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Income tax credits for South Carolina residents attending in-state colleges, universities and technical colleges sharply increased this month.
The change should particularly benefit technical college students or tuition-paying parents, because the tax credit for two-year schools has more than quadrupled.
The S.C. Tuition Tax Credit has some very particular rules, but it's not income-based, there's no grade-point-average requirement, and it's a refundable tax credit — so even those who owe little or no state income tax can benefit. The credit will save thousands of South Carolina taxpayers up to $1,500 when they file 2018 state returns next year.
The value of that tax credit went up substantially July 1, to the current $1,500, as a provision of the 2017 law that raised South Carolina's tax on gasoline, increased taxes and fees for auto purchases and registration, and imposed a tax penalty for owners of electric and hybrid vehicles.
In this case of the government taking with one hand and giving with the other, the beneficiaries are South Carolina residents paying full-time in-state tuition at two-year and four-year higher education institutions.
Students at two-year colleges and universities just saw the maximum tax credit soar from $350 to $1,500. Those at four-year schools get an increase from $850 to $1,500.
The tax credit is based upon 50 percent of tuition and fees paid, after accounting for any scholarship funds. There are lots of rules for this tax credit, which will disqualify many students. There's a whole page-long flow-chart attached to the tax form that helps determine who qualifies, but here are some key points, based upon Department of Revenue guidance:
To be eligible a student must:
- Within 12 months before enrolling, have graduated from a South Carolina high school or home school program, or a prep school outside of South Carolina while being a dependent of a legal resident of South Carolina.
- Be admitted, enrolled, and classified as a degree-seeking undergraduate or be enrolled in a certificate or diploma program of at least one year and be in good standing at the institution.
- Be eligible for in-state tuition.
- Have completed at least 30 credit hours at the end of the taxable year for which the credit is claimed, or its equivalent as determined by the S.C. Commission on Higher Education. Note: A first-semester student this fall who completes 15 credit hours would also qualify.
But a student, or tuition-paying parent, can't get the tax credit if the student:
- Obtained a GED.
- Received a Palmetto Fellows scholarship or Legislative Incentives for Future Excellence, or LIFE, scholarship during the tax year.
- Is in default of a federal Title IV or South Carolina educational loan or owes a refund on a South Carolina student financial aid program.
- Has been adjudicated delinquent or been convicted or pleaded guilty or nolo contendere to any felonies, or any alcohol or drug related offenses. Note: misdemeanor alcohol and drug offenses only disqualify the student for the tax year in which they were adjudicated.
The tax credit can be claimed for four consecutive years of tuition, which works out to five tax years for a student starting in the fall.
The higher percentage — 50 percent of tuition instead of 25 — and the higher maximum tax credit should help students and families in a state where college costs are ranked the highest in the Southeast.