Tax season is a month longer this year and filers have several new credits and tax rules to keep in mind when filling out those 1040 forms. So if you haven’t filed your state and federal tax returns, here some tips for getting the most out of your returns:
There’s a new deadline
Because of the ongoing COVID-19 pandemic, the Internal Revenue Service and S.C. Department of Revenue have extended the deadline to file 2020 income tax returns to May 17, a month after the traditional April 15 deadline.
This is the second year in a row the IRS and SCDOR have extended tax season because of the pandemic. Last year, filers had an additional three months to file.
Don’t forget to deduct charitable giving
If you made a charitable contribution, but still take the standard deduction on your federal return, you may still take up to an additional $300 deduction off your taxable income on your federal return, a temporary change made under the federal CARES Act. That change also is available for 2021 federal tax filings, and deduction limit increases to $600 for couples.
Sorry, state filers. That additional charitable deduction is not available on your state return. South Carolina has not conformed to that change in the state’s tax code and requires residents to add the amount of the charitable deduction back to their taxable income on their state returns.
For those who received those economic stimulus payments, there’s more good news: South Carolina isn’t taxing that money. And if you haven’t received either of the first two payments, the $1,200 or $600 check meant to help people during the COVID-19 pandemic, you can claim the Recovery Rebate Credit for the money on your federal return.
You can get your gas tax back
Hopefully you kept your receipts from pumping gas and maintaining your vehicle last year. For 2020 tax returns, the refundable Motor Fuel Income Tax Credit increased to 7 cents per gallon, up from 5 cents. South Carolina lets you claim a tax credit based off whichever is less: your vehicle maintenance cost, such as oil changes or new tires, or the per gallon motor user fee you paid throughout the year.
The tax credit went into place in 2017 when the Legislature began increasing the motor fuel tax 2 cents a year until 2022 in order to pay for road maintenance projects.
Earned income tax credit
If you take the earned income tax credit, South Carolina is allowing you take up to 62.5% of the federal credit on your state return. However, you must be a full-year South Carolina resident to take the credit. Also keep in mind that credit increases in South Carolina through 2023.
Married and filing jointly?
The state’s maximum allowable two-wage earner credit is $280 for this year’s filing, up from $257 in the 2019 returns. This credit is available to people who are married and file a joint return. Both spouses must have earned income taxed in the state. Last year, more than 386,000 returns claimed this credit.
More money for dependents
For those who claim dependents, the state’s exemption for each dependent increased to $4,260, up from $4,190 in 2019.
Did you claim unemployment?
Good news could be on the way. If you received unemployment benefits in 2020 and have less than $150,000 in adjusted gross income, the first $10,200 of unemployment payments is not being taxed by the federal government. That change was made as part of the American Rescue Plan signed into law last month by President Joe Biden.
The South Carolina House this week passed legislation for the state to conform with this federal provision for the state’s 2020 tax fixings. That legislation now moves to the Senate. SCDOR said if the change is signed into law, the agency would make the change retroactive. How that would work depends on whether the Legislature acts before May 17.
“If we don’t conform, you would be taxed on those benefits at the state level,” said House Majority Leader Gary Simrill, R-York. “It would be insult to injury if we taxed you on unemployment income.”
For medical professionals who teach
Doctors, advanced practice registered nurses or physician assistants who serve as teachers during clinical rotations required by medical schools, physician assistant programs or advanced practice nursing programs can now claim a tax credit. The nonrefundable tax credit is slated to be available for the 2020 through 2025 tax years.
Want to help preserve history?
If you want to help purchase and preserve items with significant historical value, you can now contribute money to the S.C. Department of Archives and History through your state tax return. What do you get in return from the state? A good feeling.