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S.C. tax question

Level 2

Are there any folks familiar with South Carolina rules that might know the answer to this question:

I have a taxpayer who does not itemize but has an estate tax deduction (Section 691(c)) input on his federal  Schedule A.  Regardless of the fact that the taxpayer doesn't itemize, Lacerte still puts an addition to income on South Carolina (Form SC1040), Line 1e (page 2 of 3) equal to this amount.  I can do one of two things to 'fix':  (1) not report the 691(c) adjustment on the federal Schedule A, or (2) report an "other subtraction" on line 3v (same page...2 of 3) to back it out.  I'm not sure why I have to jump through the hoop, but I will if I have to. 

After reviewing the instructions for Form SC1040, Line 1e, I don't see this item on the list as a necessary addback, and I'm honestly not sure what the S.C. law says about this, but it shouldn't matter.  If I didn't get a benefit on my federal tax return (since I didn't itemize) which carries to South Carolina tax return (since S.C. starts at federal taxable income), then it shouldn't be added back.  Make sense?

I called and asked about this last year and didn't get a satisfactory answer.  I just removed it from the Schedule A.

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2 Replies 2
Level 15

I think your solution from last year is the proper choice. The deduction is one of the few Sch A miscellaneous deductions, but f standard deduction on Federal, why waste the pixels (and the SC hassle.)

I know California and many standard deduction federal returns, can itemize on CA. Maybe the same is true on SC. Does removing it change the SC standard or itemized deductions? For CA it would be a plus and a minus which would net to zero.



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Level 2

Well.....one reason is I don't have to answer a client question the following year why there is no number in the 2019 (prior year) column (some clients notice such things!) in the Tax Organizer.  I have to explain to him that my tax software doesn't calculate the number right, I had to remove it from the return for it to calculate correctly, and I'd rather not have to do that (and keep the deduction in the return).

SC doesn't have a standard deduction or itemized deduction line, as the form starts at federal taxable income (which is after the standard/itemized deduction).  That is what I was trying to explain in the message.  So, for example, if I have the deduction on the Schedule A, my starting point (federal taxable income) is $220,000.  If I remove it, my starting point is the same exact number.  I shouldn't have to add it back to begin with, since I'm not getting a federal benefit to begin with.

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