HB 229: Sales and use tax; exempt materials used in construction of capital outlay projects for educational purposes; provisions

This bill, as rewritten by the Senate Committee on Finance, no longer deals with sales tax exemptions for school construction materials as its title suggests. Instead it amends Georgia's income tax law (O.C.G.A. § 48-7-27) to exclude certain overtime pay and cash tips from state taxable income. For tax years 2026 through 2028, hourly full-time employees could exclude qualified overtime compensation up to $25,000 (married filing jointly) or $12,500 (other filers) from their Georgia taxable income, with the amount phased down for higher earners. Starting in 2026, workers in tipped occupations could similarly exclude up to $25,000 in cash tips, also phased out for higher incomes, through the end of 2028. Employers would have to report overtime and tip totals to the Georgia Department of Revenue on a regular schedule, and both exclusions automatically expire (are repealed) on December 31, 2028.

• Excludes qualified hourly overtime pay from Georgia income tax for 2026-2028, up to $25,000 for joint filers or $12,500 for single filers, phased down for higher incomes.
• Excludes up to $25,000 in cash tips from Georgia income tax starting in 2026 through 2028, also phased down above certain income levels.
• Requires employers to report to the Georgia Department of Revenue the total overtime pay and tip amounts paid and the number of employees receiving them, on a monthly or quarterly basis.
• Gives the Department of Revenue authority to demand additional information from employers and to write rules implementing these exclusions.
• Sets both tax exclusions to automatically expire (be repealed) on December 31, 2028.
• Defines 'cash tips' and 'occupation that customarily and regularly receives tips' by reference to federal tax and Treasury tip-occupation codes.

Hourly full-time employees who earn overtime pay, workers in tipped occupations such as restaurant and service workers, employers who must track and report this compensation to the state, and the Georgia Department of Revenue, which administers the new exclusions and reporting rules.

Eligible workers would see less of their overtime pay and tips counted as taxable income on their Georgia returns for a three-year window, potentially lowering their state tax bills. Employers would face new state reporting duties, and the tax breaks are set to disappear automatically at the end of 2028 unless lawmakers act again.

• Section 1 adds paragraph (16) to O.C.G.A. § 48-7-27(a), excluding qualified overtime compensation for hourly workers, capped at $25,000 (joint) or $12,500 (other filers), for tax years 2026-2028.
• The overtime exclusion phases out by $100 for every $1,000 a filer's adjusted gross income exceeds $300,000 (joint) or $150,000 (other filers).
• A special rule extends the overtime exclusion to railway employees' hourly overtime as defined in their collective bargaining agreements.
• Employers must report total overtime compensation and employee counts to the Department of Revenue monthly or quarterly, with a one-time year-end option for 2026.
• Section 1 also adds paragraph (17), excluding up to $25,000 in cash tips per year starting in 2026, phased out under the same income thresholds as the overtime exclusion.
• Cash tips are defined to require voluntary payment with no penalty for nonpayment, and tipped occupations are defined using federal Treasury Tipped Occupation Codes.
• Both the overtime and tips exclusions are set to stand repealed on December 31, 2028.
• Section 2 repeals any 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