SC SCH TC 38: Solar Energy, Small Hydropower System, or Geothermal Machinery and Equipment Credit (Revision 2022-03)
South Carolina · South Carolina DOR · Used for tax years 2024, 2025, 2026
South Carolina Schedule TC-38 calculates the Income Tax credit for qualifying solar energy systems, small hydropower systems, or geothermal machinery and equipment. It reports purchase and installation costs, the current-year credit, and unused credit carried forward.
Who files this form
Use SC SCH.TC-38 to claim the credit if you are:
- An individual or corporate taxpayer who owns a qualifying solar energy or small hydropower system installed in or on a facility you own in South Carolina.
- An individual taxpayer who owns qualifying geothermal machinery and equipment for use at your residence.
Small hydropower systems must have been installed on or after July 1, 2009. Geothermal machinery and equipment must have been installed on or after January 1, 2016, and must meet or exceed applicable federal Energy Star requirements on the installation date.
You cannot claim the credit before installation is complete. You can also use the form to claim unused credits carried forward from earlier tax years.
What you'll need
Have the following information ready to complete the form:
- Your name and SSN or FEIN. Individual taxpayers must provide their Social Security Number.
- The address of the property where the system was installed and the type of system.
- Total qualifying purchase and installation costs, including costs not claimed in a previous year.
- Any unused credit carried forward from previous tax years.
- The number of facilities and your Income Tax liability from line 10 of SC1040 or line 9 of SC1120.
Keep all system, machinery, and equipment certifications with your tax records. A solar interconnection agreement between a utility and a taxpayer serves as certification that the system was reviewed by an appropriate entity. For a solar system not connected to the grid, complete the Certification for PV Systems form available at energy.sc.gov. For all other equipment, the manufacturer certifies that it meets applicable federal standards.
How to file
- Complete SC SCH.TC-38. If you are claiming the credit in a carryforward year, begin with line 3.
- Enter the current-year credit from line 10 on SC1040TC for individuals or SC1120TC for corporations.
- If filing a paper return, attach this form to your Income Tax return.
- If filing electronically, include the information from this form when you file your return.
Keep a copy of the form with your tax records.
Common mistakes
- Claiming too early: The credit is claimed in the year installation is complete, not before.
- Including excluded solar system costs: Land, structural elements such as walls and roofs, and other equipment ordinarily contained in the structure are not part of the qualifying system.
- Missing solar certification: A solar system must be certified for performance by the SRCC or a comparable entity endorsed by the State Energy Office. Keep certifications with your tax records.
- Exceeding the limits: The solar or small hydropower credit is limited to $3,500 per facility in a tax year. The geothermal credit can be claimed for only one facility and is limited to $3,500 in a tax year. The total credit claimed in a year cannot exceed 50% of your Income Tax liability.
- Overlooking filing reminders: Attach the form to a paper Income Tax return, or include its information when filing electronically.
Questions people ask
How much is the credit?
The credit is 25% of qualifying purchase and installation costs, subject to annual limits. Solar and small hydropower credits are limited to $3,500 per facility. The geothermal credit is limited to $3,500 for one facility. The credit claimed for the year also cannot exceed 50% of your Income Tax liability.
Can I carry forward unused credit?
Yes. Unused credit may be carried forward for up to 10 years. Enter the amount carried forward on line 3. If you are claiming the credit in a carryforward year, begin with that line.
Does a solar system have to heat or cool a building to qualify?
No. The credit includes qualifying systems that generate electricity without heating or cooling.
What geothermal equipment is included?
Qualifying equipment includes a heat pump that uses the ground or groundwater to heat or cool a structure, and equipment that uses the earth’s internal heat for water heating or active space heating or cooling. It must be owned by the taxpayer for use at their residence and meet or exceed applicable federal Energy Star requirements on the installation date.