HB 1370: Income tax; exclude a portion of overtime compensation and cash tips

Right now, overtime pay and cash tips are treated as ordinary taxable income under Georgia's income tax law. This bill would carve out two temporary tax breaks. For tax years 2026 through 2028, full-time hourly employees could exclude up to $2,500 a year of pay earned for hours worked beyond 40 a week, including overtime paid under the federal Fair Labor Standards Act. Workers who receive cash tips could also exclude up to $2,500 a year in tips starting in 2026, also through 2028. Employers would have to report to the Georgia Department of Revenue, on a monthly or quarterly basis, the total overtime and tip amounts paid and how many employees received them, mostly on the same schedule as their withholding tax filings. Both new tax breaks are set to automatically expire (repeal) on December 31, 2028. The changes would take effect July 1, 2026, applying to tax years starting on or after January 1, 2026.

• Excludes up to $2,500 per year of overtime pay from Georgia taxable income for full-time hourly employees, for tax years 2026 through 2028.
• Excludes up to $2,500 per year in cash tips from Georgia taxable income, starting in 2026 and also expiring after 2028.
• Requires employers to report total overtime and tip payments and employee counts to the Department of Revenue on a monthly or quarterly basis.
• Gives the Department of Revenue authority to demand additional information from employers and to write rules for administering both exclusions.
• Sets both new tax breaks to automatically repeal on December 31, 2028 unless extended.
• Sets a special overtime rule for railway employers covered by the federal National Railway Labor Act, tying the exclusion to collective bargaining agreement definitions.

Hourly full-time employees who work overtime, tipped workers such as restaurant and service industry staff, employers who must track and report overtime and tip payments, and the Georgia Department of Revenue, which must create reporting forms and enforcement rules.

Eligible workers could keep more of their overtime pay and tips instead of paying state income tax on them, up to $2,500 each per year. Employers would face new monthly or quarterly reporting duties, and the tax breaks would disappear automatically after 2028 unless lawmakers act again.

• Section 1 amends O.C.G.A. § 48-7-27(a) by adding paragraph (16), excluding up to $2,500 of overtime pay for hourly full-time employees for tax years 2026 to 2028.
• Paragraph (16)(B) applies a modified rule for railway employers under the federal National Railway Labor Act, based on collective bargaining agreement definitions of overtime.
• Paragraph (16)(C) requires employers to report total overtime pay and affected employee counts to the Department of Revenue on the withholding tax filing schedule.
• Paragraph (16)(E) repeals the overtime exclusion on December 31, 2028.
• Paragraph (17) adds a separate exclusion of up to $2,500 for cash tips received starting in tax year 2026, with similar employer reporting duties.
• Paragraph (17)(D) defines 'cash tips' and 'occupation that customarily and regularly receives tips' by reference to federal Treasury Tipped Occupation Codes and Internal Revenue Code Section 63 exclusions.
• Paragraph (17)(E) repeals the cash tips exclusion on December 31, 2028.
• Section 2 sets the effective date as July 1, 2026, applying to taxable years beginning on or after January 1, 2026.

1. 2026-03-06House Committee Favorably Reported By Substitute (House)
2. 2026-02-19House Second Readers (House)
3. 2026-02-18House First Readers (House)
4. 2026-02-18House Hopper (House)

• John Carson (R, HD-46)Primary sponsor
• Shaw Blackmon (R, HD-146)

• income tax
• overtime pay
• tip income
• tax exemptions
• employer reporting requirements