Are R&D Tax Credits
Available in South Carolina?
Yes. South Carolina provides a Research and Development (R&D) Tax Credit for increasing qualifying research activities. The state follows Internal Revenue Code Section 41 rules for qualified expenditures but calculates the credit solely on research conducted within South Carolina.
Key Highlights
Applicable law: S.C. Code Section 12-6-3415.
Research must be conducted within South Carolina.
The SC R&D Tax Credit is 5% of qualified research expenditures incurred in the state
Unused credits may be carried forward for 10 years
The credit taken in any taxable year cannot exceed 50% of the taxpayer’s remaining tax liability after all other credits.
South Carolina Tax Credit Case Study
A manufacturing company in South Carolina that creates specialized parts for the automotive industry claimed credits for designing a highly specialized prototype. The project spanned multiple years, covering the tax years 2023 and 2024.
The company qualified for:
Federal R&D Tax Credits: $213,867
South Carolina State R&D Tax Credits: $116,263
| FEDERAL | SOUTH CAROLINA | ||
Year | Total QREs | Credit | Total QREs | Credit |
2024 | $1,357,500 | $125,906 | $1,357,500 | $61,250 |
2023 | 1,100,250 | 87,961 | 1,100,250 | 55,013 |
Total | $2,457,750 | $213,867 | $2,457,750 | $116,263 |
Federal R&D Tax Credit Summary
Year | Total QREs | Credit |
2024 | $1,357,500 | $125,906 |
2023 | $1,100,250 | $87,961 |
Total | $2,457,750 | $213,867 |
South Carolina R&D Tax Credit Summary
Year | South Carolina Credit |
2024 | $61,250 |
2023 | $55,013 |
Total | $116,263 |
Criteria for Qualifying Research Activities
The four-part test below defines what counts as qualified research activities
Purpose of the Research
The activity should develop or improve a business component, such as a product, process, software, formula, technique, or invention, by enhancing functionality, performance, reliability, or quality.
Resolving Uncertainty
The work must address technical uncertainties, such as determining the optimal design, method, or approach to achieve the desired outcome. The results should not be known in advance.
Systematic Experimentation
Eligible research must follow a structured experimentation process, including trial and error, modeling, simulation, or testing alternatives to reach the intended improvement.
Technological Basis
The activity must rely on hard sciences such as engineering, physical or biological sciences, or computer science. Artistic, social science, or routine data collection work does not qualify.
Why the R&D Tax Credit Matters ?
Since 1981, the R&D Tax Credit has helped businesses save billions in federal and state taxes. The credit enables companies to hire more staff, expand R&D, invest in facilities, and drive innovation. Thousands of businesses across multiple industries take advantage of this benefit each year.