HB 361: Income tax; exempt all retirement income received as retirement benefits in the armed forces of the United States or the reserve components

Under current Georgia law, retirees under 62 can exclude only up to $17,500 of military retirement pay from state income tax, with an extra $17,500 exclusion available if they also have enough earned income. This bill rewrites that law (O.C.G.A. § 48-7-27) so that all retirement income from service in the U.S. armed forces or its reserve components is excluded from Georgia taxable income, regardless of the retiree's age or how much other income they earn. The bill removes the special rule letting each spouse in a married couple separately claim the old exclusion, since the new exclusion is unlimited and applies to whoever receives the retirement pay. It also keeps this exclusion separate from any other income adjustments in the tax code. The change would take effect July 1, 2025, and apply to tax years starting on or after January 1, 2026.

• Removes the current $17,500 and $35,000 dollar caps on excluding military retirement pay from Georgia income tax, making the exclusion unlimited.
• Eliminates the current age-62 cutoff, so military retirees of any age can exclude all their retirement pay, not just those under 62.
• Removes the requirement that a retiree have over $17,500 in other Georgia earned income to claim the larger exclusion amount.
• Eliminates the separate rule letting each spouse in a married couple individually claim the old capped exclusion, since the new exclusion is unlimited.
• Keeps the military retirement exclusion separate from and in addition to other income tax adjustments in Georgia law.
• Sets the change to take effect July 1, 2025, applying to tax years beginning on or after January 1, 2026.

Military retirees living in Georgia who receive retirement pay from the U.S. armed forces or reserve components, including those over and under age 62, and married couples where one or both spouses receive military retirement income.

Military retirees in Georgia would no longer pay state income tax on any of their retirement pay, instead of just the first $17,500 to $35,000 under current rules. This could lower state tax bills for many veterans, particularly older retirees and those with higher retirement incomes.

• Section 1 amends O.C.G.A. § 48-7-27(a)(5.1)(A) to exclude all military retirement income from Georgia taxable income, removing the prior $17,500 base cap, the age-62 limit, and the earned-income requirement for the extra $17,500 exclusion.
• Section 1 also removes former subsection (B), which had let each spouse in a married couple separately claim up to the capped exclusion amount.
• Section 1 retains language stating the exclusion applies in addition to, and does not affect, other income adjustments allowed elsewhere in the tax code.
• Section 2 sets the effective date as July 1, 2025, applicable to taxable years beginning on or after January 1, 2026.
• Section 3 repeals any conflicting laws.

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

• Bethany Ballard (R, HD-147)Primary sponsor
• Josh Bonner (R, HD-073)
• David Clark (R, HD-100)
• Carmen Rice (R, HD-139)
• Teddy Reese (D, HD-140)
• Shaw Blackmon (R, HD-146)

• military retirement pay
• income tax exemption
• veterans benefits
• Georgia state taxes