Tax Year 2026Updated July 13, 2026

Does Georgia Tax Overtime in 2026?

Q: Is the $1,750 exclusion just for overtime, or is it shared with tips?

The $1,750 HB 463 exclusion is a combined cap for tips AND overtime income together. If you have both tip income and overtime premium income, the total exclusion across both cannot exceed $1,750 per taxpayer. This is one of the most important differences from the federal approach, which provides separate caps for tips ($25,000) and overtime ($12,500 single).

Q: What part of overtime pay qualifies for the federal deduction?

Only the premium portion of overtime qualifies federally - the extra 0.5x above your regular rate for time-and-a-half. Your base hourly rate during overtime hours is not deductible. Georgia's HB 463 exclusion similarly applies to overtime premium income, not the base rate.

Partially - Georgia provides its own limited overtime exclusion in 2026, but it is far smaller than the federal deduction. Under HB 463 (signed May 2026), Georgia allows taxpayers to exclude up to $1,750 of combined tips and overtime income from state taxable income for TY2026–2028. This is dramatically less than the federal $12,500 OBBBA overtime deduction for single filers ($25,000 MFJ). The $1,750 cap must also cover any tip income. Overtime above the exclusion is taxed at Georgia's flat 4.99% rate.

How Georgia's Overtime Tax Treatment Works

Georgia does not directly conform to the federal OBBBA overtime deduction. Instead, HB 463 - the same bill that reduced Georgia's flat income tax rate to 4.99% - created a state-specific exclusion for tips and overtime income. This exclusion is capped at $1,750 per taxpayer for tax years 2026 through 2028, and the cap covers tips and overtime combined.

The gap between state and federal relief is substantial. Federally, a single filer can deduct up to $12,500 of qualifying overtime premium pay. Under Georgia's HB 463, the maximum exclusion is $1,750 - and if the taxpayer also has tip income, the exclusion must be shared across both categories. A worker with $12,500 in overtime premium saves up to $2,750 in federal tax (at the 22% bracket) but only $87.33 in Georgia state tax from the exclusion.

Georgia starts its income tax computation from federal AGI and applies its own standard deduction ($12,000 single / $24,000 MFJ). The HB 463 exclusion is an additional Georgia-specific adjustment applied separately from the federal overtime deduction. You can claim both the federal deduction and the Georgia exclusion - they operate independently at their respective caps.

Federal Overtime Deduction Quick Reference

Detail	Value
IRC Section	§225 (OBBBA)
Maximum deduction	$12,500 overtime ($25,000 MFJ)
Deduction type	Above-the-line (Schedule 1-A)
FICA still applies?	Yes (Social Security 6.2% + Medicare 1.45%)
MFS eligible?	No (MFJ or Single/HoH only)
Effective dates	Jan 1, 2025 – Dec 31, 2028
Georgia treatment	Partial (own exclusion)
What qualifies?	Overtime premium only (the 0.5x above regular rate), FLSA non-exempt employees

Worked Examples Comparing Federal and Georgia Treatment

Example 1: Delivery driver with $6,000 in overtime premium (no tip income)

Federal return:
Qualifying overtime premium: $6,000
Overtime deduction claimed: $6,000 (capped at $12,500)
Estimated federal tax savings: $720.00

Georgia return:
State tax savings from deduction: $87.33
GA excludes only $1,750 under HB 463 (not the full $6,000). The remaining $4,250 in overtime premium is still taxed at 4.99% = $212.07 in GA tax on the non-excluded portion.

Example 2: Warehouse worker with $12,500 in overtime premium (federal cap reached, no tip income)

Federal return:
Qualifying overtime premium: $12,500
Overtime deduction claimed: $12,500 (capped at $12,500)
Estimated federal tax savings: $2,750.00

Georgia return:
State tax savings from deduction: $87.33
GA excludes only $1,750 under HB 463. The remaining $10,750 in overtime premium is still taxed at 4.99% = $536.42 in GA tax. The federal deduction saves far more ($2750.00) than GA's exclusion ($87.33).

Georgia-Specific Rules for Overtime Workers

Combined cap for tips AND overtime. The most critical detail: Georgia's $1,750 exclusion is shared between tips and overtime. If you earn tips at a restaurant and work overtime shifts at a second job, your total exclusion across both income types cannot exceed $1,750. The federal system, by contrast, provides separate caps for tips ($25,000) and overtime ($12,500 single).

Georgia standard deduction still applies. The $12,000 standard deduction ($24,000 MFJ) applies to all income, not just overtime. The HB 463 exclusion is an additional benefit on top of the standard deduction.

Premium-only rule applies. Like the federal deduction, Georgia's exclusion applies to the overtime premium - the extra 0.5x above your regular hourly rate - not to your base pay during overtime hours. If you earn $20/hour and work overtime at $30/hour, only $10/hour is the qualifying premium for both the federal deduction and the Georgia exclusion.

Sunset provision. The HB 463 exclusion expires after tax year 2028 unless renewed by the General Assembly. After TY2028, overtime income would revert to being fully taxable at the Georgia state rate.

Related Tools

No Tax on Overtime Calculator - calculate your federal overtime deduction
Georgia Tax Guide - full state tax overview
Georgia Paycheck Calculator
Does Georgia Tax Tips?
W-2 Code TP: Tips Reporting Guide
W-2 Code TT: Overtime Reporting Guide
All 51 States: Tips & Overtime Tax Map

Frequently Asked Questions

Does Georgia follow the federal 'no tax on overtime' deduction?

Partially. Georgia does not adopt the federal $12,500 overtime deduction (single) / $25,000 (MFJ). Instead, HB 463 creates Georgia's own combined tips and overtime income exclusion of up to $1,750 for tax years 2026 through 2028. This is far smaller than the federal cap.

Is the $1,750 exclusion just for overtime, or is it shared with tips?

The $1,750 HB 463 exclusion is a combined cap for tips AND overtime income together. If you have both tip income and overtime premium income, the total exclusion across both cannot exceed $1,750 per taxpayer. This is one of the most important differences from the federal approach, which provides separate caps for tips ($25,000) and overtime ($12,500 single).

How does Georgia's $1,750 exclusion compare to the federal overtime deduction?

The federal OBBBA overtime deduction allows up to $12,500 for single filers ($25,000 MFJ). Georgia's exclusion is only $1,750 - about 14% of the federal single cap, and that $1,750 must also cover any tip income. A worker with $12,500 in overtime premium saves approximately $2,750 federally at the 22% bracket but only $87.33 from Georgia's exclusion.

What is Georgia's income tax rate on overtime pay in 2026?

Georgia taxes income at a flat 4.99% rate for 2026 (reduced from 5.39% under HB 463). Overtime income above the $1,750 exclusion is taxed at this rate after accounting for Georgia's standard deduction ($12,000 single, $24,000 MFJ).

What part of overtime pay qualifies for the federal deduction?

Only the premium portion of overtime qualifies federally - the extra 0.5x above your regular rate for time-and-a-half. Your base hourly rate during overtime hours is not deductible. Georgia's HB 463 exclusion similarly applies to overtime premium income, not the base rate.

Will Georgia's exclusion increase in future years?

As enacted, the $1,750 exclusion applies at the same amount for tax years 2026, 2027, and 2028. It expires after TY2028 unless renewed by the General Assembly. There is no inflation adjustment built into the provision.

What if I have both tips AND overtime income in Georgia?

You must allocate the $1,750 combined exclusion across both income types. For example, if you have $5,000 in tips and $8,000 in overtime premium, you can exclude a total of $1,750 - perhaps $1,000 from tips and $750 from overtime, or any other allocation up to the cap. The federal deductions for tips and overtime are separate with their own caps.