How the Georgia Retraining Tax Credit Helps Small Business Owners

The Georgia Retraining Tax Credit is a little-known tax benefit that many small business owners in Georgia may benefit from utilizing. The best part is that you may qualify for the credit from activities you’re already doing and can claim the benefit without changing your daily processes. However, if you don’t know about the Georgia Retraining Tax Credit, you can’t claim it!

In today’s blog we’re aiming to change that and discuss the Georgia Retraining Tax Credit, what it is, who qualifies, how it works, and how you can take advantage of it in your business.

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What is the Georgia Retraining Tax Credit?

The Georgia Retraining Tax Credit is a tax credit that rewards Georgia small businesses for training and retaining their employees. This is a longstanding tax credit that was originally passed as part of the Georgia Business Expansion Support Act of 1994.

The main purpose of the Georgia Retraining Tax Credit is to reward employers to continue to invest in workforce development and to help offset the cost of employee training.

How is the Georgia Retraining Tax Credit calculated?

The Georgia Retraining Tax Credit has a straightforward calculation method that is based on the actual costs incurred during an employee training session. The Georgia Retraining Tax Credit provides the following tax benefits to employers:

• Up to 50% of the direct cost of retraining. Think of items like bringing a consultant in to teach new software or equipment.
• Up to $500 per training per employee in employee costs
• Up to $1,250 per employee per year
• Maximum of 50% of the employer’s tax liability for the year
• Credit must be claimed within 1 year of filing deadline.
• Carries forward for 5 years for amount over 50% of the employer's Georgia tax liability. This was 10 years, but reduced to 5 years as of 1/1/2025.

Now that we have a general overview of how the Georgia Retraining Tax Credit is calculated, let’s review some additional information related to qualifying each type of expense.

Which training costs qualify for the Georgia Retraining Tax Credit?

The first type of cost that qualifies for the Georgia Retraining Tax Credit are direct costs. These are typically the easiest to quantify and are exactly what they sound like. These are additional, direct costs that you the business owner incur as a result of training your workforce.

Here are a few examples of costs that qualify for the credit:

• Instructor/consultant fees
• Employee wages during retraining (regular activities do not qualify)
• Development of program
• Materials & supplies for program
• Instructional media including textbooks, manuals, videos, presentations, etc.
• Equipment used solely for retraining
• Reasonable travel costs

These expenses must be directly tied to your training programs. They must also be documented and verifiable so you can support the credit. If they’re not, your credit will be disallowed. As we discussed earlier, these are probably things that you are already doing in your business. All you really need to do is better document the process and submit your claims to be eligible for the credit!

Which employees are eligible for the Georgia Retraining Tax Credit?

One of the major expenses incurred during any training program is the lost time related to employees being taken away from their usual duties. As part of this, the Georgia retraining tax credit qualifies employee expenses up to a limit of $500 per training and $1,250 total per year per employee.

To qualify for the credit, these employees must be qualified according to the following criteria:

• Georgia resident
• First-line employees or immediate supervisor
• Continuously employed for 16 weeks (meaning that new employee training does not qualify)
• Full-time employees (25 hours per week)

As a small business owner, this means that your personal time and that of your higher-level managers does not qualify for the credit. However, the vast majority of your workforce will qualify for the tax credit. Once again, these are activities that you are already doing in your business and now you can claim a tax credit to help defray the costs!

Are there limitations to which types of training qualify for the Georgia Retraining Tax Credit?

The main purpose of the Georgia Retraining Tax Credit is to reward business investment in workforce development. However, there are some types of training that do not qualify.

The main types of training that qualify for the credit are trainings that involve new equipment or new technology being used in the business. Typically, qualifying training does not include existing software, although significant upgrades and new systems within existing software may qualify.

Additionally, certain types of software may not qualify. This includes word processing, database management, excel spreadsheet training, and basic operating systems. Think of these as basic software that every business needs to run like the usual Microsoft Office systems. If it’s a system like that, it probably doesn’t qualify.

Finally, certain soft skill training like leadership training, personal & career development training, and safety training do not qualify. While these are valuable trainings, the focus of the credit is on technical training.

The way that I would explain it is that the more technical, customized, newer, and company specific, the higher the likelihood that the program will qualify. One of the main benefits of the Georgia Retraining Tax Credit is that it is qualified by the Technical College System of Georgia. As a result, you can have your contemplated trainings reviewed by an administrator there before applying for the credit to get a preliminary assessment of viability. This makes the credit significant less stressful and reduces audit risk.

The Georgia Retraining Tax Credit in Action

Now that we have a general idea of how the Georgia Retraining Tax Credit works, let’s take a look at a case study to see the credit in action.

Here’s a sample company:

Reynolds Engineering Corporation

• 25 employees
• Installing New Design Software
• 2-day implementation with consultant
• All engineering employees to be trained.
• GA Tax Liability - $50,000

In this example, you can see a few things –

• First, you can see that employees’ salaries were converted into hourly rates. You can only take the credit for time spent on the training, so an hourly rate is the best way to quantify your employee expenses.
• Next, you can see an eligibility chart for those who trained. The three director level employees and an intern who is only part-time were eliminated even though they received training.
• Finally, you can see how the credit was limited based on the $500 per employee cap on this training. Even though these employees were capped, they would still be eligible for another $750 in credits if there were additional trainings received throughout the year.  

Under these facts, Reynolds Engineering Corporation would be eligible for the full value of the Georgia Retraining Tax Credit as they would not reach their annual cap of $25,000. If they completed the maximum number of trainings for the year, they may be close to reaching this cap and would be subject to a carryforward.

To recap, this business offset 61.75% of their training costs or 23.25% of their Georgia Taxes (however, you’d like to look at it!) by utilizing the Georgia Retraining Tax Credit for activities they were already going to do! By understanding the credit, tracking their time, and substantiating their expenses, a significant amount in taxes was offset.

How do you claim the Georgia Retraining Tax Credit?

If you’re interested in claiming the Georgia Retraining Tax Credit, there are a few steps to properly apply:

1. Contact your accountant/tax planner to determine if the program may work for you.
2. Contact the Technical College System of Georgia to receive a preliminary review of your program.
3. Upon approval, implement training program.
4. Company documents all required items to verify expenses.
5. Company submits the Program Completion Form and documentation to the Technical College System of Georgia.
6. Company files executed Completion Form and Form IT-RC with income tax return.
7. Company receives Georgia Retraining Tax Credit on its return.

This is the best way to do things. However, remember that you can still claim credits for past trainings, if they qualify.

Summary

The Georgia Retraining Tax Credit is a program that small business owners throughout Georgia can take advantage of to assist in retaining and training their employees. In some cases, you can even take advantage of this credit without having to significantly alter your day-to-day life. By diligently documenting existing training processes, documenting your expenses, and retraining your employees, you can qualify to reduce your Georgia taxes.

Ironclad Wealth Management is a full-service financial planning firm that focuses on helping small business owners reduce their taxes in order to reach their goals faster. Want to see if the Georgia Retraining Tax Credit can you help you as part of a full financial and tax plan? Schedule a no-cost intro call to see how we can help!

Schedule a a no-cost intro call today!

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