Georgia pass-throughs invest in education!
Favorable state and federal tax laws and regulations allow pass-through businesses to improve Georgia K-12 education while achieving remarkable tax benefits. Consult your tax advisor about this powerful and popular program.
1. For “Electing” Pass-Through Entities:
Pass-through businesses may now elect to pay state income taxes at the entity level (“SALT workaround” per Georgia HB 149). Electing pass-through entities may contribute to GOAL at the same generous limits as C corporations:
|Tax Filing Status||Tax Credit Limit|
|C Corp, Trust, or Pass-Through electing to pay tax at the entity level (HB 149)||75% of annual tax liability|
Making the election and GOAL contribution likely results in a double tax benefit:
- 100% state income tax credit for the electing pass-through entity
- Federal business expense deduction, resulting in savings which GOAL’s CPA firm has calculated at up to $20,313 in an example with Georgia taxable income of $1 million.
2. For Pass-Through Entities not making the HB 149 election:
Georgia lawmakers have raised the tax credit limit for pass-through owners to a generous $25,000, if the owner would pay that much in Georgia income tax as a result of their pass-through ownership!
|Tax Filing Status||Previous Limit||New Limit|
|Pass-Through Owner (not making HB 149 election)||$10,000||$25,000|
Hint: Pass-through income required to support a $25,000 GOAL tax credit is $455,373 ($25,000 divided by .0549 = $455,373). Keep in mind that income from the pass-throughs can include both profits (K-1) and wages (W-2) income.
GOAL contributions from non-electing pass-throughs can result in a double tax benefit as well:
- 100% state income tax credit for the pass-through owner
- Federal business expense deduction if the payment qualifies as an ordinary and necessary business expense* for the pass-through business, resulting in savings which GOAL’s CPA firm has calculated at up to $3,200 for a $10,000 contribution and $8,000 for a $25,000 contribution.
*If payment is made with the reasonable expectation of financial return for the business. The IRS regs are generous – indicating the deduction may be available for payments made “for use in projects that improve conditions in the state,” such as improving educational access and outcomes.
Please consult with your tax advisor about the most advantageous taxpaying method for your business and the associated GOAL tax planning opportunity.