State outline of South Carolina

South Carolina's R&D tax credit is one of the more straightforward state programs available. Rather than rewarding only the increase in research spending over a prior-year baseline, South Carolina offers a credit on all qualifying in-state research expenses, making it accessible for businesses at any stage, including those just beginning to invest in R&D.

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South Carolina R&D Tax Incentives at a Glance

South Carolina Research Expenses Credit:

  • 5% of all qualified research expenses incurred in South Carolina, with no incremental baseline calculation required
  • Available statewide with no geographic restrictions and no pre-approval required
  • Non-refundable; offsets South Carolina corporate income tax, corporate license fees, and individual income tax
  • Credit cannot exceed 50% of remaining tax liability after all other credits have been applied in a given year
  • Unused credit carries forward for up to ten years
  • Available to corporations, S corporations, partnerships, LLCs, and individuals conducting qualifying research in South Carolina
  • Requires that the business claim and be allowed the federal R&D credit for the same tax year
  • No scheduled expiration date under current South Carolina law

Federal Benefits:

  • Available for all qualifying U.S. research
  • Payroll tax offset option for eligible startups
  • Stackable with South Carolina's state credit on the same qualifying expenses

Key Distinctions:

South Carolina calculates its credit on the full amount of qualifying in-state research expenses, not just the increase over prior years. This is meaningfully different from most state programs, which use an incremental method. A business spending $1 million on qualifying South Carolina research earns a 5% credit on the full $1 million, regardless of what it spent in prior years. This makes the credit particularly valuable for businesses that are new to R&D, growing rapidly, or conducting research in South Carolina for the first time.

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Who Qualifies for South Carolina's R&D Tax Credit?

Business Type

The credit is available to corporations, S corporations, partnerships, LLCs, and individual filers conducting qualifying research in South Carolina. For pass-through entities, the credit flows to owners based on their proportionate share of income.

Research Activity

Qualifying research must be conducted within South Carolina. The state uses the federal definition of qualified research expenses, so if your work meets the federal four-part test, it will generally qualify for the South Carolina credit as well, provided the research was performed in the state. Out-of-state research does not count toward the state credit.

Federal Credit Requirement

South Carolina requires that the business claim and be allowed the federal R&D credit under IRC Section 41 for the same tax year. Confirming federal eligibility is not just good practice here -- it is a statutory requirement for accessing the state credit.

No Spending Increase Required

Unlike many state programs, South Carolina does not require your current-year research spending to exceed a prior-year baseline. The credit applies to qualifying South Carolina expenses regardless of how your spending compares to previous years, making it accessible to businesses at earlier stages of research investment.

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What Research Activities Qualify in South Carolina?

South Carolina uses the same federal standards to define qualifying research. Work that qualifies under the federal four-part test will generally qualify for the South Carolina credit as well, as long as the research was conducted in South Carolina.

For businesses with research activity in multiple states, tracking where work physically occurs is essential. Only expenses tied to South Carolina-based research count toward the state credit, and the geographic allocation of expenses should be documented carefully.

If you are not yet familiar with how the federal four-part test applies to your industry, our R&D tax credit overview covers what qualifies and how the analysis typically works.

What Expenses Qualify for South Carolina's R&D Tax Credit?

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Wages and Salaries

Employees directly conducting, supervising, or supporting qualifying research performed in South Carolina

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Supplies

Materials consumed during the research process in South Carolina

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Contract Research

A portion of amounts paid to third parties performing qualifying research in South Carolina

South Carolina uses the federal definition of qualified research expenses under IRC Section 41, limited to costs tied to research performed within the state. The same expenses that support the federal credit calculation generally support the state credit claim as well.

R&D Credits for South Carolina Industries

How Qualifying Research Looks Across South Carolina's Key Sectors

Aerospace and Defense

South Carolina is home to more than 500 aerospace and aviation companies, including Boeing's 787 Dreamliner assembly facility and the Lockheed Martin F-16 production line. Qualifying R&D includes aircraft structural components, flight control systems, propulsion technology, avionics development, and advanced materials testing for aerospace applications

Automotive Manufacturing

South Carolina's Upstate region hosts major automotive manufacturers and a dense supplier network. Qualifying R&D includes vehicle systems development, powertrain engineering, lightweight materials research, manufacturing process improvements, and automation systems developed through systematic testing

Advanced Manufacturing and Materials

Tire manufacturing, specialty chemicals, plastics, and industrial equipment represent significant R&D opportunities in South Carolina, including new compound development, process chemistry improvements, materials performance testing, and automation engineering

Life Sciences and Pharmaceuticals

Drug formulation, medical device engineering, biologics process development, and diagnostic tool development conducted through systematic experimentation at South Carolina research facilities

Information Technology and Software

New software platforms, cybersecurity tools, data systems, and enterprise applications developed through iterative technical development and testing across South Carolina's growing technology sector

Agriculture and Agribusiness

Crop improvement technologies, precision agriculture tools, new cultivation techniques, and food processing innovations developed through technical research, drawing on South Carolina's significant agricultural economy

Energy and Clean Technology

Energy storage systems, grid technology, renewable energy equipment, and clean manufacturing process innovations developed through engineering and experimentation

Florida Claim Previous Credits

Federal R&D Tax Credit for South Carolina Businesses

South Carolina's credit is built on the federal framework, using the same definition of qualifying research expenses and requiring that the federal credit be claimed for the same tax year. This close alignment means the documentation and analysis prepared for the federal claim directly supports the state claim, and the two can be pursued together as part of a coordinated filing process.

Because South Carolina's credit is based on the full volume of qualifying in-state expenses rather than the incremental increase, businesses that coordinate their federal and state claims carefully can capture a combined benefit that meaningfully reduces the net cost of research investment. A tax advisor can help you structure the documentation and filing approach to maximize both credits on the same pool of qualifying South Carolina expenses.

How to Claim South Carolina's R&D Tax Credit

Step 1:

Confirm Federal Credit Eligibility and Track Qualifying Activity

South Carolina requires the federal credit to be claimed and allowed for the same tax year. Before preparing the state credit, confirm that your activities and expenses qualify under the federal four-part test. Maintain contemporaneous records of qualifying projects, employee time, and expenses tied to South Carolina-based research throughout the year.

Step 2:

Calculate the Credit on Schedule TC-18

Calculate the state credit on Schedule TC-18, South Carolina's Research Expenses Credit form. The credit equals 5% of your total qualifying South Carolina research expenses for the year. The credit cannot exceed 50% of your remaining South Carolina tax liability after all other credits have been applied.

Step 3:

File with Your South Carolina Tax Return

Attach Schedule TC-18 to your South Carolina income tax return. If filing electronically and unable to attach the schedule, retain a copy in your tax records. Unused credit carries forward for up to ten years. No separate state agency pre-approval or certification is required.

What Records Should You Keep?

Project-Level Descriptions

Maintain descriptions of each qualifying research project, the technical questions being addressed, and the methods used to work through them. Documentation should clearly connect specific activities to South Carolina-based work.

Payroll and Time Records

Keep payroll records and time-tracking data for employees involved in qualifying research. For businesses with employees working across multiple states, records showing where research activity occurred are essential, since only South Carolina-based work qualifies for the state credit.

 

Expense Records

Retain receipts and invoices for supplies used during research, along with contracts and payment records for any third-party research conducted in South Carolina. South Carolina's statute of limitations is generally three years from the filing date, and records should be maintained accordingly. Given the ten-year carryforward period, keeping records longer than the minimum is advisable.

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Estimate Your R&D Tax Credit in Minutes

Find out how much your innovative work could earn back in tax credits. Use our quick calculator to estimate your potential savings — no forms, no hassle.

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Saving Money, Spurring Innovation

Every day, companies nationwide further the mission of innovation with new products, processes and initiatives that change the landscape of how we do business. But innovation takes funding, and with that comes a vicious cycle: You need money to grow your business and develop your products and services… but you also need to do those same things to bring money in.

That’s why R&D tax credits were established. Designed to encourage companies like yours to invest in the innovation, creation and improvement of products or processes, R&D tax credits can offset some of the costs associated with research and development — fueling growth and technological advancement.

Pitfalls South Carolina Businesses Should Avoid

Skipping the federal credit and losing the state credit as a result

South Carolina requires the federal R&D credit to be claimed and allowed for the same tax year. Businesses that overlook the federal credit entirely are also locked out of the state credit. Establishing both claims together in the same review is both more efficient and necessary.

Missing the ten-year carryforward window

Credits carry forward for ten years in South Carolina. Businesses that accumulate more credit than they can use against the annual 50% cap should actively track their carryforward balances and plan usage to avoid losing credits as the window closes on older vintages.

Assuming the volume structure means no documentation is needed

South Carolina's credit applies to the full amount of qualifying expenses rather than just the increase, but that does not reduce the documentation requirement. Every expense claimed still needs to be tied to qualifying research activity conducted in South Carolina, and the credit remains subject to audit.

Including out-of-state research expenses

Only research conducted in South Carolina qualifies. Businesses with employees or contractors working across state lines need to allocate expenses carefully. Work performed outside South Carolina does not count toward the state credit, even if it qualifies for the federal credit.

Can You Claim Credits for Previous Years in South Carolina?

South Carolina's statute of limitations generally allows amended returns for prior tax years within three years of the original filing date, meaning businesses that conducted qualifying research in past years without claiming the credit may still have an opportunity to recover it. A tax advisor can help determine which years are open and whether a lookback review makes sense.

The federal R&D credit is also available on amended returns for open tax years. For South Carolina businesses that have been conducting qualifying research without claiming either credit, a combined state and federal review can identify meaningful value. Because South Carolina's credit applies to the full volume of qualifying in-state expenses, even businesses without significant year-over-year spending growth may find substantial prior-year credits available.

WA state R&D lookback window

Watch our latest videos to learn more!

Confused about whether you qualify or how the credits work? Our videos break it all down for you.

Claiming the R&D tax credit can provide significant tax savings, but proper documentation is key to ensuring compliance and maximizing your benefits. Without the right records, your claim could be denied or flagged for an IRS audit. In this video, we’ll cover best practices for R&D tax credit documentation, including: ✅ How to maintain detailed project records ✅ Tracking employee time on R&D activities ✅ Organizing financial records of qualifying expenses ✅ Documenting experiment results and decision-making A well-organized documentation system not only supports your R&D credit claim but also improves overall business operations. Don’t wait until tax season—stay prepared year-round! 💡 Need expert guidance? James Moore’s tax professionals can help ensure your records meet IRS standards and maximize your claim. Contact us today! 🔹 Subscribe for more tax-saving strategies! 🔹 Like & share this video to help others optimize their R&D tax credits! #RDTaxCredit #TaxSavings #ResearchAndDevelopment #RDDocumentation #TaxPlanning #IRSCompliance #SmallBusinessTax #StartupFunding #BusinessTaxes #CPAFirm #TaxCredits #BusinessGrowth #TaxTips #FinancialPlanning #IRSRecords #AuditPreparation #JamesMooreCPA #AccountingAdvice #MaximizeTaxCredits #RDFunding #IRS MORE R&D TAX CREDIT SERVICES TOPICS LIKE THIS ONE ************************************************************** 🏥 James Moore R&D Tax Credit Services: https://www.jmco.com/tax/r-and-d-tax-credit-services/ 👩‍⚕️ R&D Tax Credit Services Articles on JMCO.com: https://www.jmco.com/articles/research-and-development-tax-credits/ SOCIALIZE WITH US! *************************************************************** ⁠📹 YouTube: https://www.youtube.com/@JamesMooreAndCo 💼 LinkedIn: https://www.linkedin.com/company/james-moore-and-co 🖒 Facebook: https://www.facebook.com/JamesMooreAndCo 🐦 Twitter: https://twitter.com/JamesMooreAndCo
YouTube Video UExyQlhPa0JKMTM1a1NrRmVaQ1M2Z085a0FpTkpYRlBnNC4xMkVGQjNCMUM1N0RFNEUx
Unlock R&D tax credit savings and reduce your payroll tax liability! Did you know that eligible startups and small businesses can use the R&D tax credit to offset up to $500,000 in payroll taxes annually? If your business isn’t yet profitable, this can be a game-changer—helping you monetize tax credits sooner and improve cash flow. What qualifies? Activities like developing new or improving existing products, processes, or software may be eligible, along with associated costs such as wages, supplies, and contractor expenses. But the election must be made on originally filed tax returns, so timing is critical! At James Moore, we simplify the R&D tax credit process, ensuring you maximize benefits while staying compliant. Don't leave money on the table—reach out today to see how we can help you claim these valuable credits! #RDTaxCredit #PayrollTaxOffset #SmallBusinessTaxSavings #StartupTaxCredits #TaxIncentives #ResearchAndDevelopment #TaxPlanning #BusinessGrowth #StartupFunding #Innovation #TaxDeductions #IRS #AccountingTips #Entrepreneurship #TaxCredits #TaxStrategies #FinancialSuccess #TechStartup #Manufacturing #BusinessTaxPlanning #JamesMooreCPA MORE R&D TAX CREDIT SERVICES TOPICS LIKE THIS ONE ************************************************************** 🏥 James Moore R&D Tax Credit Services: https://www.jmco.com/tax/r-and-d-tax-credit-services/ 👩‍⚕️ R&D Tax Credit Services Articles on JMCO.com: https://www.jmco.com/articles/research-and-development-tax-credits/ SOCIALIZE WITH US! *************************************************************** ⁠📹 YouTube: https://www.youtube.com/@JamesMooreAndCo 💼 LinkedIn: https://www.linkedin.com/company/james-moore-and-co 🖒 Facebook: https://www.facebook.com/JamesMooreAndCo 🐦 Twitter: https://twitter.com/JamesMooreAndCo
YouTube Video UExyQlhPa0JKMTM1a1NrRmVaQ1M2Z085a0FpTkpYRlBnNC4wOTA3OTZBNzVEMTUzOTMy
Join R&D tax credit expert Lucia Valenzuela as she breaks down some of the biggest myths surrounding the R&D tax credit! Many believe it’s only for large corporations or tech giants, but in reality, businesses of all sizes and across various industries—like agriculture, manufacturing, and food & beverage—can qualify. Think you need a dedicated R&D department? Think again! Lucia explains why even smaller teams, including engineers and developers, often qualify for this valuable credit. And if you’re concerned about the complexity or IRS audits, she’s here to clear up the confusion and show you how, with the right guidance, claiming these credits can be straightforward. At James Moore, we make the R&D tax credit process simple, ensuring you maximize the benefits you’re entitled to. Don’t miss out on potential savings—let’s talk about how we can help! MORE R&D TAX CREDIT SERVICES TOPICS LIKE THIS ONE ************************************************************** 🏥 James Moore R&D Tax Credit Services: https://www.jmco.com/tax/r-and-d-tax-credit-services/ 👩‍⚕️ R&D Tax Credit Services Articles on JMCO.com: https://www.jmco.com/articles/research-and-development-tax-credits/ SOCIALIZE WITH US! *************************************************************** ⁠📹 YouTube: https://www.youtube.com/@JamesMooreAndCo 💼 LinkedIn: https://www.linkedin.com/company/james-moore-and-co 🖒 Facebook: https://www.facebook.com/JamesMooreAndCo 🐦 Twitter: https://twitter.com/JamesMooreAndCo
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Unlock significant tax savings for your business with the R&D Tax Credit! 💰 Many business owners aren’t aware they may qualify for this valuable federal incentive, which is designed to encourage innovation. Whether you’re developing new products, processes, or software, the R&D tax credit offers a dollar-for-dollar reduction on eligible expenses, such as wages, supplies, and certain contract research costs. But how do you know if your activities qualify? The IRS uses a four-part test: 1. Permitted Purpose – Your project should improve or create a product, process, or technique. 2. Elimination of Uncertainty – Your work must tackle technical uncertainties. 3. Process of Experimentation – Testing and trial methods should be part of your process. 4. Technological in Nature – The project must rely on scientific principles, like engineering. From software companies optimizing applications to startups experimenting with autonomous technology, the R&D credit can support your innovative efforts—even if these innovations are new only to your business! Curious if you qualify? Contact James Moore’s R&D tax specialists today to see how we can help you document your efforts and maximize your credit. MORE R&D TAX CREDIT SERVICES TOPICS LIKE THIS ONE ************************************************************** 🏥 James Moore R&D Tax Credit Services: https://www.jmco.com/tax/r-and-d-tax-credit-services/ 👩‍⚕️ R&D Tax Credit Services Articles on JMCO.com: https://www.jmco.com/articles/research-and-development-tax-credits/ SOCIALIZE WITH US! *************************************************************** ⁠📹 YouTube: https://www.youtube.com/@JamesMooreAndCo 💼 LinkedIn: https://www.linkedin.com/company/james-moore-and-co 🖒 Facebook: https://www.facebook.com/JamesMooreAndCo 🐦 Twitter: https://twitter.com/JamesMooreAndCo
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Licensed tax attorney and Chief Innovation Officer Lucia Valenzuela explains how your business can benefit from valuable R&D tax credits. These government incentives reward innovation, helping you reinvest in your company's growth through product development, process improvements and more. With years of experience and a proven track record, Lucia and the James Moore team are here to simplify the process and maximize your credits. Discover how you can unlock these benefits and fuel your company's future! MORE R&D TAX CREDIT SERVICES TOPICS LIKE THIS ONE ************************************************************** 🏥 James Moore R&D Tax Credit Services: https://www.jmco.com/tax/r-and-d-tax-credit-services/ 👩‍⚕️ R&D Tax Credit Services Articles on JMCO.com: https://www.jmco.com/articles/research-and-development-tax-credits/ SOCIALIZE WITH US! *************************************************************** ⁠📹 YouTube: https://www.youtube.com/@JamesMooreAndCo 💼 LinkedIn: https://www.linkedin.com/company/james-moore-and-co 🖒 Facebook: https://www.facebook.com/JamesMooreAndCo 🐦 Twitter: https://twitter.com/JamesMooreAndCo
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Ready to Maximize Your South Carolina R&D Tax Credits?

South Carolina's volume-based credit structure makes it one of the more accessible state programs available, rewarding all qualifying in-state research rather than just the year-over-year increase. Whether you are evaluating the credit for the first time, reviewing prior years for unclaimed credits, or building a coordinated state and federal strategy, our team can help you identify what is available and make sure your claims are well-supported.

Frequently Asked Questions

Does my business have to be in a specific part of Georgia to qualify?

All qualifying South Carolina research expenses. South Carolina uses a volume-based method, applying a 5% credit to the full amount of qualifying in-state expenses for the year. There is no baseline or prior-year comparison required, which makes the calculation simpler and the credit accessible to businesses regardless of their R&D spending history.

Does my business need to be in a specific part of South Carolina to qualify?
Do I need to claim the federal credit first?
Is the credit refundable?
Can I claim both the South Carolina credit and the federal R&D credit?
What if I have not claimed the credit in prior years?

Access the Latest South Carolina R&D Tax Credit Information and Filing Requirements

South Carolina Department of Revenue

Research Tax Credit Overview

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SC Schedule TC-18

Research Expenses Credit Form

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South Carolina Department of Commerce

Business Incentives

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IRS Form 6765

Federal R&D credit form and instructions

Download Form

IRC Section 41

Federal law defining qualified research activities

View Statute

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Lucia Valenzuela

Chief Innovation Officer (CInO)

Lucia is the driving force behind the adoption of new technologies and services at our firm. She stays up to date on advancements and works with firm leadership to develop and implement strategic plans that align with our goal of enhancing the client and employee experience.

Lucia brings to James Moore a decade of experience and forward-thinking leadership in technology, public accounting and tax law matters. A trusted advisor in the field of R&D tax credits, she has successfully guided thousands of companies through the complexities of filing for that credit. Her other notable achievements include the market launch of revolutionary tax software and building a large specialty tax practice at a top 50 accounting firm.

Lucia’s knowledge of technology, strategic partnerships, teambuilding, public accounting and tax law provides our firm with a new and unique perspective on client service and operations. Outside of James Moore, Lucia is active in local bar associations and their respective boards. She also volunteers with Project Youth, Step-Up and other organizations focused on mentoring and empowering underprivileged youth in their journeys toward college.

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Client Service Director

This information serves general educational purposes and does not constitute tax, legal, or accounting advice. South Carolina's R&D tax credit program, including credit rates, carryforward periods, eligibility requirements, and filing procedures, is subject to change by the South Carolina General Assembly and Department of Revenue. South Carolina's current conformity with federal R&D expense definitions may be affected by future state legislation following federal law changes effective for tax years beginning in 2025; businesses should confirm current conformity status with a qualified tax advisor. Federal R&D credit information reflects law as of February 2026. Consult qualified tax professionals before making decisions based on this information.

Last Updated: March 2026
Next Review: Quarterly or upon state or federal legislative or administrative changes