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Potential Tax Savings for Business Owners and Qualified Education Expense for GA Taxpayers

Potential Tax Savings for Business Owners and Qualified Education Expense for GA Taxpayers

February 09, 2022


We wanted to briefly highlight a new tax bill passed in GA that could impact pass-through entity owners. Also, changes were made to contribution limits for pass-through entities if contributing to Student Scholarship Organizations (SSOs).

Federal Deduction

  • In 2020, the IRS approved a state and local tax (SALT) workaround, meaning the state and local taxes paid by entities at the entity level can be taken as a deduction while computing federal taxable income.
  • Georgia Law – In response to the IRS Notice, GA passed a bill effective in 2022 enabling pass-through entities to make an election to pay the tax due on income at the entity level, allowing them to take advantage of the federal deduction.
  • Now, if they elect to pay SALT taxes at the entity level, GA pass-through entities should be able to reduce their federal tax liability.

Qualified Education Expense – GA State Credit

  • If you would like to support a specific private school through contributions to a Student Scholarship Organization (such as GOAL) and you own a pass-through entity, you can now divert 75% of your GA tax liability toward an SSO.
  • Please note there is no cash flow difference to the owner, rather the opportunity to direct a portion of the GA tax liability to a participating school and a credit will be applied on your GA return. There are a limited number of credits available each year, so please inquire with your CPA quickly if interested.

Here’s a short 1-minute clip for a concise summary.

We suggest speaking with your tax advisor to understand how this 2022 change can impact your return. As always, we’re here to help our clients through holistic financial planning that includes more than just investments.

Matt and Andrew