HB1416: HB1416 Income tax; exclude tips from taxation

Right now, tips that Georgia workers earn count as taxable income under both federal and state law. This bill would change that at the state level by adding a new exemption to Georgia's income tax code (O.C.G.A. § 48-7-27). Any tips an employee receives would no longer be subject to Georgia state income tax, as long as that income is already included in the person's federal adjusted gross income and would otherwise be taxable by the state. The bill also creates new reporting duties for employers. Starting with the 2026 tax year, employers must report to the Georgia Department of Revenue the total tips paid to each employee, with that first report due by January 31, 2027. From 2027 onward, employers must report tip totals monthly or quarterly, on the same schedule as their withholding tax returns. The bill defines 'tips' broadly to include cash tips, electronic tips (like credit card tips), noncash tips such as tickets, and tip-pool payouts, but excludes mandatory service charges like automatic gratuities. The changes would take effect July 1, 2026, and apply to tax years starting on or after January 1, 2026.

• Adds a new exemption to Georgia's income tax law so tips received by employees are excluded from state taxable income.
• Requires the tip income to already be counted in the worker's federal adjusted gross income for the state exemption to apply.
• Requires employers to report total tips paid to each employee to the Georgia Department of Revenue, starting with a report due January 31, 2027 for the 2026 tax year.
• Requires employers to file tip reports monthly or quarterly beginning with the 2027 tax year, matching their withholding tax return deadlines.
• Defines 'tips' to include cash, electronic, and noncash tips and tip-pool payouts, but excludes mandatory service charges such as automatic gratuities.

Tipped workers in Georgia, such as restaurant servers, bartenders, and other service employees, who would no longer owe state income tax on their tips. Employers of tipped workers face new reporting requirements to the Department of Revenue, and the department itself must collect and process the new tip data.

Tipped employees in Georgia would keep more of their take-home pay because tips would no longer be taxed by the state, though tips would still count toward federal taxes. Employers would need new payroll processes 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 employee tips from Georgia taxable income if already included in federal adjusted gross income.
• Section 1 requires employers to submit tip totals for tax year 2026 to the Department of Revenue by January 31, 2027.
• Section 1 requires employers to submit tip totals monthly or quarterly starting with tax year 2027, on the same schedule as withholding tax returns.
• Section 1 defines 'tips' to include cash, electronic payment tips, noncash tips, and tip-pooling payouts, while excluding mandatory service charges like automatic gratuities.
• Section 2 sets the effective date as July 1, 2026, applicable to tax years beginning on or after January 1, 2026.
• Section 3 repeals any conflicting laws.

1. 2026-02-25House Second Readers (House)
2. 2026-02-24House First Readers (House)
3. 2026-02-20House Hopper (House)

• Mitchell Horner (R, HD-003)Primary sponsor
• Jordan Ridley (R, HD-022)
• Jason Ridley (R, HD-006)
• Holt Persinger (R, HD-119)
• Carter Barrett (R, HD-024)

• income tax
• tips and gratuities
• tax exemptions
• service workers
• tax reporting