How to Complete the South Carolina Solar Tax Credit Form

Installing solar panels in South Carolina can lead to significant tax savings through the state’s Solar Energy Tax Credit. This incentive allows homeowners and businesses to claim a percentage of their solar installation costs as a credit on their state income taxes, reducing their overall tax liability.

To take advantage of this benefit, taxpayers must complete the appropriate form accurately. Errors or missing information could delay processing or reduce the credit amount. Understanding the process ensures you receive the full financial benefit.

Eligibility Requirements

To qualify, the solar system must be installed on property in South Carolina for residential or commercial use. Rental properties do not qualify unless the owner also resides there. The system must be new, not refurbished, and meet safety and performance standards set by the South Carolina Energy Office.

The credit covers 25% of the total system cost, including equipment, labor, and installation fees. However, the maximum claim per year is $3,500 or 50% of the taxpayer’s state income tax liability, whichever is lower. Any unused credit can be carried forward for up to ten years.

Only systems installed by a licensed contractor with the necessary permits qualify. The contractor must provide an itemized invoice detailing costs, along with proof that the system was placed in service during the tax year. Additionally, the system must be certified by the South Carolina Solar Council or another recognized authority to ensure compliance with state regulations.

Obtaining the Form

To claim the credit, taxpayers must use SC Form TC-38, available from the South Carolina Department of Revenue (SCDOR). It can be downloaded from the SCDOR website or obtained through a tax professional.

Electronic filers can usually access SC Form TC-38 through tax software, though not all platforms include every state-specific form. Some may need to request a paper copy by calling the SCDOR or visiting a regional office.

Many solar installation companies assist customers with obtaining and completing the form, sometimes providing pre-filled sections with system details. However, taxpayers are responsible for ensuring accuracy before submission.

Completing Key Sections

Filling out SC Form TC-38 requires attention to detail. The form begins with basic taxpayer identification, including name, Social Security number or Federal Employer Identification Number (FEIN), and filing status. This information must match the taxpayer’s South Carolina income tax return to avoid delays.

The next section requires details about the solar energy system, including total installation cost, which must match the contractor’s final invoice. Taxpayers must also provide the date the system was placed in service, as credits can only be claimed for systems operational within the tax year being filed.

To calculate the credit, taxpayers multiply the total installation cost by 25%. If the result exceeds $3,500 or 50% of their state income tax liability, only the lower amount can be claimed for that year. Any remaining credit can be carried forward.

Supporting Documentation

Proper documentation is required to substantiate the tax credit claim. The SCDOR may request supporting records during audits or if discrepancies arise.

Taxpayers should retain proof of payment, such as bank statements, canceled checks, or credit card receipts. An invoice alone may not be sufficient if an audit occurs. Financing agreements should also be kept if applicable.

Copies of permits and inspection approvals confirm that the installation meets building codes. Utility interconnection agreements, which verify the system’s connection to the electrical grid, provide additional proof that the system is operational.

Calculating the Credit

The credit is calculated as 25% of the total system cost, including equipment, labor, and installation fees. For example, if a system costs $20,000, the total credit would be $5,000. However, since the maximum claim per year is $3,500 or 50% of the taxpayer’s state income tax liability—whichever is lower—the full credit may not be used immediately. If a taxpayer’s liability is only $2,500 for the year, they can claim that amount and carry forward the remaining $2,500.

South Carolina’s credit is independent of federal incentives like the Investment Tax Credit (ITC). While the ITC reduces taxable income, the state credit directly offsets state tax liability. Keeping records of all incentives claimed helps avoid errors and ensures the full financial benefit is realized.

Carryforward Options

If a taxpayer cannot use the full credit in the year of installation due to income tax liability limits, the unused portion can be carried forward for up to ten years.

To track the remaining credit, taxpayers must document the unused portion each year and report it on future tax filings. For example, if a taxpayer has a total credit of $6,000 but can only use $3,000 in the first year, they must document the remaining $3,000 for future claims. Each year, they can apply as much of the remaining credit as their tax liability allows until the full amount is used or the ten-year period expires.

Businesses with fluctuating income may benefit from the carryforward provision, as it allows them to maximize the credit in years when profitability is higher. Taxpayers should stay informed about any legislative changes that could affect the credit’s availability. Consulting a tax professional can help ensure the credit is used effectively and in compliance with state tax laws.