HB1370: HB1370 Income tax; exclude a portion of overtime compensation and cash tips

Georgia currently taxes overtime pay and cash tips as ordinary income. This bill would change that for a limited period. Starting with tax years beginning January 1, 2026, hourly full-time employees could exclude up to $2,500 of pay earned for hours worked beyond 40 a week, and up to $2,500 in cash tips, from their state taxable income. The overtime exclusion runs through the end of 2028 and then automatically repeals. The cash tips exclusion also repeals at the end of 2028. Employers would have to report to the Georgia Department of Revenue, on a monthly or quarterly basis, the total overtime and tip amounts paid and how many employees received them, with special rules for the first year. The department can write additional rules to administer the program. The law would take effect July 1, 2026, but apply retroactively to income earned starting January 1, 2026.

• Excludes up to $2,500 per year of overtime pay for hourly full-time employees from Georgia state income tax, for tax years 2026 through 2028.
• Excludes up to $2,500 per year in cash tips from Georgia state income tax, for tax years 2026 through 2028.
• Requires employers to report to the Department of Revenue the total overtime and tip amounts paid and the number of employees receiving them, on a monthly or quarterly schedule.
• Gives the Department of Revenue authority to require additional employer information and adopt rules to administer both exclusions.
• Automatically repeals both the overtime and tips tax exclusions on December 31, 2028.
• Defines 'cash tips' and 'occupation that customarily and regularly receives tips' by reference to federal Treasury Tipped Occupation Codes and the Internal Revenue Code.

Hourly full-time employees who work overtime and workers in tipped occupations, such as restaurant and service industry staff, benefit from the tax exclusions. Employers across Georgia must track and report overtime and tip payments to the Department of Revenue, which must create forms and rules to administer the program.

Eligible workers could see a smaller state tax bill on overtime pay and tips for three tax years, up to $5,000 total in excluded income per year. Employers face new reporting duties, and both tax breaks disappear automatically after 2028 unless lawmakers act again.

• Section 1 amends O.C.G.A. § 48-7-27 to add paragraph (16), excluding up to $2,500 of overtime compensation for hourly full-time employees working over 40 hours a week, for tax years 2026-2028.
• Paragraph (16)(B) creates a special rule for railway employers under the federal National Railway Labor Act, applying the exemption to overtime as defined in collective bargaining agreements.
• Paragraph (16)(C) requires employers to report total qualifying overtime pay and employee counts to the Department of Revenue monthly or quarterly, with a year-end option for 2026.
• Paragraph (16)(E) automatically repeals the overtime exclusion on December 31, 2028.
• New paragraph (17) excludes up to $2,500 in cash tips per year starting in 2026, with similar employer reporting duties and department rulemaking authority.
• Paragraph (17)(D) defines 'cash tips' and ties eligible occupations to federal Treasury Tipped Occupation Codes, excluding occupations excluded under Internal Revenue Code Section 63.
• Paragraph (17)(E) automatically repeals the cash tips exclusion on December 31, 2028.
• Section 2 sets the effective date as July 1, 2026, applicable retroactively to taxable years beginning on or after January 1, 2026.

1. 2026-03-06House Committee Favorably Reported By Substitute (House)
2. 2026-02-19House Second Readers (House)
3. 2026-02-18House First Readers (House)
4. 2026-02-18House Hopper (House)

• John Carson (R, HD-046)Primary sponsor
• Shaw Blackmon (R, HD-146)

• income tax
• overtime pay
• tipped workers
• tax exemptions
• employer reporting