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Georgia Tax Credits for Education Offer Choices for Charitable Giving

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Georgia taxpayers have two options for getting tax credits for contributions to education programs: the Qualified Education Expense Credit, available for donating to scholarship funds for private schools, and the PEACH Education Tax Credit (formerly known as the Qualified Education Donation Tax Credit), available for donations to public education. Tax credits give taxpayers a dollar-for-dollar reduction in their tax liability, so these credits can result in substantial savings. Below is a description of the rules for each of these tax credits that can help offset the state tax liability of individuals, passthrough owners and corporations.

Qualified Education Expense Credit (QEE)

This credit is allowed for contributions to a State-approved student scholarship organization (SSO) (A list of current SSOs is available here). The SSOs under the GOAL Scholarship Program use the contributions to award scholarships to students so they can attend private schools chosen by their parents. Donors can designate that the scholarships be given for attendance at a particular school but cannot designate the students who receive them. That selection is made by the GOAL Program and places a priority on recommending children from low and middle income families.

Credit Limits

The credit limits for individuals and entities are shown below.

Tax Filing StatusContribution Limit
Single Filer$2,500
Married Separate Filer$2,500
Married Joint Filer$5,000
Passthrough Owner* (not electing to pay tax at entity level)$25,000**
C Corp, Trust, or Passthrough electing to pay tax at the entity level75% of annual tax liability
Business that pays insurance premium tax75% of annual tax liability, but credit shall not exceed $1 million

* If the taxpayer is filing a joint return, the taxpayer’s spouse who also is an owner is separately eligible for a credit.

**If the individual taxpayer is a member, partner, or shareholder in more than one passthrough entity, the total credit allowed cannot exceed $25,000.

Carryforwards

Any credit that cannot be used because an individual taxpayer’s liability is not high enough to cover it may be carried forward for five years.

The carryforward rules for taxpayers who contribute as “C” corporations, trusts or other entities that receive a credit determined by a percentage of their income can be illustrated by the following example.

Example: Taxpayer, a Corporation, gets preapproved for a $75,000 education expense credit. Taxpayer then makes a $75,000 donation to an SSO. When Taxpayer files their Georgia income tax return, Taxpayer’s income tax liability for the tax year is $80,000, Taxpayer can only claim a $60,000 credit (which is 75% of their actual income tax liability for the year). The extra $15,000 cannot be claimed by Taxpayer and cannot be carried forward; however, any amount of the $60,000 education expense credit claimed but not used on the Taxpayer’s current Georgia income tax return can be carried forward to apply to the taxpayer’s succeeding five years’ tax liability.

Preapproval and the Yearly Program Cap

There are limited credits available each year, with a $120 million cap for 2023. The tax credits are given on a first-come, first-served basis. Taxpayers who are interested in contributing must be pre-approved by the Georgia Department of Revenue (DOR), so the DOR can keep the total amount of credits within the program limits.

Taxpayers need to request preapproval online through the Georgia Tax Center on Form IT-QED-TPI. The DOR will let the taxpayer know within 30 days whether the request has been approved. Once the credit is approved, taxpayers must make the donation within 60 days of receiving the preapproval notice and before the end of the tax year.

Effect on Federal Taxes

One issue to consider with this program is how the donations will be treated on a taxpayer’s federal return. The DOR regulations require offsets if the taxpayer also receives a federal charitable contribution deduction. The taxpayer must add back to Georgia taxable income the amount of any federal charitable contribution deduction taken for which an education credit is allowed.

PEACH Education Tax Credit

The PEACH Education Tax Credit is available to individuals and corporations for contributions to Georgia’s K-12 public education students. Donations go through the Georgia Foundation for Public Education. The credit is allowed on a first-come first-served basis, and taxpayers must apply to receive it. The aggregate amount of the tax credit allowed to all taxpayers cannot exceed $5 million per tax year through 2023.

Credit Limits

Credits limits for individuals and entities are as follows:

  • A single individual or head of household is eligible to receive a Georgia state income tax credit up to $1,000.
  • For married couples that file separately, you are eligible to receive a Georgia state income tax credit up to $1,250.
  • A married couple filing jointly is eligible to receive a Georgia state income tax credit up to $2,500.
  • An S-corporation shareholder, LLC member or partnership partner is eligible to receive a Georgia state income tax credit up to $10,000.
  • A C-corporation or trust is eligible to receive up to 75% of annual Georgia income tax liability.
Tax Filing StatusContribution Limit
Single Filer$1,000
Married Separate Filer$1,250
Married Joint Filer$2,500
Passthrough Owner of S Corp, LLC, or partnership*$10,000**
C Corp or Trust75% of annual tax liability

How to Claim the Credit

After a taxpayer applies for the credit, the Foundation and the Georgia DOR will notify the taxpayer of the approved tax credit amount and payment deadline. The contribution should be made within 60 days of receiving pre-approval. Then, to claim the tax credit against state income taxes, the taxpayer needs to complete Form IT-QED-TP2.

As with the QEE, taxpayers who take the PEACH Education Tax Credit must add back to Georgia taxable income the amount of any federal charitable contribution deduction taken on a federal return for which a credit is allowed.

Contact Your Tax Advisor 

The State of Georgia has designed tax credits that give individuals, passthroughs and corporate taxpayers an opportunity to save on their taxes, do good and support programs that they believe in. The two education tax credits have similar rules but some key differences. Taxpayers need to seek pre-approval for both credits. To find out more, consult your tax advisors at Frazier & Deeter to discuss the potential tax savings from participation in these two Georgia education credit programs.

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