SB26: SB26 State Income Taxes; with regard to military retirement income, to determine and apply a cost-of-living adjustment to the amount of allowable retirement pay; require the state revenue commissioner

Georgia currently allows military retirees to exclude a set amount of their retirement pay from state taxable income, but that amount does not automatically move with inflation. This bill changes that by directing the state revenue commissioner to write rules that apply a cost-of-living adjustment to the excluded amount each year. The commissioner would choose an appropriate inflation index, such as the Consumer Price Index used for Social Security adjustments, or another federal index if it better reflects conditions for military retirees in Georgia. Whatever adjustment is determined would proportionally raise or lower the amount of military retirement income shielded from state income tax. The change would take effect July 1, 2025, and apply to tax years beginning on or after January 1, 2026.

• Requires the state revenue commissioner to create regulations applying a cost-of-living adjustment to the military retirement income tax exclusion.
• Directs the commissioner to select a cost-of-living index, such as the federal Consumer Price Index used for Social Security, to measure inflation and deflation effects.
• Ties the size of the tax exclusion adjustment directly to changes in the chosen index on a proportional basis.
• Sets the law to take effect July 1, 2025, applying to tax years starting on or after January 1, 2026.

Military retirees living in Georgia who currently exclude part of their retirement pay from state income tax, and the Georgia Department of Revenue, which must write and maintain the new cost-of-living adjustment rules.

Without this change, the dollar amount of retirement pay excluded from state taxes could lose value over time as prices rise. This bill would let that exclusion grow (or shrink) with inflation, changing how much tax military retirees owe Georgia each year.

• Section 1 amends O.C.G.A. § 48-7-27(a) by adding paragraph (5.2), requiring the commissioner to establish rules for cost-of-living adjustments to the military retirement pay tax exclusion.
• Section 1 specifies the commissioner may use the Consumer Price Index as reported by the U.S. Bureau of Labor Statistics, the same index used for Social Security adjustments, or another federal index if more appropriate.
• Section 1 states that any adjustment must result in a proportional change to the amount of military retirement income excluded from Georgia taxable net income.
• Section 2 sets the effective date as July 1, 2025, applicable to taxable years beginning on or after January 1, 2026.
• Section 3 repeals any conflicting laws.

1. 2026-01-12Senate Recommitted (Senate)
2. 2025-02-28Senate Read Second Time (Senate)
3. 2025-02-27Senate Committee Favorably Reported (Senate)
4. 2025-01-27Senate Read and Referred (Senate)
5. 2025-01-17Senate Hopper (Senate)

• Michael Rhett (D, SD-033)Primary sponsor
• Ed Harbison (D, SD-015)
• Chuck Payne (R, SD-054)
• Timothy Bearden (R, SD-030)
• Billy Hickman (R, SD-004)
• Kenya Wicks (D, SD-034)
• Harold Jones (D, SD-022)
• Nabilah Islam Parkes (D, SD-007)
• Shawn Still (R, SD-048)
• Matt Brass (R, SD-006)
• Jason Anavitarte (R, SD-031)
• Emanuel Jones (D, SD-010)

• military retirement
• state income taxes
• veterans benefits
• tax exemptions
• cost-of-living adjustment