HB 388: Income tax; exempt income received as personal compensation for active duty service while stationed outside Georgia

Under current Georgia law, income earned by members of the U.S. armed forces on active duty can be subject to state income tax even when a service member is stationed outside Georgia. This bill changes that by adding a new exemption to the state's income tax code (O.C.G.A. § 48-7-27), removing personal compensation for active duty service performed while stationed outside Georgia from a person's taxable net income. The bill amends Article 2 of Chapter 7 of Title 48 of the Official Code of Georgia, which governs how the state computes income tax. If enacted, the change would take effect July 1, 2025, but would only apply to taxable years beginning on or after January 1, 2026, meaning the first tax returns affected would be those filed for the 2026 tax year.

• Adds a new exemption to Georgia's income tax law (O.C.G.A. § 48-7-27) for pay earned from active duty military service performed while stationed outside Georgia.
• Excludes that active duty compensation from a taxpayer's computed net income, lowering the amount of income subject to state tax.
• Sets the law to take effect July 1, 2025, but applies it only to tax years starting on or after January 1, 2026.
• Repeals any existing state laws that conflict with the new exemption.

Georgia residents serving on active duty in the U.S. armed forces who are stationed outside Georgia would see their military pay for that service exempted from state income tax. The Georgia Department of Revenue would need to implement the new exemption category.

Service members stationed outside Georgia would keep more of their active duty pay because that income would no longer count toward their Georgia taxable income, potentially lowering their state tax bills starting with returns for the 2026 tax year.

• Section 1 adds new paragraph (12.6) to O.C.G.A. § 48-7-27(a), exempting personal compensation for active duty service performed while stationed outside Georgia from taxable net income.
• Section 2 sets an effective date of July 1, 2025, but limits applicability to taxable years beginning on or after January 1, 2026.
• Section 3 repeals any conflicting laws, a standard clause ensuring the new exemption takes precedence over inconsistent provisions.

1. 2025-02-13House Second Readers (House)
2. 2025-02-12House First Readers (House)
3. 2025-02-11House Hopper (House)

• David Clark (R, HD-100)Primary sponsor
• Josh Bonner (R, HD-073)
• Bill Hitchens (R, HD-161)
• Reynaldo Martinez (R, HD-111)
• Charles Cannon (R, HD-172)
• Brad Thomas (R, HD-021)

• income tax
• military pay
• veterans and service members
• tax exemptions