SC Tax Credit

South Carolina Educational Credit for Exceptional Needs Children

As the tax year comes to a conclusion, now is the opportune time for taxpayers to do year-end tax planning and to consider the benefits of available state tax credits.  

South Carolina currently offers an Educational Credit for Exceptional Needs Children tax credit, a dollar-for-dollar tax credit, for individuals and corporations.  Applicants are required to make a donation to Exceptional SC, a 501(c)(3) entity authorized by the South Carolina state legislature.  

A pool of $10,000,000 has been designated for these tax credits, given out on a first-come, first-serve basis, for tax year 2016.  As of November 4th, $5,285,631 of the $10,000,000 pool had been donated.  A five-person board awards tuition scholarships from this pool to qualifying exceptional needs children who attend approved private schools in the state.

Benefits of a Donation

  • Provides a dollar-for-dollar state tax credit  for up to 60% of a taxpayer’s South Carolina income tax
  • Allows for a charitable contribution for federal income tax purposes

Eligible Donors

  • C corporations
  • LLCs
  • Partnerships
  • S corporations
  • Individuals (parents/guardians of scholarship recipients will have a credit limitation)

Eligible Funds for Donation

  • Cash
  • Publicly Traded Securities

Taxpayers Who Benefit Most

  • Individual taxpayers paying Alternative Minimum Tax (AMT) – for federal income tax purposes, the donation is considered a charitable contribution; it is not an add-back for AMT purposes whereas state income tax payments are
  • C corporations paying Alternative Minimum Tax
  • Individual taxpayers contributing appreciated stock – taxpayers will receive a charitable contribution deduction for the fair market value of the security donated (no taxable gain reported)

Other Items

  • The state tax credit is limited to 60% of state tax, with no carryovers
  • The amount of the federal charitable contribution deduction is an addback for SC income tax purposes
  • Charitable contributions may be limited for federal tax purposes
  • Flowthrough entities making donations should consider the effect on each owner individually

How to Make a Donation – Go to https://exceptionalsc.org/donate/

How to Apply for the Credit - Complete and file SC Form 57A after the donation has been made

This information has been provided by Project Hope Foundation, Inc., a 501(c)(3) public charity located throughout upstate South Carolina, which provides a lifespan of services to the autism community, including Hope Academy,  an exceptional needs school for children with autism that is located in Greenville, SC.

While Project Hope does not directly benefit from your donation, we are providing this material to help facilitate full utilization of the $10,000,000 pool for this tax year.  Hope Academy provides services for approximately sixty children who received these scholarships.  These scholarships are vital to our ability to provide future services to the children.