SB 2: State Income Tax; exclude tips from taxation

Georgia currently taxes tip income the same as other wages under state income tax law (O.C.G.A. § 48-7-27). This bill would add a new exemption so that tips employees receive, whether in cash, electronic payment, or noncash items like tickets, would no longer count as taxable income for Georgia state purposes, as long as the tips are already included in the person's federal adjusted gross income. To make this work, employers would have to report tip totals to the Georgia Department of Revenue. For 2025, employers must report total tips by January 31, 2026. Starting in 2026, employers must report tip data monthly or quarterly along with their withholding tax returns. The bill defines 'tips' broadly but excludes mandatory service charges like automatic gratuities. If passed, the law would take effect July 1, 2025, and apply retroactively to the entire 2025 tax year.

• Adds a new exemption to Georgia's income tax law (O.C.G.A. § 48-7-27) so that tips are excluded from state taxable income, as long as they are part of federal adjusted gross income.
• Requires employers to report total tips paid to employees to the Georgia Department of Revenue, starting with a report due January 31, 2026 for tax year 2025.
• Requires employers to submit tip data monthly or quarterly beginning in 2026, timed to match their regular withholding tax return deadlines.
• Defines 'tips' to include cash tips, electronic payments like credit or debit card tips, gift cards, noncash items of value, and tip-pooling arrangements, while excluding mandatory service charges.
• Allows the state revenue commissioner to require additional reporting information from employers as needed to carry out the tip exemption.
• Sets the effective date as July 1, 2025, applying retroactively to all tax years beginning on or after January 1, 2025.

Tipped workers in Georgia, such as restaurant servers, bartenders, and other service employees who receive cash or electronic tips, would see those tips excluded from state income tax. Employers of tipped workers would face new reporting duties to the Department of Revenue.

Tipped workers in Georgia would keep more of their income because tips would no longer be taxed at the state level, though tips would still count toward federal taxes. Employers would need new systems to track and report tip totals to the state on a regular schedule.

• Section 1 amends O.C.G.A. § 48-7-27(a) by adding paragraph (16), excluding tips included in federal adjusted gross income from Georgia taxable income.
• Paragraph (16)(B) requires employers to report total tips paid: once by January 31, 2026 for the 2025 tax year, then monthly or quarterly starting in 2026 alongside withholding tax filings.
• Paragraph (16)(C) defines 'tips' to include cash, electronic payments, noncash items, and tip-sharing arrangements, but excludes mandatory service charges like automatic gratuities.
• Section 2 sets the effective date as July 1, 2025, applying retroactively to tax years beginning on or after January 1, 2025.
• Section 3 repeals any conflicting laws.

1. 2026-01-12Senate Recommitted (Senate)
2. 2025-02-10Senate Read Second Time (Senate)
3. 2025-02-06Senate Committee Favorably Reported (Senate)
4. 2025-01-14Senate Read and Referred (Senate)
5. 2025-01-13Senate Hopper (Senate)

• Greg Dolezal (R, SD-27)Primary sponsor
• Brandon Beach (R, SD-21)
• Randy Robertson (R, SD-29)
• Steve Gooch (R, SD-51)
• Jason Anavitarte (R, SD-31)
• John F. Kennedy (R, SD-18)
• John Albers (R, SD-56)
• Carden Summers (R, SD-13)
• Mike Hodges (R, SD-3)
• Chuck Payne (R, SD-54)
• Drew Echols (R, SD-49)
• Sam Watson (R, SD-11)
• Max Burns (R, SD-23)
• Timothy Bearden (R, SD-30)
• Brian Strickland (R, SD-42)
• Lee Anderson (R, SD-24)
• Clint Dixon (R, SD-45)
• Shawn Still (R, SD-48)
• Bo Hatchett (R, SD-50)
• Marty Harbin (R, SD-16)
• Colton Moore (R, SD-53)

• state income tax
• tips and gratuities
• tax exemptions
• restaurant workers
• tax reporting