Senate · Introduced · 2025-2026 Regular Session

SB2: SB2 State Income Tax; exclude tips from taxation

Last action January 12, 2026 · Senate Recommitted

Senate Bill 2 would exclude tips from Georgia state income tax for employees who earn them, while requiring employers to report tip totals to the state.

In plain language

Under current Georgia law, tips that employees earn are counted as part of their taxable income for state income tax purposes. Senate Bill 2 would change that by adding a new exemption to Georgia's income tax code (O.C.G.A. § 48-7-27) so that all tips an employee receives, as long as they are included in the employee's federal adjusted gross income, would no longer be subject to Georgia state income tax. The bill also requires employers to report tip totals to the Georgia Department of Revenue. For 2025, employers must report the total tips employees received by January 31, 2026. Starting in 2026, employers must report tip totals monthly or quarterly, on the same schedule as their withholding tax returns. The bill defines tips broadly, covering cash tips, electronic payments like credit card tips, noncash tips, and tip-pooling arrangements, but excludes mandatory service charges such as automatic gratuities. The law would take effect July 1, 2025, and apply to tax years starting on or after January 1, 2025.

What the bill does

Creates a new exemption in Georgia's income tax law (O.C.G.A. § 48-7-27) so tips employees receive are no longer taxed by the state.
Requires the tip income to already be counted in the employee's federal adjusted gross income for the state exemption to apply.
Requires employers to report total employee tip amounts to the Georgia Department of Revenue, starting with a report due January 31, 2026 for the 2025 tax year.
Requires ongoing monthly or quarterly tip reporting from employers beginning in 2026, timed to match existing withholding tax return deadlines.
Defines 'tips' to include cash tips, electronic payment tips, noncash tips, and tip-pool or tip-split amounts, but excludes mandatory service charges like automatic gratuities.
Sets the law to take effect July 1, 2025, applying retroactively to tax years beginning on or after January 1, 2025.

Who it affects

Tipped employees in Georgia, such as restaurant servers, bartenders, and other service workers, would benefit from the tax exclusion. Employers who pay tipped workers would face new reporting duties to the Georgia Department of Revenue, and the department itself would administer the new reporting and exemption process.

Why it matters

Tipped workers in Georgia would keep more of their tip income because it would no longer count toward state income tax. Employers would need to track and report tip totals to the state on a new schedule, adding a compliance task tied to their existing tax reporting deadlines.

Key provisions

Section 1 amends O.C.G.A. § 48-7-27(a) by adding paragraph (16), excluding all employee tips from Georgia taxable income if those tips are part of federal adjusted gross income.
Section 1(B) requires employers to report total tips paid to each employee, with the first report due January 31, 2026 for tax year 2025.
Section 1(B)(ii) requires monthly or quarterly tip reporting starting in 2026, due on the same dates as withholding tax returns.
Section 1(C) defines 'tips' to include cash, electronic payment, noncash, and pooled tips, but excludes mandatory service charges such as automatic gratuities.
Section 2 sets the effective date as July 1, 2025, applying to tax years beginning on or after January 1, 2025.
Section 3 repeals any conflicting laws.

Status timeline

2026-01-12Senate Recommitted (Senate)
2025-02-10Senate Read Second Time (Senate)
2025-02-06Senate Committee Favorably Reported (Senate)
2025-01-14Senate Read and Referred (Senate)
2025-01-13Senate Hopper (Senate)

Topics

state income tax
tipped workers
tax exemptions
employer reporting requirements