Georgia’s Pass Thru Entity Election (PTET)

Are you taking advantage of Georgia’s Pass Thru Entity Tax (PTET) Election? We have found that many businesses are still not because either they are simply not aware of it or unsure of how that will benefit in their particular case, or the payment deadlines associated with it. Read our summarization of to find out more …

The Tax Cuts and Jobs Act created a $10,000 cap on itemized deductions of state and local tax (“SALT”) – including income taxes, real property taxes, personal property taxes and sales/use taxes – for tax years beginning after December 31, 2017, and before January 1, 2026.

Subsequently, several states and municipalities have enacted laws designed to tax pass-through entities at the entity level as opposed to having individuals deduct them on their personal returns. This allows PTEs to make an election to pay taxes and circumvent the $10,000 state tax SALT limitation.

Determining which businesses are best suited to capture advantages under Georgia’s Pass-Through Entity Tax Election (PTET) is a complex matter that should be discussed with your CPA.

3 Key Considerations for Georgia Resident Shareholders/Partners:

  1. Weigh the benefits of shifting tax to PTE against any loss of deductions for the PTE’s income taxed in another state, and loss of credits for income tax paid to other states.
  2. Certain personal income tax credits may not be utilized (i.e., R&D, Jobs Tax Credits, etc.).
  3. Timing of deductibility of state tax paid by PTE (IRS Notice 2020-75).

8 Key Takeaways Regarding Georgia’s PTE Election

  1. PTE with corporate owners can’t make election.
  2. PTE election is an annual election due by extended due date.
  3. There is penalty relief for estimated payments, if payments made by Owners and not PTE, when PTE election is made.
  4. Owners can’t transfer estimated payments to PTE. PTE can’t transfer estimated payments to Owners, but PTE can transfer estimated payments to composite/NRWH accounts if PTE election ends up NOT being made.
  5. PTE can’t deduct any income taxes paid by PTE to other states.
  6. Owners don’t get credit for taxes paid by PTE to GA or other states.
  7. Credits can’t be transferred by the owners to the PTE.
  8. Credits CAN be transferred from the PTE to the owners.

The savings associated with a PTET election can be significant and there may still be a chance to take advantage of PTET for 2023. We understand the intricacies of this new opportunity. Reach out to discuss the viability of taking advantage of Georgia’s PTE Election.

Be sure to consult with your tax professional to analyze your specific tax situation. At Taxperts, we can assess your small business structure and suggest ways to increase your savings. Check out our website, Facebook page, or LinkedIn page to learn more.

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