Does Georgia Tax Tips in 2026? The $1,750 Cap
Georgia did not ignore the federal "no tax on tips" movement. When Governor Kemp signed HB 463 in May 2026, the bill included a state-level income exclusion for tips and overtime pay. But the number attached to that exclusion surprised many workers:$1,750, covering tips and overtime combined. Compare that to the federal tips deduction cap of $25,000 and the federal overtime deduction cap of $12,500 (single) or $25,000 (married filing jointly), and the gap is stark.
The answer to whether Georgia taxes tips in 2026: mostly yes, at the state's flat 5.0% rate, with a small exclusion for the first $1,750.
The HB 463 exclusion: $1,750 combined cap
HB 463 was a broad tax reform bill. It cut Georgia's flat income tax rate to 5.0%(down from 5.39%), restructured the standard deduction to $12,000 for single filers and $24,000 for married filing jointly, and included several other changes. Tucked into the bill was a new exclusion allowing workers to exclude up to $1,750 of combined tips and overtime income from Georgia taxable income for tax years 2026 through 2028.
The key word is "combined." If you earn $1,000 in tips and $750 in overtime premium, you have reached the cap. Any additional tip or overtime income above $1,750 is taxed at the full 5.0% rate.
This is Georgia's own response to the federal OBBBA deductions. It does not directly conform to the federal deduction amounts. Instead, the state created a much smaller, separate benefit.
Federal deduction vs. Georgia exclusion
The federal and Georgia benefits operate independently. On your federal return, you can deduct up to $25,000 in qualified tips (if your MAGI is below $150,000single or $300,000 MFJ). On your Georgia return, you can exclude up to $1,750 of combined tips and overtime income.
The practical effect is that Georgia workers get enormous federal savings but minimal state savings. A server with $20,000 in tips saves thousands at the federal level but only $87 at the Georgia level (the 5.0% rate applied to the $1,750 exclusion).
Worked example: server with $20K in tips
Consider Marcus, a single filer who works as a server in Atlanta. He earns $28,000 in base wages and $20,000 in qualified tips during 2026, for a total of $48,000. His MAGI is below the $150,000 federal phase-out threshold.
Federal return
Total income: $48,000
Tips deduction (Schedule 1-A): -$20,000
Federal AGI: $28,000
Standard deduction: -$16,100
Federal taxable income: $11,900
At the 12% bracket, Marcus saves approximately $2,400 in federal income tax.
Georgia return
Georgia starts from federal AGI: $28,000
Georgia adds back federal tips deduction (since GA uses its own exclusion): +$20,000
Georgia gross income: $48,000
HB 463 tips/OT exclusion: -$1,750
Georgia standard deduction: -$12,000
Georgia taxable income: $34,250
Georgia tax at 5.0%: $1,709
Without the HB 463 exclusion, Marcus's Georgia taxable income would be $36,000, and his state tax would be $1,796. The exclusion saves him $87 in Georgia tax. That is the full value of the $1,750 cap at 5.0%.
For comparison, if Georgia fully conformed to the federal tips deduction (letting Marcus exclude all $20,000 at the state level), his state savings would have been $998. The gap between the $1,750 exclusion and full conformity costs Marcus about $911 in additional Georgia tax.
Why the combined cap matters
The $1,750 cap covers tips and overtime together. A worker who earns both types of income must split the exclusion between them. If a restaurant worker earns $10,000 in tips and $3,000 in overtime premium, only $1,750 of that combined $13,000 is excluded at the state level. The remaining $11,250 is taxed at 5.0%.
At the federal level, tips and overtime have separate caps ($25,000 and $12,500respectively). A worker could deduct the full $10,000 in tips and the full $3,000 in overtime premium from federal income. Georgia's single combined cap means the state benefit is exhausted much faster for workers earning both types of income.
The bottom line for Georgia workers
HB 463's $1,750 exclusion is better than nothing, but it is a fraction of the federal benefit. A Georgia server with significant tip income will see the vast majority of tax savings come from the federal deduction, with the Georgia exclusion adding only $87 in state tax relief.
This places Georgia in a middle ground between states that fully conform (like Ohio and North Carolina) and states that provide no state benefit at all (like Illinois and Alabama).Georgia acknowledged the issue and offered something, just not at the scale of the federal law.
For a full comparison of how each state handles the OBBBA deductions, see the state-by-state tips and overtime tax map.