Is the 2008 federal economic stimulus rebate taxable in South Carolina, and does receiving it require a South Carolina return (per SC IL #08-7)?

Plain-English summary

The 2008 federal economic stimulus rebate is not subject to South Carolina income tax, and filing a federal return just to receive it does not, by itself, require you to file a South Carolina return. This Information Letter addresses the one-time federal rebate the IRS began paying in May 2008.

To get the rebate, an eligible taxpayer had to file a 2007 federal income tax return — even people who were not otherwise required to file. The Department explains the South Carolina consequence: a person who files a federal return solely to obtain the rebate, and who is not otherwise required to file, does not need to file a 2007 South Carolina income tax return. Examples include lower-income taxpayers who fall under the federal standard deduction and exemptions, individuals with Social Security income and little other income, and certain military personnel with nontaxable combat pay.

The rebate itself is not taxable: the IRS treats it as not subject to federal income tax, and it is likewise not subject to South Carolina income tax.

A footnote addresses seniors: individuals age 65 and older may not be required to file a South Carolina return even if they file a federal one. In applying South Carolina's filing test, those 65+ who are married filing jointly get an additional $30,000 deduction, and those using any other status (single, married filing separately, or head of household) get an additional $15,000 deduction. Anyone entitled to a South Carolina refund, however, must file a return to obtain it.

What this means for you

If you received the 2008 federal stimulus rebate, you do not owe South Carolina income tax on it. If you only filed a 2007 federal return to claim the rebate and had no South Carolina filing obligation otherwise, you were not required to file a 2007 South Carolina return — but if South Carolina owes you a refund, you must file to get it.

Common questions

Q: Is the federal stimulus rebate taxed by South Carolina?
A: No. It is not subject to South Carolina income tax (and the IRS treats it as not subject to federal income tax).

Q: Do I have to file a South Carolina return just because I filed a federal return to get the rebate?
A: No — not if you were not otherwise required to file a South Carolina return. But you must file if you are owed a South Carolina refund.

Q: What about taxpayers age 65 and older?
A: They may not be required to file a South Carolina return even if they file federally; an added $30,000 (married filing jointly) or $15,000 (other statuses) deduction applies to the South Carolina filing test.

Subject

Federal Economic Stimulus Payment

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/IL08-7.pdf

Original ruling text

State of South Carolina

Department of Revenue
301 Gervais Street, P. O. Box 12265, Columbia, South Carolina 29211
Website Address: http://www.sctax.org

SC INFORMATION LETTER #08-7

SUBJECT:

Federal Economic Stimulus Payment
(Individual Income Tax)

DATE:

April 14, 2008

AUTHORITY:

S. C. Code Ann. Section 12-4-320 (2000 and Supp. 2007)
S.C. Code Ann. Section 1-23-10(4) (2005)
SC Revenue Procedure #05-2

SCOPE:

An Information Letter is a written statement issued to the public to
announce general information useful in complying with the laws
administered by the Department. An Information Letter has no precedential
value.

The Internal Revenue Service will begin sending qualifying taxpayers rebate payments in early
May. To receive the payment, eligible taxpayers must file a 2007 federal income tax return.
Even taxpayers who are not otherwise required to file a federal return must file a federal return to
get the rebate. Generally resident taxpayers who are under the age of 65 and file a federal
income tax return are also required to file a South Carolina income tax return. a Those taxpayers
who are not otherwise required to file a federal income tax return but who file a federal return
solely to get the rebate do not need to file a 2007 South Carolina income tax return.
Examples of individuals who may be filing a federal return only to receive the rebate are low
income taxpayers who because of the federal standard deduction and federal exemptions are not
required to file a federal return, individuals with social security income who do not have
sufficient other income to require filing a federal return, and certain military personnel with
nontaxable combat pay who do not have other income that would require the filing of a federal
return.
According to the IRS website, the rebates are not subject to federal income tax. The rebates will
also not be subject to South Carolina income tax.
a

Individuals age 65 and older may not be required to file a South Carolina return even if they file a
federal return. In determining whether they are required to file a South Carolina return, individuals age
65 and older who are “married filing jointly” are allowed an additional $30,000 deduction and individuals
age 65 and older who file under any other filing status (single, married filing separately, or head of
household) are allowed an additional $15,000 deduction. Refer to the General Instruction for the South
Carolina 2007 Individual Income Tax Return for information on South Carolina filing requirements for
individuals age 65 and older. Any individual who is entitled to a refund of income taxes from South
Carolina must file a South Carolina return to obtain that refund.

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