HB 266: Income tax; exempt income received as personal compensation for full-time duty in the active military service of the United States

Georgia currently lets military retirees under 62 exclude a limited, tiered amount of their retirement pay (up to $17,500, with an additional $17,500 possible depending on other earned income) from state income tax. House Bill 266 replaces that tiered system with a flat exclusion of up to $65,000 for retirees under 65, removing the requirement to have other earned income to qualify for the larger amount. That change takes effect January 1, 2027. The bill separately rewrites the law enforcement foundation tax credit program (O.C.G.A. § 48-7-29.25). It lets a single foundation support multiple local law enforcement agencies or operate statewide, expands what donated money can pay for (technology, community engagement, multi-agency emergency response teams), keeps the $75 million yearly statewide cap but shifts how it is allocated in the second half of the year, extends the credit's expiration from 2027 to 2031, and eliminates the ability to carry unused credits into future tax years. Most of these changes take effect July 1, 2025, for tax years starting in 2026.

• Replaces the tiered military retirement income tax exclusion (up to $17,500, or up to $35,000 with qualifying earned income) with a flat exclusion of up to $65,000, effective for tax years beginning in 2027.
• Raises the age limit for the military retirement pay exclusion from under 62 to under 65.
• Allows a law enforcement foundation to support more than one local police or sheriff's agency, or to operate on a statewide basis, instead of being limited to a single agency.
• Expands what donated funds to law enforcement foundations can pay for, including technology purchases, community engagement activities, and costs of joint law enforcement/behavioral health emergency response teams.
• Extends the sunset date of the law enforcement foundation tax credit from December 31, 2027 to December 31, 2031.
• Removes the ability for taxpayers to carry unused law enforcement foundation tax credits forward into future tax years.

Military retirees under 65 who receive military retirement pay and file Georgia income taxes, individual and corporate taxpayers who donate to certified law enforcement foundations, local police and sheriff's offices affiliated with those foundations, and the Georgia Department of Revenue, which administers both tax provisions.

Military retirees would be able to exclude significantly more retirement income from Georgia taxes starting in 2027, lowering their state tax bills. Donors to law enforcement foundations would have more ways to direct their contributions and the program would run four more years, but they would lose the option to save unused credits for later tax years.

• Section 1 amends O.C.G.A. § 48-7-27(a)(5.1) to exclude up to $65,000 of military retirement pay from state income tax for individuals under 65, replacing the prior $17,500/$35,000 tiered structure.
• Section 1 specifies this exclusion cannot be combined with the separate exclusion in paragraph (5) of the same subsection.
• Section 2 amends O.C.G.A. § 48-7-29.25 to redefine 'law enforcement foundation' to include organizations supporting multiple agencies or statewide law enforcement, not just a single local unit.
• Section 2 expands 'qualified expenditures' to cover technology purchases, community engagement leases or services, and expenditures benefiting employees generally, not just officers.
• Section 2 keeps the $75 million aggregate annual tax credit cap and $3 million per-foundation contribution cap, but adds a mid-year (July 1 to December 31) preapproval process capped at 95 percent of the normal credit amount.
• Section 2 extends the tax credit program's expiration from tax years ending December 31, 2027 to December 31, 2031.
• Section 2 eliminates the three-year carry-forward of unused law enforcement foundation tax credits, stating no unused credit shall be allowed against future years.
• Section 3 sets the military retirement exclusion (Section 1) effective January 1, 2027, while the law enforcement foundation changes (Section 2) take effect July 1, 2025, for tax years beginning on or after January 1, 2026.

1. 2025-07-01Effective Date
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-73)
• David Clark (R, HD-100)
• Jesse Petrea (R, HD-166)
• Karen Mathiak (R, HD-82)
• Greg Dolezal (R, SD-27)

1. PassedHouse voteMarch 6, 2025

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

   PASSAGE: House Vote #264

2. PassedSenate voteMarch 21, 2025

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

   MOTION TO ENGROSS: HB 266, HB 426: Senate Vote #266

3. PassedSenate voteMarch 21, 2025

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

   PASSAGE BY SUBSTITUTE: Senate Vote #269

4. PassedHouse voteMarch 31, 2025

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

   Agree to Senate Sub as Am: House Vote #364

5. PassedSenate voteApril 2, 2025

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

   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 excused)

   Agree to Senate Amend to HAm to SSub: House Vote #419

• military retirement tax exemption
• income tax exclusions
• law enforcement foundations
• tax credits
• veterans