This is how the form is designed to work. SC 1040TC Line 1 is supposed to include all taxable income for which the credit applies. The amount of income that was taxed by another state and South Carolina will then show on Line 2 of the worksheet.
Income that is excluded on the non-resident schedule is not eligible for the tax credit (it is either excluded or eligible for the credit.)
South Carolina nonresidents are not eligible for the credit for taxes available to another state. This credit is available for part-year and full-year residents only.
Nonresident income which is excluded from the taxation isn't eligible for the credit. The credit applies only for income that was taxed in both South Carolina and the other state - that is why the income is added back in on the worksheet.
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