HB266: HB266 Income tax; exempt income received as personal compensation for full-time duty in the active military service of the United States

Georgia currently lets veterans exclude some military retirement pay from state income tax if they are under 62 and meet certain earned income conditions. This bill rewrites that rule in O.C.G.A. § 48-7-27, raising the age limit to under 65, removing the flat $17,500 cap on the base exclusion, and changing the earned income test so it applies as long as total qualifying income does not exceed $65,000. That change takes effect January 1, 2027. The bill separately rewrites the tax credit for donations to law enforcement foundations (O.C.G.A. § 48-7-29.25). It broadens which foundations can qualify, including those serving multiple neighboring agencies or statewide law enforcement support, adds new allowed uses for donated funds such as community engagement programs and behavioral health emergency response teams, lowers the credit cap for corporations to 75 percent of their tax liability, extends the program through 2031, and eliminates the ability to carry forward unused credits to future tax years. This part takes effect July 1, 2025, for tax years starting in 2026.

• Raises the age threshold for the military retirement income tax exclusion from under 62 to under 65 years old, starting with the 2027 tax year.
• Removes the flat $17,500 cap on the base military retirement income exclusion and ties eligibility to a new $65,000 earned income ceiling.
• Expands which nonprofit law enforcement foundations can qualify for the tax credit program, including those covering multiple neighboring agencies or statewide support.
• Adds new allowed uses for donated funds, including community engagement spending and joint law enforcement/behavioral health emergency response teams.
• Lowers the maximum credit for corporations and other entities from their prior cap to 75 percent of their income tax liability.
• Eliminates the option to carry forward unused law enforcement foundation tax credits to future tax years and extends the program's sunset date from 2027 to 2031.

Retired members of the U.S. armed forces and reserve components living in Georgia, individual and corporate taxpayers who donate to local law enforcement foundations, the sheriff's offices and police departments affiliated with those foundations, and the Georgia Department of Revenue, which administers both tax provisions.

Veterans would see changes to how much of their retirement pay is shielded from Georgia income tax and at what age. Donors to police and sheriff support foundations would face a new 75 percent cap if they are corporations, lose the ability to carry unused credits forward, and have more foundations and spending categories to choose from.

• Section 1 rewrites O.C.G.A. § 48-7-27(a)(5.1) to raise the military retirement income exclusion's age limit from under 62 to under 65 and replace the $17,500 earned income threshold with a $65,000 ceiling.
• Section 1 takes effect January 1, 2027, and applies to tax years beginning on or after that date.
• Section 2 rewrites O.C.G.A. § 48-7-29.25 to let law enforcement foundations qualify if they serve multiple neighboring agencies or provide statewide support, not just a single local unit.
• Section 2 adds community engagement spending and joint law enforcement/behavioral health emergency response team costs to the list of qualified expenditures foundations may fund.
• Section 2 caps corporate and other entity tax credits at 75 percent of income tax liability and removes the ability to carry forward unused credits to future years.
• Section 2 extends the program's sunset date from December 31, 2027 to December 31, 2031 while keeping the $75 million annual aggregate credit limit and $3 million per-foundation contribution limit.
• Section 3 sets the general effective date as July 1, 2025, applicable to tax years beginning on or after January 1, 2026, except for Section 1's later 2027 effective date.

1. 2025-05-13Effective Date 2025-07-01
2. 2025-05-13Act 181
3. 2025-05-13House Date Signed by Governor (House)
4. 2025-04-10House Sent to Governor (House)
5. 2025-04-04House Agreed Senate Amend or Sub (House)
6. 2025-04-02Senate Agreed House Amend or Sub As Amended (Senate)
7. 2025-03-31House Agreed Senate Amend or Sub As Amended (House)
8. 2025-03-21Senate Passed/Adopted By Substitute (Senate)

• Steven Sainz (R, HD-180)Primary sponsor
• Bethany Ballard (R, HD-147)
• Josh Bonner (R, HD-073)
• David Clark (R, HD-100)
• Jesse Petrea (R, HD-166)
• Karen Mathiak (R, HD-082)
• Greg Dolezal (R, SD-027)

1. PassedHouse voteMarch 6, 2025

   171 yea, 0 nay (2 not voting, 7 absent)

   Passage: House Vote #264

2. PassedSenate voteMarch 21, 2025

   32 yea, 22 nay (1 not voting, 1 absent)

   Motion To Engross: Hb 266, Hb 426: Senate Vote #266

3. PassedSenate voteMarch 21, 2025

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

   Passage By Substitute: Senate Vote #269

4. PassedHouse voteMarch 31, 2025

   164 yea, 0 nay (5 not voting, 11 absent)

   Agree To Senate Sub As Am: House Vote #364

5. PassedSenate voteApril 2, 2025

   52 yea, 0 nay (4 not voting, 0 absent)

   Agree To House Amendment To Senate Substitute As Amended: Senate Vote #412

6. PassedHouse voteApril 4, 2025

   167 yea, 0 nay (3 not voting, 10 absent)

   Agree To Senate Amend To Ham To Ssub: House Vote #419

• military retirement tax exemption
• veterans benefits
• law enforcement funding
• income tax credits
• Georgia tax law