The South Carolina R&D tax credit, explained
Yes, South Carolina offers a 5% research expenses credit, capped each year at half of remaining tax liability.
Last verified July 2026 against South Carolina Department of Revenue guidance.
The short answer
Does South Carolina have an R&D tax credit? Yes. The Research Expenses Credit equals 5% of a company's qualified research expenses performed in South Carolina, using the same definition of qualified research as the federal credit.
How the South Carolina credit works
Unlike many states, South Carolina does not subtract a base amount first. The 5% applies to total in-state qualified research expenses for the year. The credit is nonrefundable, and in any single year it can only offset up to 50% of the tax liability remaining after other credits are applied.
To claim it, a company must be eligible for, or actually claiming, the federal research credit under Section 41. It applies against South Carolina corporate income tax, corporate license fees, or individual income tax for pass-through owners.
How it stacks with the federal credit
South Carolina's flat 5% credit stacks directly with the federal credit, which is worth roughly 6% to 10% of qualified spend. Startups under $5 million in revenue can also apply up to $500,000 of the federal credit against payroll taxes each year.
Example: a Charleston logistics software startup with 20 employees and $2.1 million in qualified research expenses would earn a South Carolina credit of about $105,000 (5% of $2.1 million), subject to the 50%-of-liability cap each year. At a 7% effective federal rate on the same spend, the federal credit would add roughly $147,000, much of which the company could apply to payroll taxes if it qualifies as a startup.
Because the state credit is capped at half of remaining liability each year, a fast-growing company might not use all of it right away. The unused balance carries forward for up to 10 years, so it is not lost, just deferred until the company owes more South Carolina tax.
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Eligibility and how to claim it
Any company performing qualified research in South Carolina and claiming the federal Section 41 credit can generally claim the state credit too. It is available to corporations and pass-through entities alike.
The credit is claimed on Schedule TC-18, filed with the South Carolina income tax return. The South Carolina Department of Revenue administers it under South Carolina Code Section 12-6-3415.
Claimship prepares the federal research study and Form 6765 package that documents the qualified expenses. The company's CPA files both the federal and South Carolina returns based on that documentation.
Official source: South Carolina Department of Revenue.
Carryforward and deadlines
Unused credit carries forward for up to 10 years from the year it was earned. Each year, the amount usable is capped at 50% of remaining tax liability after other credits.
The credit is claimed with the company's regular annual South Carolina tax filing. There is no separate application deadline or pre-approval step required before claiming it.