There are two valuable tax breaks South Carolina homeowners should know about this tax season, and they’re surprisingly easy to overlook.
The first is quite simple and is worth up to $1,250. This is a state-specific tax break, and I’ve found in over a decade of writing this personal finance column that many homeowners and some accountants were unaware of its existence.
This is called excess insurance premium credit, it is claimed in South Carolina income tax form TC44 and here’s how it works: if the amount of money you paid to secure your legal residency is more than 5% of your adjusted federal gross income, you get a tax credit for the difference, up to $1,250 .
Simple enough, right?
Like most South Carolina income tax credits, this one can only be used to reduce your state tax liability – the amount owed to the Columbia Department of Revenue before any payments, including including payroll deductions, is accounted for. The credit can be carried forward for five years and applied to future returns.
If you have just discovered this break and could have used it before, you can file amended tax returns for up to three prior years. In hurricane-prone areas, it’s easy for people to pay more than 5% of their income on home insurance, and this credit can help ease the pain.
When I first wrote about this years ago, I received a number of calls from people living on barrier islands who were able to claim the credit, and some filed declarations of changed income and saved thousands more.
The second tax credit might also be of particular interest to homeowners in hurricane-prone areas, but it’s a bit trickier to claim.
The Home Renovation Credit is actually two credits in onewhich are claimed together on form TC-43. This is a tax credit for people who have retrofitted their legal residence so that it is more resistant to hurricanes, floods or wind damage.
For example, installing storm shutters, upgrading to a hurricane-proof roof, or installing roof bracing could qualify. This credit is good to keep in mind for homeowners considering such upgrades, as it can help offset costs to make their home less prone to damage, which is the intent.
The credit pair requires a bit of research and either a written statement that the work qualifies or an affidavit from the owner along with receipts.
The payoff is considerable – and I’m speaking from personal experience here. First, there is a 25% credit for the cost of renovations, to a maximum value of $1,000.
Second, and in addition, there is a credit for state sales tax paid on materials, up to a value of $1,500. With this one, the credit amounts to 6% of the cost of the “tangible personal property” — the taxed materials — used for the renovation work.
The credit pair seems oddly structured, as the sales tax portion is capped at a higher amount than the renovation cost credit. With most renovations, it would be easy to get the maximum credit of $1,000 for the cost of the project, by spending $4,000 or more, but someone would have to spend $25,000 on taxed materials to get the maximum sales tax credit.
In any case, the two credits combined offer real savings, up to $2,500, for owners who have carried out eligible work on their residence.
Credits can also be claimed by anyone lucky enough to have received a safe house grant through the SC Department of Insurance for a renovation project, but only expenses that the grant proceeds did not cover may be considered.
To reach David Slade at 843-937-5552. Follow him on Twitter @DSladeNews.