How to Make a Georgia PTET Election: Form 600S, HB 149, and the 4.99% Rate

Picture a software consultant in Atlanta who runs her business as an S corporation. After she pays herself a reasonable salary, the company still clears $300,000 that flows through to her personal return. She already pays well over the federal cap on state and local tax deductions from property tax alone, so the $14,970 of Georgia income tax on that pass-through profit earns her nothing on her federal return. She writes the check and the deduction disappears at the cap. The owner here is theoretical, not an actual EntityIQ client, but the trap is real, and Georgia's pass-through entity tax is the way out of it.

What the Georgia PTET does

Georgia enacted its pass-through entity tax in 2021 through House Bill 149, effective for tax years beginning on or after January 1, 2022. The idea is simple. Instead of the profit flowing to you and getting taxed on your Georgia individual return, the S corporation or partnership elects to pay the tax itself, at the entity level. The Georgia pass-through entity tax rate equals the state's flat individual income tax rate, which HB 463 lowered to 4.99% for tax years beginning in 2026. The entity pays 4.99% on the Georgia income that flows to its owners, and those owners then leave that same income off their own Georgia returns, so the tax is paid once, at the entity level.

The reason to bother is federal. The state tax an individual pays is trapped behind the deduction cap under IRC §164(b)(6), which the One Big Beautiful Bill Act set at roughly $40,400 for 2026 with a phase-down that begins at $505,000 of modified adjusted gross income. State tax a business pays is an ordinary business expense with no such cap. When the entity pays the Georgia tax, it deducts the full amount on the federal 1120-S or 1065, and the IRS blessed this exact move in Notice 2020-75. So the Georgia PTET does not lower your state tax. It moves the payment from your personal return to the entity, where it becomes a federal business deduction that is not capped by the $40,400 SALT limit under IRC §164(b)(6).

How to make the election

You make the election on the entity's Georgia income tax return, Form 600S for an S corporation or Form 700 for a partnership, by checking the pass-through entity tax box and completing the related schedule. The election must be made by the original or extended due date of that return, it is irrevocable once the due date passes, and it applies only to that year, so you have to elect again every year you want it. There is no separate advance form to file and no pre-registration with the state. The checkbox on a timely return is the election.

Two mechanics catch people. First, the election is annual, not a set-and-forget switch like a federal S election. A calendar-year filer decides again each spring, on the 2026 return due March 16, 2026 for S corps or April 15, 2026 for partnerships, or on the extended due date if the entity extends. Second, the entity computes and pays the tax the way a C corporation does. An electing entity pays Georgia estimated tax the same way a C corporation does, using Form 602-ES or the Georgia Tax Center. Skipping the estimates can trigger an underpayment penalty on the entity itself.

Pay before year-end, or lose the year

This is the timing point that quietly wrecks the benefit. The federal deduction follows the cash the entity actually pays. If your entity elects for 2026 but does not send Georgia the money until it files in early 2027, the deduction lands in 2027, not 2026. Just as important, the entity has to actually pay the tax during the tax year to deduct it federally that year, because the deduction follows the cash the entity pays, so a payment you defer to next spring lands in the wrong year. Fund the PTET with an estimated payment by December 31 if you want the write-off on that year's federal return.

The 2026 math, side by side

Here is the Atlanta consultant's $300,000 of pass-through income, taxed at the 2026 Georgia rate of 4.99%, shown without the election and with it. She is in the 37% federal bracket and already over the SALT cap, so the entire personal state tax is non-deductible for her. On $300,000 of Georgia income, the entity pays about $14,970, and deducting that federally saves an owner in the 37% bracket roughly $5,539 that the SALT cap would otherwise block. Figures are rounded.

Who can elect, and the fine print

The election is open to S corporations and partnerships. HB 149 limits it to entities owned entirely by persons who could be shareholders of an S corporation under IRC §1361, which means individuals, certain trusts, and estates. An entity with a corporate partner or a partnership sitting in its ownership chain runs into that restriction, so tiered structures need to be checked before anyone assumes the box is available. The Georgia Department of Revenue keeps the current rules and answers on its HB 149 pass-through entity tax FAQ.

One more federal wrinkle. Paying the tax at the entity level lowers the ordinary income that passes through to you, which is also the income the qualified business income deduction under IRC §199A is built on. The PTET deduction shrinks your QBI slightly, so the net benefit is a hair below the headline number. It is still strongly positive for owners over the SALT cap, but it is why you model it rather than assume the full 37%.

The nonresident pitfall

If your S corp or partnership has owners who live outside Georgia, run the numbers on each of them before you elect. The Georgia election binds every owner, including nonresidents. A nonresident owner bears their share of the 4.99% Georgia entity tax, but their home state may not give them a credit for a tax the entity paid rather than the individual. That can leave a nonresident paying Georgia tax at the entity level and full tax at home on the same income, so partnerships and S corps with out-of-state owners should model each owner before electing. A single-owner Georgia-resident S corp, like the consultant above, does not have this problem. A four-partner firm with members in Florida, Tennessee, and the Carolinas might, and the answer turns on each home state's rules.

A practical read for Georgia owners

For a profitable Georgia S corp or partnership whose owners are over the SALT cap, the HB 149 election is close to free money, worth roughly 4.99 cents of federal deduction on every dollar of state tax, cashed out at your top federal rate. The work is small: check the box on a timely Form 600S or Form 700, fund the tax with an estimated payment before December 31, and re-elect next year. The two things that undo it are paying late, which pushes the deduction into the wrong year, and out-of-state owners who cannot recover the entity tax at home.

Before you elect, confirm the S-Corp side of the house is set up right, because the PTET sits on top of it. Run your salary and profit through the EntityIQ S-Corp tax calculator, read whether the $40,400 SALT cap leaves the PTET worth it for your income, and compare Georgia's mechanics to the Utah TC-75 election and the New Jersey BAIT election if you file in more than one state.

This article is educational and is not legal or tax advice. The numbers above are 2026 figures, and the owner is theoretical. Georgia's rate and PTET rules change often, so please consult a qualified CPA or enrolled agent before making the election on Form 600S or Form 700.