Tax law changes for pass-through entities

Georgia House Bill 149 was passed during the 2021 legislative session and signed into law. It allows pass-through entities to pay state tax at the entity level rather than through individual owners and partners which mitigates the $10,000 SALT cap. This applies to tax years beginning on or after January 1, 2022.

GRACE benefit: If the pass-through makes this election, they are eligible to apply for a tax credit as a C-corp in an amount up to 75% of the entity’s 2022 Georgia income tax liability.

This workaround may not be appropriate for every pass-through entity and this tax law change should be discussed with a tax advisor prior to making the election.

Forms and Tax Filing Information

Electronic filing is required for taxpayers claiming the Qualified Education Expense (QEE) credit for taxable years beginning on or after January 1, 2017. Individual taxpayers that electronically file their tax return do not have to submit Form IT-QEE-SSO1. Form IT-QEE-SSO1 should be maintained by the taxpayer and made available to the Department of Revenue upon request.

Form IT-QEE-SSO1 for 2019 was previously mailed to you by GRACE following receipt and processing of your donation. This acknowledges your contribution. A replacement copy can be requested at

A software program’s Form IT-QEE-TP2 that is electronically filed with the Georgia income tax return satisfies the requirement that a taxpayer must submit Form IT-QEE-TP2 with the Georgia tax return when the QEE credit is claimed. For your reference, a blank TP2 form can be referenced above.

Only for donors who itemize on federal return: If a donor falls short of the full $10,000 SALT (State and Local tax) cap, the donor is allowed to treat their contribution to GRACE as payment of state or local taxes for federal income tax purposes.

If you itemized your deductions on your federal return, in order to prevent “double dipping” you must add back to your Georgia taxable income any portion of the GRACE contribution deducted. This increase to Georgia taxable income is reported on Form 500 Schedule 1 – Adjustments to Income, as “Other” and use the description “Qualifed Education Expense Credit Adjustment.”

Georgia Form 500 – Credit: The Qualified Education Expense Credit code number is 125. This needs to be entered on Form 500 Schedule 2 (Georgia Tax Credit Usage and Carryover). Enter your “Credit Certificate #” which was provided on your approval letter from the Georgia Department of Revenue, social security number and credit amount claimed.