SB 26: State Income Taxes; with regard to military retirement income, to determine and apply a cost-of-living adjustment to the amount of allowable retirement pay; require the state revenue commissioner

Georgia currently lets military retirees exclude a certain amount of their retirement pay from state taxable income (O.C.G.A. § 48-7-27), but that excluded amount does not automatically change with inflation. This bill would require the state revenue commissioner to write rules that apply a cost-of-living adjustment to that exclusion amount. The commissioner would be allowed to use the federal Consumer Price Index, the same index used to adjust Social Security payments, or another similar federal index if it reasonably reflects inflation's effect on military retirees in Georgia. Whatever adjustment the commissioner sets would proportionally increase or decrease the amount of military retirement income excluded from state taxes. The change would take effect July 1, 2025, and apply to tax years starting on or after January 1, 2026.

• Requires the state revenue commissioner to create rules for applying a cost-of-living adjustment to the military retirement income tax exclusion.
• Allows the commissioner to use the federal Consumer Price Index or a similar federal inflation index to calculate the adjustment.
• Ties any adjustment to a proportional change in the amount of military retirement pay excluded from Georgia taxable income.
• Sets the law to take effect July 1, 2025, applying to tax years beginning on or after January 1, 2026.

Military retirees living in Georgia who receive retirement pay for service in the armed forces or reserve components, and the state Department of Revenue, which must write and maintain the new cost-of-living adjustment rules.

Without an inflation adjustment, the value of the tax break for military retirement pay can erode over time as living costs rise. This bill would let the excluded amount grow (or shrink) with inflation, changing how much military retirement income is taxed each year.

• Section 1 adds a new paragraph (5.2) to O.C.G.A. § 48-7-27(a) requiring the commissioner to establish rules for cost-of-living adjustments to the military retirement income exclusion.
• Section 1 specifies the commissioner may use the Consumer Price Index as used for Social Security adjustments, or another comparable federal index, if it reflects inflation's effect on military retirees.
• Section 1 states any cost-of-living adjustment results in a proportional change to the amount of military retirement income excluded from Georgia taxable net income.
• Section 2 sets the effective date as July 1, 2025, applicable to taxable years beginning on or after January 1, 2026.

1. 2026-01-12Senate Recommitted (Senado)
2. 2025-02-28Senate Read Second Time (Senado)
3. 2025-02-27Senate Committee Favorably Reported (Senado)
4. 2025-01-27Senate Read and Referred (Senado)
5. 2025-01-17Senate Hopper (Senado)

• Michael Rhett (D, SD-033)Patrocinador principal
• Ed Harbison (D, SD-015)
• Chuck Payne (R, SD-054)
• Timothy Bearden (R, SD-030)
• Billy Hickman (R, SD-004)
• Kenya Wicks (D, SD-034)
• Harold Jones (D, SD-022)
• Nabilah Islam Parkes (D, SD-007)
• Shawn Still (R, SD-048)
• Matt Brass (R, SD-006)
• Jason Anavitarte (R, SD-031)
• Emanuel Jones (D, SD-010)

• military retirement pay
• state income taxes
• cost-of-living adjustment
• veterans benefits
• tax exclusions