolina?
Manufacturing, software development, construction engineering, biotech, automotive, aerospace, food and beverage, and many more. If your team solves technical problems, you likely qualify.
Evaluate Your South Carolina R&D Credits
A complimentary consultation to review your qualifying activities and outline what a well-supported SC credit engagement would look like. No obligation.