Georgia PTE Tax Rate: Eligibility, Election, and Owner Impact

Georgia’s pass-through entity tax rate is the same as the state’s flat individual income tax rate: 5.19 percent for the 2025 tax year, with scheduled step-downs toward 4.99 percent if state revenue benchmarks keep being met.¹ There is no separate PTE rate written into the code; whatever rate applies to individual income that year automatically applies to electing S corporations and partnerships.

Current Rate and Where It’s Headed

Both O.C.G.A. § 48-7-21 (S corporations) and O.C.G.A. § 48-7-23 (partnerships) require an electing entity to pay tax “at the same rate of the tax imposed on individuals” under O.C.G.A. § 48-7-20.²³ So the PTE rate moves in lockstep with the individual rate.

That individual rate is on a downward path. House Bill 1437, signed in 2022, replaced Georgia’s graduated brackets with a flat rate and built in annual reductions tied to revenue conditions.⁴ Those conditions have been met ahead of the original schedule, which is how 2025 landed at 5.19 percent — a level first projected for 2026. If revenue benchmarks continue to hit, the rate keeps stepping down by roughly 0.10 percentage points per year until it settles at 4.99 percent.

The PTE tax applies to the entity’s Georgia net income, not gross receipts, and the entity cannot deduct taxes based on gross or net income when computing what’s subject to the PTE rate.³

Why the Rate Matters: The Federal SALT Deduction

The reason owners care about the Georgia PTE rate at all is the federal deduction it unlocks. When an individual pays Georgia income tax on a personal return, the payment counts toward the state and local tax deduction, which 26 U.S.C. § 164(b)(6) caps.⁵ When the entity pays instead, the tax becomes a business expense, and business-level taxes are not subject to the personal cap. The full amount reduces the entity’s federal taxable income before it flows through.

The math changed in 2025. The One Big Beautiful Bill Act raised the SALT cap from $10,000 to $40,000 for most filers, with 1 percent annual increases through 2029, putting the 2026 cap near $40,400. The higher cap phases down for taxpayers with modified adjusted gross income above $500,000, shrinking by 30 cents for every dollar above that threshold until it reaches a $10,000 floor.⁶

What that means in practice:

Owners with income well above the phase-down threshold still face an effective $10,000 cap. For them, the PTE election continues to deliver a meaningful federal benefit at the Georgia rate.
Owners whose total state and local taxes stay under $40,000 and whose income stays under the phase-down threshold may see the federal advantage disappear.

Because the election has to be made each year, an entity whose owner picture changes can turn the election on or off as the federal side shifts.

Who Can Elect

Only partnerships and S corporations can make the election, and the entity must be 100 percent directly owned by persons eligible to be S corporation shareholders under Section 1361 of the Internal Revenue Code. That group includes individuals, certain estates, and certain grantor trusts.⁷

A few structures are shut out. A disregarded single-member LLC cannot elect on its own, though a qualifying regarded owner (such as an eligible partnership) can elect and cover the disregarded entity’s income within its own election. An entity with any ineligible owner — a C corporation, for instance, or a non-qualifying trust — cannot elect. In a tiered structure, each pass-through entity elects independently for itself, provided it qualifies on its own.⁷

How the Election Is Made and When It Locks In

The election is made by checking a box on the Georgia income tax return: Form 600S for S corporations, Form 700 for partnerships. There is no separate election form. The entity has until the due date of the return, including any granted extensions, to make it.⁸

Two features surprise people. The election is irrevocable for the tax year once the filing deadline passes; there is no unwinding once the box is checked and the return is filed (or the extended deadline lapses). And the election does not carry forward. Every year the entity wants entity-level taxation, it has to elect again. That yearly reset is what preserves the flexibility to walk away if the federal benefit stops paying off for the owners.

What Owners Owe After the Entity Pays

When the entity pays the PTE tax, owners are not taxed again in Georgia on the same income. The mechanism is a subtraction, not a credit. Each owner starts from federal adjusted gross income on the Georgia personal return and subtracts their distributive share of income that was apportioned and allocated to Georgia at the entity level. If the entity had a loss, the owner adds back their share.⁹

Owners cannot claim a Georgia credit for the tax paid under the election, and the entity cannot claim the credit under O.C.G.A. § 48-7-28 for those payments. Other business credits — film credits, job tax credits, and similar — remain available to an electing entity.²

For non-resident owners, whether their home state gives credit for Georgia’s entity-level tax is a question of that state’s rules, not Georgia’s. Treatment varies, so non-resident members should confirm with their home state before assuming the Georgia PTE payment will offset tax there.⁸

1
Georgia Department of Revenue. Important Tax Updates
2
Justia Law. Georgia Code 48-7-23 – Taxation of Partnerships
3
Justia Law. Georgia Code 48-7-21 – Taxation of Corporations
4
Georgia House of Representatives. Tax Reform Update
5
Office of the Law Revision Counsel. 26 USC 164 – Taxes
6
RSM US. SALT Considerations From the One Big Beautiful Bill Act
7
Legal Information Institute. Georgia Regulation 560-7-3-.03 – Election to Pay Tax at the Pass-Through Entity Level
8
Georgia Department of Revenue. HB 149 Pass-Through Entity Tax FAQ
9
Georgia Secretary of State. Georgia Regulation 560-7-3-.03 – Election to Pay Tax at the Pass-Through Entity Level