Instructions For Form Sc1040 - 2011 (Page 2 of 9) in pdf

Instructions - South Carolina Form SC1040

Taxpayers that claim bonus depreciation under federal law

ADDITIONS TO FEDERAL TAXABLE INCOME

must add back the difference between the bonus depreciation

taken and the depreciation which would have been allowed

without bonus depreciation.

Enter all numbers on lines a through e as positive numbers

even if they are negative numbers on the federal return. Lines a

Taxpayers that claim a child care program credit for donations

through e are adjustments which must be added to your federal

to a nonprofit corporation (Sch. TC-9) are not allowed a

taxable income to determine your South Carolina taxable income.

deduction for those donations. The disallowed deductions are

Line 2 is the total of these additions.

an addition to federal taxable income.

Taxpayers that claim credits such as the Community

Line a - STATE TAX ADDBACK, IF ITEMIZING ON

Development Credit (Sch. TC-14), the Industry Partnership

FEDERAL RETURN

Fund Credit (Sch. TC-36), and the Hydrogen Infrastructure

If you deducted state and local income taxes or general sales

Development Credit (Sch. TC-47), may not claim a deduction

taxes while itemizing on your 2011 federal income tax return, you

for the same qualified contribution which results in the credit.

are required to add all or part of this amount to federal taxable

Federal net operating loss when claiming a larger amount than

income to arrive at your South Carolina taxable income. Use the

for state purposes is an addition.

worksheet below to figure the adjustment. (Keep this worksheet

for your records.)

Expenses deducted on the federal return related to any

income exempt or not taxed by South Carolina is an addition.

Worksheet A - State Tax Adjustment

Some examples are investment interest to out-of-state

partnerships and interest paid to purchase United States

Itemized deductions from 2011 federal

obligations

Form 1040.

Foreign areas allowances, cost of living allowances and/or

Enter

allowable

federal

standard

income from possessions of the United States are additions

deduction you would have been allowed

to federal taxable income.

if you had not itemized. Enter zero if

married filing separate (MFS) returns.

Effective for qualifying investments made after June 30, 1998,

(See federal instructions)

taxpayers must reduce the basis of the qualifying property to

the extent the Economic Impact Zone Investment Tax Credit is

Subtract line 2 from line 1.

claimed. An addition to federal taxable income must be made

(Enter zero if line 2 is greater than line 1.)

for the resulting reduction in depreciation.

A deduction for domestic production activities under IRC

Enter the amount of state and local

Section 199 must be added back.

income taxes or general sales taxes

from federal Schedule A.

A charitable contribution deduction under IRC Section 170 for

a gift of land must be added back unless the contribution also

The lesser of line 3 or line 4. Enter this

meets the requirements of S.C. Code Section 12-6-5590.

amount on SC1040 line a.

Include any withdrawals during the tax year from a

Line b - OUT-OF-STATE LOSSES

Catastrophe Savings Account that were:

(1) necessary because contributions were more than the

If you have reported losses from out-of-state rental property, a

allowable limits; or

business located outside South Carolina, or losses from real

(2) more than the amount needed to cover qualified cata-

property located out of state, enter the amount shown on your

strophe expenses. (Qualified catastrophe expenses are

federal return on line b and check the appropriate box. You must

expenses paid or incurred because of a major disaster

also include any related expenses, such as investment interest.

as declared by the Governor.)

Enter the total of these losses and related expenses on this line.

Do not include any withdrawals made by a spouse surviving

Personal service income (W-2 or business wages) is taxable to

the spouse who set up the Account.

South Carolina no matter where it is earned.

Line c - EXPENSES RELATED TO RESERVE INCOME

As of January 1, 2009, a business must add back any amount

paid for services performed by an unauthorized alien if the

Because inactive duty military reserve income is taxed for federal

amount is $600 or more a year. An “unauthorized alien” is a

purposes but deductible on your South Carolina return, you must

person who is not admitted for permanent residence and not

add back the amount of the federal deduction for expenses

authorized to be employed either under federal law or by the

related to this income. Enter the amount of these expenses on

U.S. Attorney General. An add-back is not required if: (1) the

this line.

business is a S.C. business exempt from compliance with

federal employment verification procedures under federal law;

Line d - INTEREST INCOME

or (2) the person being paid is not directly paid or employed by

the business; or (3) the employment status of the person is

Interest income on obligations of states and political subdivisions

verified using the procedures contained in the new law; or (4)

other than South Carolina must be added. In the case of a

the person was hired by the taxpayer before January 1, 2009;

mutual fund, add back the percentage of exempt interest income

or (5) the business made a reasonable investigation of the

attributable to out-of-state non-federal obligations. Enter the

person and did not know or should not have known that the

amount of taxable interest income on this line.

person was an unauthorized alien.

Line e - OTHER ADDITIONS TO INCOME

Depending upon how a particular item was reported or

deducted, the following items may be an addition or a

Attach an explanation of your entry for this line. Some examples

subtraction:

of items which you must enter on this line are:

Instructions For Form Sc1040 - 2011 Page 2

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