How was South Carolina's state-tax addback calculated for individuals itemizing deductions in tax years 2018 through 2025?

Plain-English summary

South Carolina Revenue Ruling #19-1 explains the state-tax addback for individuals who itemized federal deductions during tax years 2018 through 2025. Its stated period tracks the temporary federal SALT cap enacted by the Tax Cuts and Jobs Act, so this is historical guidance for those years.

Federal law limited the combined Schedule A deduction for state and local income taxes—or general sales taxes elected instead—plus real and personal property taxes to $10,000, or $5,000 for married filing separately.

South Carolina did not allow an itemized deduction for state or local income taxes. If the taxpayer elected federal general sales taxes instead of income taxes, South Carolina also disallowed those sales and use taxes. A taxpayer who deducted either category federally could therefore need an addback on the South Carolina return.

For the period covered by the ruling, the addback was the least of:

• federal itemized deductions exceeding the standard deduction that would otherwise have applied;
• state and local income taxes or general sales taxes deducted on federal Schedule A; or
• the federal $10,000 limit, reduced by deductible Schedule A real and personal property taxes.

The ruling allowed the taxpayer to apply real and personal property taxes against the federal limit before state income or sales tax. This could reduce the South Carolina addback when property taxes used most of the capped federal deduction.

What this means for you

Amended or reviewed 2018-2025 returns

Reconstruct the federal Schedule A, the standard deduction for the year and filing status, and the amounts of income or sales tax and property tax included in the federal deduction. Calculate all three limits and use the smallest.

Business and rental property owners

The federal cap did not apply to property taxes deducted in carrying on a trade or business or holding property for income production under I.R.C. §§ 162 and 212. Those amounts were generally reported on Schedules C, E, or F rather than Schedule A and were not part of this itemized-deduction addback calculation.

Returns after 2025

Do not extend this ruling automatically. Its effective-date line ends December 31, 2025, so later returns require current federal and South Carolina authority.

Common questions

Q: Did South Carolina permit a deduction for state income tax paid?
A: No. Section 12-6-1130(2) disallowed state and local income taxes and other taxes measured by net income.

Q: Could a taxpayer avoid the addback by electing sales tax federally?
A: No. South Carolina also disallowed state and local general sales and use taxes when the taxpayer made that federal election.

Q: Was the addback always the full state-income-tax amount?
A: No. It was limited to the least of the three amounts described by the ruling.

Citations and references

• S.C. Code Ann. § 12-6-1130(2) — South Carolina modification to the federal tax deduction
• I.R.C. § 164(b)(6) — federal 2018-2025 SALT cap addressed by the ruling
• I.R.C. §§ 162 and 212 — trade-or-business and income-producing property taxes outside the Schedule A cap

Source

• Landing page: SC Advisory Opinion Search
• Original PDF: RR19-1.pdf

Original ruling text

STATE OF SOUTH CAROLINA

DEPARTMENT OF REVENUE
300A Outlet Pointe Blvd., Columbia, South Carolina 29210
P.O. Box 12265, Columbia, South Carolina 29211

SC REVENUE RULING #19-1

SUBJECT:

State Tax Deduction for Individuals who Itemize Deductions
(Income Tax)

EFFECTIVE DATE: Tax years beginning January 1, 2018 through December 31, 2025
REFERENCES:

S.C. Code Ann. Section 12-6-1130(2) (2014)
Internal Revenue Code Section 164(b)(6)

AUTHORITY:

S.C. Code Ann. Section 12-4-320 (2014)
S.C. Code Ann. Section 1-23-10(4) (2005)
SC Revenue Procedure #09-3

SCOPE:

The purpose of a Revenue Ruling is to provide guidance to the public. It
is an advisory opinion issued to apply principles of tax law to a set of facts
or general category of taxpayers. It is the Department’s position until
superseded or modified by a change in statute, regulation, court decision,
or another Department advisory opinion.

BACKGROUND
Internal Revenue Code (IRC) Section 164 provides a deduction of certain taxes, paid or accrued
for federal income tax purposes. Pursuant to Code Section 12-6-1130(2), South Carolina adopts
IRC Section 164 with the following modifications:
(2) The deduction for taxes permitted by Internal Revenue Code Section 164 is
computed in the same manner as provided in Section 164 except there is no
deduction for state and local income taxes, state and local franchise taxes
measured by net income, other income taxes, or taxes measured with respect to
net income. In addition, if a taxpayer elects, pursuant to Section 164, to deduct
state and local sales taxes instead of state and local income taxes, the taxpayer
may not deduct state and local sales and use taxes.
This modification is limited for individual taxpayers to the excess of itemized
deductions over the standard deduction that would be allowed if the taxpayer had
used the standard deduction for federal income tax purposes.
1

Prior to the federal Tax Cuts and Jobs Act of 2017 (TCJA), IRC Section 164 provided a
deduction for the following taxes paid or accrued during the tax year:
•

State, local and foreign income taxes;

•

State and local sales taxes 1 in lieu of deducting state and local income taxes;

•

State, local and foreign real property taxes;

•

State and local personal property taxes; and

•

Generation-skipping transfer taxes imposed on income distributions.

FEDERAL AND STATE ITEMIZED TAX DEDUCTIONS AFTER THE TCJA
The TCJA amended IRC Section 164 for tax years beginning January 1, 2018 through December
31, 2025 by adding IRC Section 164(b)(6) to limit the individual federal itemized tax deduction
to a combined, total deduction of $10,000 ($5,000 if “Married Filing Separate”) for the
following taxes:
•

State and local income taxes; or

•

State and local general sales taxes deducted in lieu of state and local income
taxes; and

•

State and local real and personal property taxes. 2

The dollar limit applies to the combined total deduction claimed as an itemized deduction on the
Federal Form 1040, Schedule A. 3

1

The IRC defined the term “general sales tax” as a tax imposed with respect to the sale at retail
of a broad range of classes of items. IRC Section 164(b)(5)(B). This definition would include
South Carolina’s use tax.
2
Foreign real property taxes are no longer deductible as an itemized deduction for tax years
beginning in 2018 through 2025. Also, the federal limit does not apply to foreign income taxes;
however, these taxes are not deductible for South Carolina income tax purposes under Code
Section 12-6-1130(2).
3
The limit does not apply to state and local property taxes paid or accrued in carrying on a trade
or business or on property held for the production of income pursuant to IRC Sections 162 and

212. These state and local property taxes are not itemized deductions allowed on the individual’s
     Federal Form 1040, Schedule A, but may be deducted on the individuals’ Federal Form 1040,
     Schedules C, E or F, as appropriate. As a result, these property taxes in excess of $10,000 are
     deductible for South Carolina income tax purposes.

2

Under the South Carolina Taxpayer Protection and Relief Act, South Carolina conformed to the
IRC as of February 9, 2018, adopting most of the IRC changes enacted in the TCJA, including
the $10,000 ($5,000 if “Married Filing Separate”) tax deduction limitation.
Prior to the TCJA, for federal purposes individuals could deduct the entire amount paid of either
state and local individual income tax or state sales tax, but not both, along with state and local
property taxes paid. For tax years beginning January 1, 2018, for federal income tax purposes,
individuals who itemize are limited to deducting a total of $10,000 among state and local
property and income taxes (or sales taxes if deducted instead of state and local income taxes).
South Carolina does not allow a deduction for state and local income taxes. Additionally, if
under IRC Section 164 a taxpayer elects to deduct state and local sales taxes instead of state and
local income taxes, the taxpayer may not deduct state and local sales taxes for South Carolina
income tax purposes. Code Section 12-6-1130(2). As a result, if a taxpayer itemized deductions
on his federal income tax return and deducted state and local income taxes or general sales taxes,
the taxpayer may be required to add back all or a portion of this amount to federal taxable
income when computing South Carolina taxable income. This document provides guidance on
how the state tax addback should be calculated for South Carolina income tax purposes.

STATE TAX ADDBACK CALCULATION
If a taxpayer itemized deductions in calculating his federal income tax, a state tax addback may
be required for South Carolina. The addback is the lesser of the following:
•

Itemized deductions in excess of the standard deduction that would have been allowed if
the taxpayer had used the standard deduction for federal income tax purposes; 4

•

State and local income taxes or general sales taxes deducted on the Federal Form 1040,
Schedule A; or

•

The $10,000 federal tax deduction limit less deductible property taxes.

In determining the state tax addback for taxpayers whose deduction is limited to $10,000, the
taxpayer may first apply real or personal property taxes reported on Federal Schedule A before
applying state and local income taxes.

4

The standard deductions for 2018 are generally $24,000 (married filing jointly or surviving
spouse); $18,000 (head of household); and $12,000 (single or married filing separate). These
amounts will be indexed for inflation in subsequent years and are available on the IRS website
(www.irs.gov).
3

EXAMPLES
The examples below illustrate the state tax addback on the SC 1040 for a single taxpayer under
different scenarios who would be allowed a standard deduction of $12,000 had he not itemized.
Example 1 below illustrates the state tax addback amount is the excess of itemized deductions
over the standard deduction.
Example 2 below illustrates the state tax addback amount is the amount of state income taxes. In
this example total taxes are less than the $10,000 federal deduction limit.
Example 3 below illustrates the state tax addback is determined by the $10,000 federal tax
deduction limitation reduced by property taxes. In this example total taxes are more than the
$10,000 federal deduction limit.
Calculation of State Tax Addback Based on Illustrated Amounts

1. Itemized Deductions
2. Standard Deduction
3. Itemized Deductions in excess of Standard Deduction
4. State and local income taxes or sales taxes (Federal 1040, Schedule A)
   5.A. Federal tax deduction limitation ($10,000)

Ex. 1
18,000
12,000
6,000
7,000
10,000

Ex. 2
23,000
12,000
11,000
5,000
10,000

Ex. 3
23,000
12,000
11,000
5,000
10,000

5.B. State and local real estate and personal property taxes on Federal
1040, Schedule A

2,000

4,000

9,000

5.C. Limitation in excess of deductible property taxes (5.A. minus 5.B.)

6. State tax addback on SC 1040 (the lesser of lines 3, 4, and 5.C. above)

8,000
6,000

6,000
5,000

1,000
1,000

SOUTH CAROLINA DEPARTMENT OF REVENUE

s/W. Hartley Powell
W. Hartley Powell, Director
March 8
, 2019
Columbia, South Carolina

4