HB 826: Overtime Income Tax Exemption Act; enact

Under current Georgia law, overtime pay counted toward federal adjusted gross income is generally subject to state income tax like any other wages. This bill, called the Overtime Income Tax Exemption Act, would let full-time hourly employees exclude up to $10,000.00 of overtime compensation (pay for work beyond 40 hours in a week) from their taxable income each year, as long as that money is part of their federal adjusted gross income and would otherwise be taxed by Georgia. Starting with the 2026 tax year, employers would have to report to the Georgia Department of Revenue how much overtime pay they gave employees and how many employees received it, on the same schedule as their withholding tax filings. The department would then report the exemption's fiscal impact to the General Assembly by January 31, 2028, so lawmakers can adjust tax rates or find other revenue if the exemption reduces state income. The exemption would automatically expire on December 31, 2030 unless lawmakers act to extend it. The law would take effect July 1, 2025, applying to tax years starting on or after January 1, 2026.

• Creates a new exclusion letting full-time hourly employees exclude up to $10,000.00 of overtime pay per year from Georgia taxable income.
• Requires the overtime income to already be part of the worker's federal adjusted gross income to qualify for the state exclusion.
• Requires employers to report overtime pay totals and employee counts to the Georgia Department of Revenue monthly or quarterly, matching withholding tax deadlines.
• Requires the Department of Revenue to report the exemption's fiscal impact to the General Assembly by January 31, 2028.
• Sets the exemption to automatically repeal on December 31, 2030 unless the General Assembly extends or modifies it beforehand.

Full-time hourly employees in Georgia who work overtime hours would see part of that pay excluded from state income tax. Employers of hourly workers face new monthly or quarterly reporting duties to the Department of Revenue, which must also compile and report data to the General Assembly.

Hourly workers who regularly log overtime could keep more of that pay by avoiding state income tax on up to $10,000.00 of it annually. Employers would take on new payroll reporting obligations, and the state would need to track and eventually address any resulting drop in tax revenue.

• Section 1 titles the act the 'Overtime Income Tax Exemption Act.'
• Section 2 states the purpose: reducing the tax burden on overtime earners and promoting fairness for hourly employees.
• Section 3 amends O.C.G.A. § 48-7-27(a) by adding paragraph (16), excluding up to $10,000.00 of qualifying overtime pay from taxable income for full-time hourly employees.
• Paragraph (16)(B) requires employers to report overtime pay totals and affected employee counts to the Department of Revenue starting with the 2026 tax year.
• Paragraph (16)(C) requires the department to report the exemption's fiscal impact to the General Assembly by January 31, 2028, so lawmakers can respond to any revenue shortfall.
• Paragraph (16)(D) sets an automatic repeal date of December 31, 2030 for the exemption.
• Section 4 sets the effective date as July 1, 2025, applying to tax years beginning on or after January 1, 2026.

1. 2025-03-28House Second Readers (House)
2. 2025-03-27House First Readers (House)
3. 2025-03-25House Hopper (House)

• Tanya F. Miller (D, HD-62)Primary sponsor
• Sam Park (D, HD-107)
• Tyler Paul Smith (R, HD-18)
• Spencer Frye (D, HD-122)
• Bill Werkheiser (R, HD-157)

• income tax
• overtime pay
• hourly workers
• tax exemptions
• state revenue