Tax Credits for Fortification Measures

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FAQs: Tax Credits for Fortification Measures

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What tax credits are available for fortification measures?

There are two income tax credits available for individuals that complete fortification measures or retrofits on their homes.

The first income tax credit is for costs to retrofit a taxpayer’s legal residence to make it more resistant to loss due to a hurricane, a castastrophic windstorm event, or rising floodwaters. The residence must be the taxpayer's legal residence for property tax purposes. The fortification measures or retrofits must increase the structural resistance to hurricane, catastrophic windstorm event or rising floodwater damage. The fortification measures or retrofits must qualify under and be completed in accordance with Department of Insurance Regulation 69-75. Applicable costs do not include ordinary repair or replacement of existing items. The allowed credit amount for any taxable year must not exceed the lesser of (1) 25% of the cost incurred; or (2) $1,000. This credit is found in S.C. Code Section 12-6-3660.

The second income tax credit is for state sales or use taxes paid on purchases of tangible personal property used to retrofit the individual's legal residence. This credit is 6% of the purchase price of tangible personal property for which the individual may claim the income tax credit in S.C. Code Section 12-6-3660. The maximum credit allowed is $1,500. This credit is found in S.C. Code Section 12-6-3665.
Can the tax credits be claimed for new construction?

No, the credits are only available for retrofits made to an existing residential structure that would make the existing structure more resistant to loss due to hurricane, rising floodwater, or other catastrophic windstorm event and meet the criteria provided in Regulation 69-75. (See Question 3 for more information on Regulation 69-75.)
Is there a list of items or projects that are approved and qualify for the tax credit?

There is not a list of projects or items that are approved and qualify for the tax credit.

Department of Insurance Regulation 69-75 provides that the standards which must be met by an individual taxpayer to qualify for state income tax credits for costs to fortify their legal residence pursuant to S.C. Code Section 12-6-3660 or sales and use tax credits pursuant to S.C. Code Section 12-6-3665 are the same as those required under the SC Safe Home Program. The standards are contained in the South Carolina Safe Home Resource Document for Mitigation Techniques dated July 2008, developed for the SC Safe Home Program by the Federal Alliance for Safe Homes and available at www.scsafehome.com. This document is also available on the Department of Insurance website by clicking by visiting www.doi.sc.gov/consumer/coastal.htm.

Fortification measures must be accomplished in accordance with the standards contained in the South Carolina Safe Home Resource Document for Mitigation Techniques. All products must have an ICC Evaluation Services Legacy Report or other appropriate test reports acceptable to the local building officials for the intended use.
What documentation is needed to claim the tax credits?

The acceptable forms of evidence include:
(1) A written certification or a report (with certification) from a licensed professional with expertise in construction techniques, building design, or property inspection or appraisal including, but not limited to an: architect; appraiser; building inspector; or contractor stating that the fortification measure has been implemented in accordance with applicable standards. Copies of the applicable receipts must accompany the certification or report; or

(2) An Affidavit from the individual taxpayer certifying that the fortification measures have been implemented. Copies of the applicable receipts must accompany the affidavit.
How does a homeowner claim the tax credits?

Both credits can be claimed on the homeowner’s individual income tax return using a SC Sch. TC-43.
Where can I get the form to claim the tax credits?

This form is available on the Department of Revenue website at www.sctax.org or by calling the Department of Revenue forms request line at 1-800-768-3676.
I completed my fortification project in 2007 and have already filed my taxes. Can I claim the tax credit? If so, how?

A taxpayer may amend his 2007 tax return to claim the credits for qualifying expenditures. File SC1040X and SC Sch. TC-43 to claim the credits. The credits should be claimed on Line 9 of the SC1040X. In order to receive a refund, this amended return must be filed within 3 years of the original filing date or 3 years from the date of filing if a proper extension was filed and a return was filed by the extended due date. For individuals who filed their 2007 returns by April 15, 2008, the amended return must be filed by April 15, 2011.
I completed my fortification project in 2008 and have already filed my taxes. Can I claim the tax credit? If so, how?

A taxpayer can amend his 2008 tax return to claim the credits for qualifying expenditures. File SC1040X and SC Sch. TC-43 to claim the credits. The credits should be claimed on Line 9 of the SC1040X. In order to receive a refund, this amended return must be filed within 3 years of the original filing date or 3 years from the date of filing if a proper extension was filed and a return was filed by the extended due date. For individuals who filed their 2008 returns by April 15, 2009, the amended return must be filed by April 15, 2012.
I plan to complete several approved fortification projects in the next few years. Will I be able to apply for the tax credit each year for the fortification measures I have made during that year?

Yes, the credit may be claimed in each year that fortification measures are completed.
Do SC Safe Home grant projects automatically qualify as approved fortification projects for purposes of being eligible for the tax credit?

Yes, as long as the fortification measures are accomplished in accordance with the standards that are contained in the South Carolina Safe Home Resource Document for Mitigation Techniques.
Can projects that are not part of the SC Safe Home grant program qualify for the credits?

Yes, a homeowner does not have to be a recipient of a SC Safe Home grant to qualify for the income tax credits. The projects and costs must, however, meet the requirements of Department of Insurance Regulation 69-75.
If a homeowner received a SC Safe Home grant and the grant is not required to be included in income on the homeowner’s individual income tax return, can the homeowner claim the tax credits for the grant money spent on the fortification project?

No, the credits cannot be claimed if the only money spent on the fortification project was grant money that was not included in income on the homeowner’s individual income tax return. (See S.C. Code Sections 12-6-3660 and 12-6-3665).

Note: Whether or not the grant money is included in taxable income for income tax purposes is a federal income tax question which cannot be answered by the Department of Revenue or the Department of Insurance.
If a homeowner has received a SC Safe Home grant that is required to be included in the income of the taxpayer for income tax purposes, can the homeowner claim the tax credits for both the grant money and personal money spent on the fortification project?

Yes, if the homeowner received a grant that was included in the income of the homeowner for income tax purposes, the homeowner can claim the tax credit for both the grant money and personal money spent on the fortification project.

Note: Whether or not the grant money is included in taxable income for income tax purposes is a federal income tax question which cannot be answered by the Department of Revenue or the Department of Insurance.
If a homeowner received a matching SC Safe Home grant requiring that the homeowner pay a certain amount of the costs of the fortification measures in order to receive the matching grant, does the amount paid by the homeowner qualify for the credits?

Yes, amounts paid by the homeowner in connection with a matching grant qualify for the credits.

EXAMPLE: The homeowner receives a matching SC Safe Home grant of $3,000 and pays the matching funds of $3,000. The $3,000 paid by the homeowner for qualifying fortification measures can be used to calculate the credits. The amount of credit for the fortification measures under S.C. Code Section 12-6-3660 would be $3,000 X 25% = $750.

The grant funds cannot be used to claim the credit unless the homeowner is required to include those funds in income on the homeowner’s individual income tax return. If the grant funds were included in the homeowner’s income for income tax purposes, the taxpayer could claim a credit under S.C. Code Section 12-6-3660 for $1,000 ($6,000 X 25% = $1,500 – limited to a maximum credit of $1,000).
If the homeowner pays the matching funds to the contractor that performs the work pursuant to the terms of the grant, can the taxpayer claim that the matching funds were used to purchase the tangible personal property in order to increase the amount of the income tax credit for state sales and use taxes paid?

No, if the matching funds are paid to the contractor for the project, the costs of the tangible personal property purchased for the project must be prorated between the grant funds and the money paid by the taxpayer.

EXAMPLE: A homeowner receives a $5,000 grant which is paid directly to the contractor and the homeowner pays matching funds of $5,000 to the contractor. The project costs consist of tangible personal property purchases (for example, qualifying windows and doors) of $6,000 and labor costs of $4,000. The homeowner’s portion of the $6,000 of tangible personal property is $3,000 ($6,000 X 50%). The homeowner’s credit for the sales tax paid would be $180 ($3,000 X 6%).

The homeowner should request information in writing from the contractor about the cost of tangible personal property used in the project in order to calculate the credit. This information should be kept in the event the homeowner is audited by the Department of Revenue.

NOTE: This question assumes that the grant funds are not included in the income of the homeowner for income tax purposes.
If the homeowner pays the contractor the matching funds plus an additional amount to perform the work, can the taxpayer claim that all of the additional funds were used to purchase tangible personal property in order to increase the amount of the income tax credit for sales and use taxes paid?

No, if the additional funds are given to the contractor for the project, the costs of the tangible personal property purchased for the project must be prorated between the grant funds and the money paid by the taxpayer.

EXAMPLE: A homeowner receives a $5,000 grant which is paid directly to the contractor and the homeowner pays matching funds of $5,000 to the contractor. The taxpayer also pays the contractor an additional $5,000 to complete the project. The project costs consist of tangible personal property purchases (for example, qualifying windows and doors) of $10,000 and labor costs of $5,000. The homeowner’s portion of the $10,000 of tangible personal property is $10,000 [tangible personal property] X $10,000 [costs paid by taxpayer] / $15,000 [total costs] = $6,667 [homeowner’s portion of tangible personal property]. The homeowner’s credit for the sales tax paid would be $400 ($6,667 X 6%).

The homeowner should request information in writing from the contractor about the cost of tangible personal property used in the project in order to calculate the credit. This information should be kept in the event the taxpayer is audited by the Department of Revenue.

NOTE: This question assumes that the grant funds are not included in the income of the homeowner for income tax purposes.
If in addition to the grant and matching funds provided by a homeowner, the homeowner directly purchases qualifying tangible personal property to be used by the contractor in completing the project, can the taxpayer claim all of the direct purchases for the income tax credit for state sales and use tax?

Yes, if the homeowner directly purchases qualifying tangible personal property that is used by the contractor to complete a qualifying fortification project, the taxpayer can claim all of these direct purchases when calculating the income tax credit for state sales and use tax.

EXAMPLE: A homeowner receives a $5,000 grant which is paid directly to the contractor and the homeowner pays matching funds of $5,000 to the contractor. The taxpayer also purchases $4,000 of windows and doors that qualify for the credits. The project costs for the grants and matching funds paid to the contractor consist of tangible personal property purchases (for example, qualifying windows and doors) of $4,000 and labor costs of $6,000. The homeowner’s portion of the $4,000 of tangible personal property purchased by the contractor is $2,000 ($4,000 X $5,000 [costs paid by taxpayer] / 10,000 [total costs]). The homeowner’s total tangible personal property is $2,000 + $4,000 [for doors and window purchased directly by the homeowner] = $6,000. The homeowner’s credit for the sales tax paid would be $6,000 X 6% = $360.

NOTE: This question assumes that the grant funds are not included in the income of the homeowner for income tax purposes.
My question was not answered in the above. Who should I contact for assistance?

Questions about what items or procedures qualify for the credits should be directed to the SC Safe Home Program at scsafehome@doi.sc.gov or ny visting the following link /consumers/coastal/htm.

Questions about how to claim the tax credit should be directed to the Department of Revenue by calling 803-898-5709 or by emailing them directly at TaxCredit@sctax.org or by visiting the following link www.sctax.org.

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