SB474: SB474 State Income Tax; overtime compensation from taxation; exclude

Right now, overtime pay earned by hourly workers in Georgia is taxed as regular income under the state's income tax law (O.C.G.A. § 48-7-27). This bill would add a new exemption so that, for tax years beginning on or after January 1, 2027, amounts an hourly full-time employee earns for working more than 40 hours a week, and overtime paid under the federal Fair Labor Standards Act, would not count as taxable income for Georgia purposes. For railroad workers covered by the federal National Railway Labor Act, the exemption would instead apply to whatever counts as overtime under their union contracts. Employers would have to report to the Georgia Department of Revenue, on a monthly or quarterly basis, how much overtime pay they paid out and how many employees received it. The department could require more information and would write rules to administer the exemption. The law would take effect July 1, 2026, and apply to tax years starting in 2027.

• Exempts overtime pay earned by hourly full-time employees, including pay required under the federal Fair Labor Standards Act, from Georgia state income tax.
• Creates a special rule for railroad employers under the federal National Railway Labor Act, basing the tax exemption on overtime terms in their collective bargaining agreements.
• Requires every employer to report to the Georgia Department of Revenue the total overtime pay and number of employees who received it, on a monthly or quarterly schedule.
• Gives the Department of Revenue authority to demand additional information from employers and to write rules implementing the exemption.
• Sets the law's effective date as July 1, 2026, applying to tax years beginning on or after January 1, 2027.

Hourly full-time workers in Georgia who earn overtime pay, railroad employees covered by collective bargaining agreements under federal railway labor law, and all Georgia employers, who must track and report overtime pay data to the Department of Revenue.

Hourly workers who regularly work more than 40 hours a week would keep more of their overtime pay because it would no longer be subject to Georgia income tax starting in 2027. Employers would face new recordkeeping and reporting duties tied to overtime pay.

• Section 1 amends O.C.G.A. § 48-7-27(a) to add a new paragraph (16) excluding overtime pay for hourly full-time employees from taxable net income, effective for tax years starting January 1, 2027.
• Subparagraph (A) covers overtime pay under the federal Fair Labor Standards Act of 1938 for hours worked beyond 40 per week.
• Subparagraph (B) creates a special exemption rule for employers under the federal National Railway Labor Act, based on overtime terms in collective bargaining agreements.
• Subparagraph (C) requires employers to report total overtime pay and affected employee counts to the Department of Revenue monthly or quarterly, due with withholding tax returns.
• Subparagraph (D) authorizes the Department of Revenue to require more employer information and adopt rules to administer the exemption.
• Section 2 sets the effective date as July 1, 2026, applicable 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 requirements