HB229: HB229 Sales and use tax; exempt materials used in construction of capital outlay projects for educational purposes; provisions

This bill, as rewritten by a Senate committee substitute, has nothing to do with its original title about sales tax exemptions for school construction materials. Instead it amends Georgia's income tax law (O.C.G.A. § 48-7-27) to let taxpayers exclude certain overtime pay and cash tips from their state taxable income. For tax years 2026 through 2028, hourly full-time employees could exclude qualified overtime pay up to $25,000 (married filing jointly) or $12,500 (other filers), with the excludable amount shrinking as income rises above $300,000 or $150,000. Starting in 2026, workers in tipped occupations recognized by the U.S. Treasury could exclude up to $25,000 in cash tips, with the same income-based phase-out, though this tip exclusion has no stated end date in the text while the overtime exclusion is set to expire December 31, 2028. Employers must report overtime and tip totals to the Georgia Department of Revenue periodically, and the department can write rules to administer both provisions.

• Lets hourly full-time employees exclude qualified overtime pay from Georgia income tax for 2026 through 2028, up to $25,000 for joint filers or $12,500 for others.
• Reduces the overtime tax break by $100 for every $1,000 a filer's federal adjusted gross income exceeds $300,000 (joint) or $150,000 (other filers).
• Lets workers in recognized tipped occupations exclude up to $25,000 in cash tips from Georgia income tax starting in 2026, subject to the same income phase-out.
• Requires employers to report to the Department of Revenue, on a monthly or quarterly basis, the total overtime pay and cash tips paid and how many employees received them.
• Automatically repeals the overtime pay exclusion on December 31, 2028, while the cash tips exclusion section is also listed as repealed on that date.
• Gives the Department of Revenue authority to write rules and require additional information from employers to administer both exclusions.

Hourly employees who work overtime and workers in occupations that customarily receive tips, such as restaurant and service workers, would benefit from the tax exclusions. Employers across Georgia would face new reporting duties to the Department of Revenue, which would also administer the program.

Eligible hourly workers and tipped employees could see a lower state income tax bill on their overtime pay and tips for a limited period, while higher earners would see the benefit shrink. Employers would need new payroll reporting processes to track and submit this data to the state.

• Section 1 amends O.C.G.A. § 48-7-27(a) by adding paragraph (16), excluding qualified overtime compensation (as defined by federal Internal Revenue Code Section 225) from Georgia taxable income for 2026-2028.
• The overtime exclusion caps at $25,000 for married joint filers and $12,500 for single filers, head of household, or married filing separately, phased out above $300,000 or $150,000 in federal adjusted gross income.
• A special rule extends the overtime exclusion to railway workers' hourly overtime pay as defined in their collective bargaining agreements.
• Paragraph (17) excludes up to $25,000 in cash tips from taxable income starting in 2026, with the same income-based phase-out and employer reporting requirements.
• Cash tips are defined narrowly to require voluntary payment without penalty for nonpayment, and only for occupations with a federal Treasury Tipped Occupation Code.
• Employers must report overtime and tip totals and employee counts to the Department of Revenue on a monthly or quarterly schedule tied to withholding tax return deadlines.
• The overtime exclusion (paragraph 16) is set to expire December 31, 2028; the tips provision (paragraph 17) also states it stands repealed on that date.
• Section 2 repeals all conflicting laws.

1. 2026-03-27Senate Passed/Adopted By Substitute (Senate)
2. 2026-03-27Senate Third Read (Senate)
3. 2026-03-27Senate Engrossed (Senate)
4. 2026-03-25Senate Read Second Time (Senate)
5. 2026-03-25Senate Committee Favorably Reported By Substitute (Senate)
6. 2025-03-04Senate Read and Referred (Senate)
7. 2025-03-03House Passed/Adopted By Substitute (House)
8. 2025-03-03House Third Readers (House)

• Yasmin Neal (D, HD-079)Primary sponsor
• Demetrius Douglas (D, HD-078)
• Alan Powell (R, HD-033)
• Steve Tarvin (R, HD-002)
• Mitchell Scoggins (R, HD-014)
• Buddy DeLoach (R, HD-167)
• Greg Dolezal (R, SD-027)

1. PassedHouse voteMarch 3, 2025

   169 yea, 2 nay (2 not voting, 7 absent)

   Passage: House Vote #142

2. PassedSenate voteMarch 27, 2026

   31 yea, 18 nay (4 not voting, 1 absent)

   Motion To Engross: Hb 229, Hb 583, Hb 960, Hb 1070: Senate Vote #826

3. PassedSenate voteMarch 27, 2026

   51 yea, 0 nay (2 not voting, 1 absent)

   Passage By Substitute: Senate Vote #829

• income tax
• overtime pay
• tip income
• tax exemptions
• payroll reporting