HB 880: Income tax; reduce tax rate that may be reached under certain conditions

Georgia has been phasing down its flat income tax rate under a law that stops the reductions once the rate hits 4.99 percent, with the schedule delayed in years when state revenue growth or reserves fall short. This bill lowers that final target to 3.99 percent and links future rate cuts to whether the standard deduction is also increasing on schedule. The bill also phases in higher deductions: the standard deduction would rise from $24,000 to $36,000 for joint filers and from $12,000 to $18,000 for single filers and heads of household, in steps starting in 2027, subject to the same revenue-based delay rules. The dependent exemption would climb from $4,000 to $6,000 in $200 annual steps. The retirement income exclusion for people 65 and older would rise from $65,000 to $70,000. The bill also raises the ceiling on Georgia's Revenue Shortfall Reserve from 15 percent to 20 percent of the prior year's net revenue and lets the Governor release reserve funds above 8 percent (up from 4 percent) for lawmakers to appropriate. The changes take effect January 1, 2027.

• Lowers the eventual floor for Georgia's income tax rate cuts from 4.99 percent to 3.99 percent, phased in at 0.10 percent per year.
• Ties future income tax rate reductions to whether standard deduction increases are also happening on schedule, replacing the old separate delay rules.
• Phases in a higher dependent exemption from $4,000 to $6,000 in $200 annual increments starting in 2027.
• Phases in higher standard deductions, from $24,000 to $36,000 for joint filers and $12,000 to $18,000 for single filers and heads of household, starting in 2027.
• Raises the retirement income exclusion for taxpayers 65 and older from $65,000 to $70,000 starting in 2027.
• Raises the cap on the state's Revenue Shortfall Reserve from 15 percent to 20 percent of net revenue and allows the Governor to release reserve funds above 8 percent (previously 4 percent) for appropriation.

Georgia individual income taxpayers generally, including married couples and single filers who use the standard deduction, parents claiming dependent exemptions, and retirees 65 and older who exclude retirement income from state taxes. The Governor, the Office of Planning and Budget, and the General Assembly are also affected through the changed budget reserve and reporting rules.

If enacted, most Georgia taxpayers would eventually see a lower income tax rate and larger deductions, meaning less state income tax withheld from paychecks over several years, though the increases can be delayed if state revenue growth or reserve levels fall short of set benchmarks.

• Section 1 amends O.C.G.A. § 48-7-20 to change the final target income tax rate from 4.99 percent to 3.99 percent and removes the old three-factor delay test in favor of linking rate cuts to standard deduction increases.
• Section 2 amends O.C.G.A. § 48-7-26 to raise the dependent personal exemption from $4,000 to $6,000 in $200 annual increments starting January 1, 2027.
• Section 3 amends O.C.G.A. § 48-7-27 to raise standard deductions (joint: $24,000 to $36,000; single/head of household: $12,000 to $18,000) starting 2027, subject to delays tied to revenue estimates, net revenue trends, and reserve levels as of December 1 each year.
• Section 3 also raises the retirement income exclusion for taxpayers 65 and older from $65,000 to $70,000 for taxable years beginning on or after January 1, 2027.
• Section 4 amends O.C.G.A. § 45-12-93 to raise the Revenue Shortfall Reserve cap from 15 percent to 20 percent of net revenue and raise the threshold for gubernatorial release of reserve funds from 4 percent to 8 percent, and allows surplus above 20 percent to be used for tax relief.
• Section 5 sets the effective date as January 1, 2027, applicable to taxable years beginning on or after that date.

1. 2026-03-09Senate Read and Referred (Senate)
2. 2026-03-06House Passed/Adopted By Substitute (House)
3. 2026-03-06House Third Readers (House)
4. 2026-02-26House Committee Favorably Reported By Substitute (House)
5. 2026-02-17House Withdrawn, Recommitted (House)
6. 2026-02-11House Committee Favorably Reported By Substitute (House)
7. 2025-04-02House Second Readers (House)
8. 2025-03-31House First Readers (House)

• Shaw Blackmon (R, HD-146)Primary sponsor
• Trey Kelley (R, HD-016)
• Ron Stephens (R, HD-164)
• Mark Newton (R, HD-127)
• Charles Martin (R, HD-049)
• Bruce Williamson (R, HD-112)

1. PassedHouse voteMarch 6, 2026

   102 yea, 69 nay (1 not voting, 5 absent)

   Passage: House Vote #663

• income taxes
• standard deduction
• retirement income tax exclusion
• state budget reserve
• tax rate cuts