South Carolina Pass-Through Entity Tax (PTET)
South Carolina's PTET regime is one of the 37+ state workarounds to the federal SALT cap (IRC §164(b)(6)). The election is annual, statute-pinned below, and interacts with composite filing and §199A QBI in state-specific ways.
- State DOR portal
- https://www.dor.sc.gov/income-tax-tax-rate-reduction-active-trade-or-business-income-pass-through-business
- Election deadline
- [PLACEHOLDER: state DOR cite] — pin election timing rules in SC1065/SC1120S instructions.
- Entity-level rate
- 3.00% — 3% flat rate on active trade or business income (per § 12-6-545; SC graduated individual rate runs 0%–6% for non-electing income).
- Eligible entities
- s-corp, partnership, llc-as-s, llc-as-partnership
- Owner credit
- non-refundable — [PLACEHOLDER: state DOR cite] — pin owner mechanic (exclusion vs credit) in SC1065/SC1120S 2025 instructions.
- Composite interaction
- stacks
- §199A QBI base reduction
- Yes — Reduces federal flow-through income (Notice 2020-75).
- Last verified
- 2026-05-11
Source: dor.sc.gov/income-tax-tax-rate-reduction-active-trade-or-business-income-pass-through-business + I-435 + I-335 + 2025 SC1065. SC's 3% rate is the LOWEST in the manifest — competitive intel.
Reference computation
For a South Carolina pass-through entity with $500,000 of qualified net income allocated to this state, at a 37% federal marginal bracket, the entity-level PTET and federal-deduction math is:
At a 37% federal bracket, the entity-level deduction saves $5,550 in federal tax. Net of §199A QBI offset (~20% × bracket × entity tax = $1,110), aggregate benefit is approximately $4,440.
Election walkthrough
- Verify eligibility. South Carolina accepts: s-corp, partnership, llc-as-s, llc-as-partnership. Active trade or business income only — excludes passive investment income and capital gains/losses.
- Check the deadline. [PLACEHOLDER: state DOR cite] — pin election timing rules in SC1065/SC1120S instructions. Beginning tax year 2021, qualified PTE may elect entity-level 3% tax on active trade or business income.
- Compute the entity-level tax. Apply the 3.00% rate to qualified net income.
- Pay and file. Use Form I-435 (Active Trade or Business Income for Electing PTE); reported on SC1065 (partnership) or SC1120S (S corp); I-335 for individual reporting. Quarterly estimates may be required.
- Owners claim the state credit. non-refundable credit on the personal state return.
- Verify composite interaction. Composite interaction: stacks. See composite vs PTET.
- Run the federal §199A QBI math. PTET reduces the QBI base proportionally; net the federal SALT-arbitrage against the §199A offset.
South Carolina PTET — common questions
State PTET law revises annually. South Carolina's data was last verified on 2026-05-11. Re-confirm with the state DOR primary source before electing or filing. Last full-site review: 2026-05-12.