HB 375: Income tax; exclude overtime compensation

Currently, overtime pay earned by hourly employees in Georgia is taxed as ordinary income under state law. This bill would change that by adding a new exemption to Georgia's income tax code (O.C.G.A. § 48-7-27). Starting with tax years beginning on or after January 1, 2026, overtime compensation paid to full-time, hourly employees for work beyond 40 hours a week, including overtime required under the federal Fair Labor Standards Act, would no longer count as taxable income. The bill also covers railway workers under a separate federal law, applying the exemption based on overtime terms in their union contracts. To track how much overtime pay is being exempted, employers would have to report the total overtime amounts and number of employees receiving it to the Georgia Department of Revenue on a monthly or quarterly basis. The department would be allowed to write rules to administer the new exemption. The law would take effect July 1, 2025, but the tax exemption itself applies to income earned in 2026 and later.

• Exempts overtime pay earned by hourly, full-time employees for work beyond 40 hours a week from Georgia state income tax, starting in tax year 2026.
• Extends the same tax exemption to railway workers' overtime pay as defined in their collective bargaining agreements under the federal National Railway Labor Act.
• Requires every employer to report to the Georgia Department of Revenue the total overtime pay and number of employees who received it, on a monthly or quarterly basis.
• Gives the Department of Revenue authority to demand additional information from employers and to write rules for administering the new tax exemption.
• Sets the law's effective date as July 1, 2025, while making the actual tax exemption apply only to income earned in tax years starting on or after January 1, 2026.

Hourly, full-time workers in Georgia who earn overtime pay, railway employees covered by union collective bargaining agreements, employers who must track and report overtime data, and the Georgia Department of Revenue, which must collect that data and write new rules.

Hourly workers who regularly work more than 40 hours a week would keep more of their overtime earnings because that pay would no longer be taxed by the state. Employers would face new monthly or quarterly reporting duties, and the state would collect less income tax revenue from overtime wages.

• Section 1 adds a new paragraph (16) to O.C.G.A. § 48-7-27 excluding overtime pay for hourly full-time employees, including overtime under the federal Fair Labor Standards Act, from Georgia taxable income.
• Subparagraph (B) extends the exemption to railway workers governed by the federal National Railway Labor Act, based on overtime terms in applicable collective bargaining agreements.
• Subparagraph (C) requires employers to report total overtime pay and the number of employees receiving it to the Department of Revenue monthly or quarterly, on the same schedule as withholding tax returns.
• Subparagraph (D) allows the Department of Revenue to request additional information and adopt rules to administer the exemption.
• Section 2 sets the effective date as July 1, 2025, with the exemption applying to tax 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)

• 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
• tax exemption
• hourly workers
• employer reporting