SB 474: State Income Tax; overtime compensation from taxation; exclude

Georgia currently taxes overtime pay as regular income under the state's income tax law (O.C.G.A. § 48-7-27). This bill would change that by excluding from taxable income any amount an hourly, full-time employee earns for working more than 40 hours a week, as well as overtime pay calculated under the federal Fair Labor Standards Act of 1938. For railway workers covered by the federal National Railway Labor Act, the exemption would instead follow the overtime definitions in their union contracts. Starting with tax years beginning on or after January 1, 2027, employers would have 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 tied to existing withholding tax filing deadlines. The department could require more information and would write rules to administer the new exemption. The law would take effect July 1, 2026.

• Excludes overtime pay earned by hourly, full-time employees for hours worked beyond 40 per week from Georgia's state income tax, starting in tax year 2027.
• Also excludes overtime compensation calculated under the federal Fair Labor Standards Act of 1938 from state taxable income.
• Sets a special rule for railway employers, applying the exemption based on overtime definitions in applicable collective bargaining agreements.
• Requires every employer to report to the Department of Revenue the total overtime pay and the number of employees who received it, on a monthly or quarterly schedule.
• Gives the Department of Revenue authority to demand additional information and adopt rules to administer the exemption.

Hourly, full-time employees in Georgia who work overtime, all employers who pay overtime and must now file new reports, railway employers and unionized railway workers with collective bargaining agreements, and the Georgia Department of Revenue, which must build reporting rules and process the new filings.

Hourly workers who regularly work more than 40 hours a week would keep more of their overtime pay because it would no longer count toward state taxable income. Employers would take on new recordkeeping and reporting duties tied to their existing withholding tax filing deadlines.

• Section 1 amends O.C.G.A. § 48-7-27 to add new paragraph (16), excluding overtime pay for hourly, full-time employees working over 40 hours a week from state taxable income beginning with tax years starting on or after January 1, 2027.
• Subparagraph (A) also covers overtime compensation paid under the federal Fair Labor Standards Act of 1938.
• Subparagraph (B) applies a different standard for employers covered by the federal National Railway Labor Act, using overtime definitions from collective bargaining agreements.
• Subparagraph (C) requires employers to report total overtime pay and employee counts to the Department of Revenue monthly or quarterly, matching withholding tax return deadlines.
• Subparagraph (D) authorizes the Department of Revenue to request additional employer information and to issue rules implementing the exemption.
• Section 2 sets the effective date as July 1, 2026, applying to tax years beginning on or after January 1, 2027.

1. 2026-02-09Senate Read and Referred (Senate)
2. 2026-02-06Senate Hopper (Senate)

• Randy Robertson (R, SD-029)Primary sponsor
• Bo Hatchett (R, SD-050)
• Blake Tillery (R, SD-019)
• Brian Strickland (R, SD-042)
• Ricky Williams (R, SD-025)
• Steve Gooch (R, SD-051)
• Greg Dolezal (R, SD-027)
• Matt Brass (R, SD-006)
• Russ Goodman (R, SD-008)
• Shawn Still (R, SD-048)

• state income tax
• overtime pay
• hourly workers
• tax exemptions
• employer reporting