Running a small business in South Carolina comes with many challenges, but understanding the tax benefits available can help you save money and invest in growth. Whether you’re a startup or an established company, taking advantage of deductions, credits, and incentives can significantly impact your bottom line.
At Peavy and Associates, we specialize in helping small businesses navigate the complex tax landscape to maximize savings. Here’s a guide to key tax benefits available for South Carolina small businesses in 2025.
1. South Carolina Small Business Tax Rate
South Carolina offers a favorable tax environment for small businesses. The state’s corporate income tax rate is a flat 5%, while pass-through entities (LLCs, S-corps, and partnerships) are taxed at the individual income tax rate, which has been reduced to 6.2% in 2025 as part of ongoing tax reform efforts.

How to Benefit:

  • Structure your business appropriately to take advantage of lower tax rates.
  • Work with a CPA to determine whether electing S-corp status could reduce your tax liability.

2. Qualified Business Income (QBI) Deduction
Small businesses structured as sole proprietorships, S-corps, partnerships, or LLCs may be eligible for the 20% Qualified Business Income (QBI) deduction under federal tax law. This deduction allows you to reduce taxable income, resulting in significant savings.

How to Benefit:

  • Ensure your business qualifies by meeting income and operational requirements.
  • Consult with a tax professional to maximize your deduction before filing.

3. South Carolina Jobs Tax Credit
To encourage job creation, South Carolina offers tax credits for businesses that create new jobs. The credit amount varies depending on location and industry, with higher incentives available in rural and economically distressed areas.

How to Benefit:

  • If you’re expanding your workforce, check if your county qualifies for enhanced credits.
  • The credit can be carried forward for up to 15 years, so plan strategically for long-term tax savings.

4. Research and Development (R&D) Tax Credit

Businesses investing in research and innovation can claim the South Carolina R&D tax credit, which is equal to 5% of qualified R&D expenses. This credit can offset up to 50% of your business’s state tax liability.

How to Benefit:

  • If your business develops new products, software, or processes, you may qualify.
  • Keep detailed records of expenses related to research, employee wages, and materials.

5. South Carolina Manufacturer’s Tax Exemptions
If your small business is in manufacturing, processing, or production, you may qualify for sales tax exemptions on machinery, raw materials, and industrial equipment.

How to Benefit:

  • Review the South Carolina sales tax exemption list to see if your purchases qualify.
  • Consider reinvesting tax savings into equipment upgrades or business expansion.

6. Section 179 Deduction for Equipment Purchases

  • The Section 179 deduction allows businesses to deduct the full cost of qualifying equipment and technology purchases upfront instead of depreciating them over time. In 2025, the deduction limit is $1.16 million.

How to Benefit:

  • If you’re purchasing new business equipment, claim the deduction in the same year to reduce taxable income.
  • Qualifying items include office furniture, machinery, and vehicles used for business purposes.

7. Work Opportunity Tax Credit (WOTC)

If you hire employees from certain target groups (such as veterans, ex-felons, or individuals receiving government assistance), your business may qualify for the Work Opportunity Tax Credit (WOTC), which provides up to $9,600 per eligible employee in tax credits.

How to Benefit:

  • Check eligibility before hiring to take advantage of the credit.
  • Submit Form 8850 to the South Carolina Department of Employment and Workforce within 28 days of hiring a qualifying employee

8. Home Office Deduction

If you operate your business from home, you can claim a home office deduction for expenses such as rent, utilities, and maintenance. The IRS allows two methods: the simplified option (up to $1,500) or the actual expense method (based on square footage used for business).

How to Benefit:

  • Ensure your home office is used exclusively for business to qualify.
  • Keep records of expenses related to maintaining your workspace.

9. Health Insurance Tax Credit

If you provide health insurance for your employees, you may qualify for the Small Business Health Care Tax Credit, covering up to 50% of premium costs. This applies to businesses with fewer than 25 full-time employees and an average wage of $50,000 or less.

How to Benefit:

  • Work with a CPA to determine if your business meets the requirements.
  • Consider offering health benefits as an incentive to attract and retain employees.

10. Energy Efficiency Incentives

South Carolina provides tax credits and rebates for businesses that invest in energy-efficient upgrades, such as solar panels, LED lighting, and energy-efficient HVAC systems.

How to Benefit:

  • Check for state and federal incentives before making upgrades.
  • The federal Investment Tax Credit (ITC) offers a 30% credit for solar energy installations.

Maximize Your Tax Savings with Peavy and Associates

Navigating South Carolina’s tax landscape can be complex, but taking advantage of these tax benefits can reduce your tax liability and increase profitability. At Peavy and Associates, our experienced CPAs can help you identify deductions, credits, and incentives tailored to your business.
Don’t leave money on the table—contact us today for expert tax planning and financial guidance!