Like many South Carolina residents, Robert McKenzie decided to put solar panels on his West Ashley house in order to reduce his electric bills, and state and federal tax credits for up to 55 percent of the cost were a big incentive.
McKenzie got 30 percent of the solar panel cost back — $5,409 — as a federal tax credit, and was expecting another 25 percent of the cost back from South Carolina.
However, most South Carolina income tax credits can only be collected by people who owe the state income taxes. That's a problem, because McKenzie is 84 years old, and like many retirees in South Carolina, he owes no income taxes to the state.
If McKenzie owed South Carolina income tax, he could reduce his bill by as much as $3,500 because of the solar energy tax credit. But, he gets no tax credit because he owed no tax.
"I think that what they are really doing is, the state is penalizing senior citizens," he said. "Money is money."
Indeed, money is money, and tax credits are a form of government spending. Refunding a dollar of income tax, or spending a dollar, both cost the state a dollar.
As it stands, South Carolina has dozens of "nonrefundable" tax credits that can only be claimed by those who owe S.C. income tax. There are credits for people with expensive homeowner's insurance, for installing fire sprinklers, for rehabilitating historic homes, for taking a marriage preparation course, for donating venison to charity and many more.
South Carolina also has generous income tax rules for senior citizens. Social Security benefits don't count as S.C. income, there's a $15,000-per-person deduction of other income for those over 65, there are property tax breaks for the elderly and more.
As a result, many older S.C. residents owe no state income tax and can't claim tax credits for doing things the state encourages through tax policy, such as installing solar panels.
"I want to find out why they want to penalize me," McKenzie said. "I'm 84 years old and I've been working since I was 14. I enjoy working."
Even now, he works part time as a security guard, but said his earnings aren't high enough to owe income tax to the state.
If they were, he could recoup $4,760 of the cost of his solar panels.
South Carolina rebates 25 percent of the cost of a residential solar project, with tax credits of up to $3,500 per year. When the rebate amount is higher than $3,500 the difference is carried over to the next year's tax return, for up to 10 years until the full amount is claimed or forfeited.
Being able to carry over the tax credit is of no use to McKenzie and others in his situation. With no taxes owed, they can't take advantage of S.C. tax credits this year or next year or 10 years from now.
The state does have some "refundable" tax credits, which means they are paid regardless of whether people owed the state any money. Those credits — the tuition tax credit, the gas tax credit, the classroom teacher expense credit — are rare exceptions in South Carolina.