HB375: HB375 Income tax; exclude overtime compensation

Georgia currently taxes overtime pay the same as regular wages under the state income tax law (O.C.G.A. § 48-7-27). House Bill 375 would change that by excluding certain overtime compensation from a worker's taxable income. The exemption covers amounts paid to full-time hourly employees for hours worked beyond 40 in a week, as well as overtime paid under the federal Fair Labor Standards Act. Workers covered by the federal National Railway Labor Act would get a similar exemption based on overtime terms in their union contracts. The bill also requires employers to report to the Georgia Department of Revenue, on a monthly or quarterly basis, the total overtime pay and number of employees who received it. The department could ask for more information and would write rules to administer the exemption. The change would take effect July 1, 2025, and apply to tax years starting on or after January 1, 2026.

• Excludes overtime pay earned by full-time hourly employees for hours worked beyond 40 per week from Georgia state income tax, starting with tax years on or after January 1, 2026.
• Also excludes overtime compensation paid under the federal Fair Labor Standards Act of 1938 from state income tax.
• Creates a special rule for railway workers covered by the federal National Railway Labor Act, tying their exemption to overtime terms in their collective bargaining agreements.
• Requires every employer to report to the Georgia Department of Revenue the total overtime pay and number of employees who received it, on the same schedule as withholding tax returns.
• Gives the Department of Revenue authority to request additional information from employers and to write rules for administering the new exemption.

Full-time hourly employees in Georgia who earn overtime pay, employers who must track and report overtime data to the state, railway workers covered by federal labor agreements, and the Georgia Department of Revenue, which must administer the new reporting system and tax exemption.

Hourly workers who regularly work more than 40 hours a week would keep more of their overtime pay because it would no longer count as taxable income under Georgia law. Employers would face new recordkeeping and reporting duties tied to overtime wages.

• Section 1 amends O.C.G.A. § 48-7-27(a) to add paragraph (16), excluding overtime pay for hourly full-time employees working more than 40 hours a week from state taxable income, for tax years starting on or after January 1, 2026.
• Paragraph (16)(A) also excludes overtime compensation paid under the federal Fair Labor Standards Act of 1938.
• Paragraph (16)(B) applies a modified version of the exemption to employers governed by the federal National Railway Labor Act, based on overtime terms in collective bargaining agreements.
• Paragraph (16)(C) requires employers to report total overtime pay and affected employee counts to the Department of Revenue monthly or quarterly, matching withholding tax return deadlines.
• Paragraph (16)(D) authorizes the Department of Revenue to require additional employer information and to adopt rules implementing the exemption.
• Section 2 sets the effective date as July 1, 2025, applicable to tax years beginning on or after January 1, 2026.
• Section 3 repeals conflicting laws.

1. 2025-02-12House Second Readers (House)
2. 2025-02-11House First Readers (House)
3. 2025-02-10House Hopper (House)

• Tyler Smith (R, HD-018)Primary sponsor
• Steve Tarvin (R, HD-002)
• Alan Powell (R, HD-033)
• Martin Momtahan (R, HD-017)
• Stan Gunter (R, HD-008)
• Rob Leverett (R, HD-123)

• income tax
• overtime pay
• hourly workers
• tax exemptions
• employer reporting