There are many good resources for learning about federal taxes, but not so many when it comes to the rules in a small state such as South Carolina.
If you prepare your own returns, it would be easy to overlook some of the money-saving deductions and credits that are peculiar to the Palmetto State.
The state's overview of taxes and tax credits runs 279 pages, and some of the language can be confusing, but don't worry, you don't have to read it all.
Many of the credits and deductions are tailored for industry such as the "whole effluent toxicity testing credit for manufacturing facility" or for very particular businesses.
Others are for specific purposes such as the tax credit for farmers who add an ingredient to anhydrous ammonia so that it can't be used to make methamphetamine, or the "venison for charity" tax credit for those with contracts to donate butchered deer to nonprofits that feed the poor.
But there are some valuable credits for regular folks tucked into South Carolina's tax code. Remember, a tax credit reduces the amount you owe dollar-for-dollar, so a credit is much more valuable than a deduction.
Here are some examples:
--Have kids? The Child and Dependent Care credit is one of the few listed by name on South Carolina's income tax form, and it's the easiest to figure out. Just take the deduction you claimed on your federal tax form for such expenses and multiply by 0.07 (7 percent), to calculate the S.C. tax credit.
One thing people often overlook with the child/dependent care credit, on both federal and state tax forms, is that it's not just about day care costs. If you sent your under-13 child to day camp or an after-school program so you could work or job hunt, that's deductible.
--Expensive homeowners insurance? If your homeowners insurance cost more than 5 percent of the "adjusted gross income" on your federal tax form, then South Carolina will give you a tax credit for the excess, up to $1,250. For example, if your AGI was 50,000 and your insurance cost $2,700, you would get a $200 tax credit. It's called the "excess insurance premium credit."
--Tuition bills? If you are a state resident who enrolled in college within 12 months of graduating high school, and you completed at least 30 hours of college credits last year, and you did not receive a LIFE scholarship or Palmetto Fellowship, you may be eligible for the College Tuition Tax Credit worth up to $850 for those at four-year colleges or $350 for two-year schools.
--Efficient manufactured home? If you bought an Energy Star-rated manufactured home, you're due a $750 tax credit.
--Solar panels? If you installed solar power equipment in 2011, you likely already know about this one: a 30 percent tax credit.
--Nursing home expenses? If you paid for nursing-home-level care for yourself or someone else, in any state, in an institution or at home, you can get a tax credit of up to $300 (equal to 20 percent of out-of-pocket costs, up to the $300 limit).
--Got married? Here's an odd little tax credit. If the bride and groom took a "qualifying marriage preparation course" prior to getting a marriage certificate, the happy couple could claim a $50 tax credit.
There also are tax deductions that could reduce your South Carolina taxable income.
--Contributions to a Future Scholar college savings program account are fully deductible, even if the contributed money is used right away to pay tuition and other eligible bills.
Future Scholar is South Carolina's 529 plan, a type of federally sanctioned savings vehicle that works somewhat like a Roth IRA, but for higher education expenses. The big difference is that Future Scholar contributions are deductible from state income, and withdrawals are not taxed when used for qualified expenses.
--Retirement deductions might not sound like something that applies to people who haven't yet retired, but in South Carolina, if you're under 65 and converted some retirement savings to a Roth IRA, that converted amount can be subtracted from your taxable income, up to $3,000.
The amount is added to your federal taxable income, which is the starting point for South Carolina taxes, and then South Carolina allows you to subtract it back off.
Reach David Slade at 937-5552.