The South Carolina 529 Plan Deduction for SC Residents

Rules for Claiming the Unlimited Income Tax Deduction for Funding a SC 529 Plan

Overview of the SC 529 Plan Tax Deduction:

South Carolina residents who contribute to a South Carolina 529 Plan receive an "unlimited" state income tax deduction. This means that a South Carolina taxpayer can deduct any amount they contribute to a SC 529 plan, as long as they have income to deduct.

An additional feature of the South Carolina 529 Plan not found in most other plans, is its April 15th contribution deadline for the previous year. Most states' plans require contributions to be made by December 31st to qualify for the deduction.

Value of the SC 529 Plan Tax Deduction:

South Carolina residents trying to decide whether to use a SC 529 plan versus another state's Section 529 plan need to account for the potential tax savings of contributing to their in-state plan. Considering that the top South Carolina income tax rate is 7.00%, each $1,000 contributed can save a taxpayer up to $70 at tax time.

South Carolina does not currently offer a tax deduction to residents contributing to out-of-state plans or other types of college savings accounts such as a Coverdell Education Savings Account (ESA) or UTMA Custodial Account.

Claiming the SC 529 Plan Tax Deduction:

Residents can claim the South Carolina 529 plan tax deduction on line 43 of their South Carolina SC1040 Form.

The South Carolina 529 Plan tax deduction is an "above the line" income adjustment, meaning residents can claim it even if they do not itemize their other deductions (opting for the standard deduction). There is no income phaseout on the SC 529 Plan tax deduction.

Reference and Documentation:

Additional information on the South Carolina 529 plan tax deduction can be found on the South Carolina Department of Revenue's website and the official South Carolina FutureScholar 529 Plan website.