1099-G/INT in South Carolina: Refunds, Interest, Corrections

On a South Carolina return, amounts from Form 1099-G and Form 1099-INT are handled by adjusting your federal Adjusted Gross Income: subtract state income tax refunds and interest from U.S. government obligations, add interest from out-of-state municipal bonds, and leave unemployment compensation in because South Carolina taxes it in full. The SC1040 starts from your federal AGI, so most 1099 figures are already there; your work is limited to the places where South Carolina’s rules diverge from the federal ones.¹

The 2025 South Carolina Filing Deadline Was Extended

Before working through the adjustments, note the deadline. Because the state legislature is still updating South Carolina’s conformity with the current Internal Revenue Code, the South Carolina Department of Revenue automatically extended the filing deadline for all 2025 individual income tax returns to October 15, 2026. You don’t need to request it.²

The extension covers filing, not payment. If you owe South Carolina tax, pay at least 90% of your 2025 liability by April 15, 2026, or you’ll face penalties. If the legislature passes conformity legislation before you file, the SCDOR has said it will issue additional guidance, including for people who already filed.²

State Income Tax Refund on Your 1099-G

Box 2 of Form 1099-G reports state or local income tax refunds paid to you during the year. South Carolina never taxes its own income tax refunds. If any part of that refund made it into your federal AGI, subtract it out on the SC1040. The 2025 instructions direct you to enter the amount on Line f of the subtractions schedule.³ The exclusion is written into the statute that defines South Carolina gross income.¹

One thing to watch: the refund figure on the 1099-G reflects your total overpayment for the prior year, which may include amounts applied to other state debts or credited toward estimated tax. It can be larger than the check you actually received.

Unemployment Compensation on Your 1099-G

Unemployment compensation is fully taxable in South Carolina. The state adopted Internal Revenue Code Section 85, so whatever unemployment amount is taxable federally is also taxable at the state level.⁴ There is no South Carolina subtraction for it.

South Carolina law requires that people filing an initial unemployment claim be told the benefits are subject to both federal and state income tax. You can elect to have state income tax withheld from each payment at 7%.⁵ If you didn’t elect withholding, expect a balance due when you file. The 1099-G amount flows through your federal AGI onto the SC1040 with no adjustment.

A common software mistake: some states do exempt unemployment, and tax software sometimes has state-specific toggles for it. In South Carolina, the unemployment stays in. Don’t subtract it.⁴

Other Payments Reported on a 1099-G

A 1099-G can also report agricultural payments, taxable grants, or other government payments. These are included in your federal AGI and generally carry over to South Carolina without modification. The state’s subtraction statute doesn’t list an exclusion for these payment types.

Ordinary Interest on Your 1099-INT

Interest reported in Box 1, from bank accounts, CDs, corporate bonds, and similar sources, is taxable both federally and in South Carolina. No adjustment. The amount is already in your federal AGI and South Carolina taxes it at the same figure.

U.S. Government Interest on Your 1099-INT

Interest on direct obligations of the United States, including Treasury bonds, Treasury notes, Treasury bills, and U.S. savings bonds, is exempt from South Carolina income tax. Federal law bars states from taxing interest on U.S. obligations.⁶ South Carolina’s gross income statute mirrors that exemption.¹

This interest usually shows up in Box 3 of your 1099-INT and is already inside your federal AGI. Subtract it on Line m of the SC1040 subtractions schedule.³ If you hold a mutual fund that invests partly in Treasuries, only the portion of interest attributable to U.S. obligations qualifies. Your fund company reports that percentage on its year-end tax statement.

Not every federal agency security qualifies. The line runs between direct obligations of the U.S. government, which are always exempt, and obligations of government-sponsored enterprises, which are not automatically exempt. Some agency securities are exempted by their own charter acts, so verify each issuer rather than assuming all “government” bonds qualify. Your brokerage statement or fund tax guide will identify the qualifying portion.

Municipal Bond Interest on Your 1099-INT

Municipal bond interest is usually exempt from federal tax and shows up in Box 8. South Carolina’s treatment depends on who issued the bond.

Interest from bonds issued by South Carolina or its political subdivisions, such as cities, counties, and school districts, is exempt from both federal and state tax. No addition on your SC1040.⁷

Interest from another state’s municipal bonds is different. It’s still exempt federally, but South Carolina taxes it. The state’s gross income statute narrows the federal Section 103 exclusion so that only South Carolina and U.S. obligations stay exempt.¹ Add the out-of-state municipal interest to your South Carolina taxable income. Because that interest wasn’t in your federal AGI, this is one of the few additions that raises your SC taxable income above the federal starting point.

If you own a municipal bond fund, it likely holds bonds from many states. Your fund company’s year-end tax statement should break down the percentage of interest attributable to each state. Only the South Carolina portion (and any qualifying U.S. territory obligations) stays exempt at the state level.

Where the Adjustments Go on the SC1040

The SC1040 begins with federal AGI and then applies two kinds of modifications:

Subtractions reduce your state taxable income for amounts that sit in federal AGI but are exempt in South Carolina. The relevant ones here are the state tax refund on Line f and interest from U.S. obligations on Line m.³
Additions increase your state taxable income for amounts excluded from federal AGI but taxable in South Carolina. From these forms, the addition is out-of-state municipal bond interest.

Tax software handles the calculations once you enter the 1099 data and identify the source of the interest. If you file on paper, enter the subtraction amounts on the designated lines of the subtractions schedule and the addition amounts on the additions schedule, and attach documentation showing the breakdown of interest by source.

Part-Year Residents and Nonresidents

If you lived in South Carolina for only part of the year, or earned income there as a nonresident, file the SC1040 with Schedule NR to allocate income between South Carolina and other states. Column A captures your total income as reported federally; Column B captures only the portion taxable by South Carolina.⁸

Interest income from a 1099-INT is taxable by South Carolina for the portion of the year you were a resident. If the interest is connected to a trade or business in South Carolina, it’s taxable regardless of residency.
Interest on U.S. and South Carolina obligations is excluded from Column B, just as a full-year resident would subtract it.
State tax refunds on a 1099-G go in Column A at the federal amount but stay out of Column B, because South Carolina doesn’t tax them regardless of residency.

Unemployment compensation for nonresidents is sourced to the state that paid the benefits. If the South Carolina Department of Employment and Workforce paid your unemployment, that income is allocable to South Carolina on Schedule NR.

Fixing a Wrong or Missing 1099

1099-G for Unemployment

The South Carolina Department of Employment and Workforce (SCDEW) issues the 1099-G for unemployment. Forms are mailed during the last week of January to the address on file, and you can also download the form through SCDEW’s MyBenefits Portal. Registration is required even if your benefits have ended.⁹

If the amount looks wrong, submit a dispute through the unemployment benefits portal. If you received a 1099-G for benefits you never applied for, that’s a sign of identity theft: report it to SCDEW’s fraud unit and file a report with your local police. Don’t include fraudulent 1099-G amounts on your return; resolve the fraud first so you aren’t taxed on income you never received.⁹

1099-G and 1099-INT From SCDOR

The South Carolina Department of Revenue issues a 1099-G if you received a state income tax refund during the year, and a 1099-INT if the state paid you interest on an overpayment. These forms are provided by the end of January. If the amount is wrong, contact the SCDOR’s Individual Income Tax section, or view your account through the MyDORWAY portal for filed returns and refund details.

1099-INT From Financial Institutions

Banks, brokerages, and mutual fund companies issue their own 1099-INT forms. For an error, contact the issuing institution directly to request a corrected form; the institution will file the correction with the IRS and send you an updated copy. If the correction won’t arrive in time, you can file with the correct amount and attach an explanation, or request a filing extension. With the extended October 15, 2026, deadline for 2025 South Carolina returns, most people have ample time to resolve corrections before filing.

1
South Carolina Legislature. South Carolina Code 12-6-1120 – Gross Income
2
South Carolina Department of Revenue. SCDOR Statement on Income Tax Conformity; April 15 Filing Deadline Extended for SC Returns
3
South Carolina Department of Revenue. 2025 Individual Income Tax Instructions
4
South Carolina Department of Revenue. SC Information Letter 20-15 – Unemployment Compensation (Income and Withholding Taxes)
5
South Carolina Legislature. South Carolina Code 41-39-40 – Income Tax
6
Office of the Law Revision Counsel. 31 USC 3124 – Exemption From Taxation
7
South Carolina Department of Revenue. SC Revenue Ruling 91-15 – Interest Exempt From South Carolina Income Tax
8
South Carolina Department of Revenue. 2025 Nonresident Schedule Instructions
9
SC Department of Employment and Workforce. Accessing Your 1099-G