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Tax Year 2026Updated July 13, 2026

Does Georgia Tax Tips in 2026?

Partially - Georgia provides its own limited tips 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 $25,000 OBBBA tips deduction (IRC §224). Tips above the $1,750 exclusion are taxed at Georgia's flat 4.99% rate.

How Georgia's Tips Tax Treatment Works

Georgia does not directly conform to the federal OBBBA tips deduction. Instead, the state enacted its own, much smaller benefit through HB 463. This bill - part of a broader tax reform package that also reduced Georgia's flat income tax rate to 4.99% and restructured the standard deduction - includes a tips and overtime income exclusion of up to $1,750 per taxpayer for tax years 2026 through 2028.

The key differences between Georgia's exclusion and the federal deduction: the federal cap is $25,000 per taxpayer for tips alone, while Georgia's cap is $1,750 for tips and overtime income combined. A worker with $20,000 in tips can deduct the full amount federally but only exclude $1,750 from Georgia taxable income. The remaining $18,250 is taxed at 4.99%.

Georgia starts its income tax computation from federal AGI and then applies its own standard deduction and adjustments. The HB 463 exclusion is applied as a Georgia-specific adjustment - it does not depend on whether you claimed the federal tips deduction on your Form 1040. You can claim both the federal deduction and the Georgia exclusion, but they operate independently at their respective caps.

Federal Tips Deduction Quick Reference

DetailValue
IRC Section§224 (OBBBA)
Maximum deduction$25,000 tips
Deduction typeAbove-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 datesJan 1, 2025 – Dec 31, 2028
Georgia treatmentPartial (own exclusion)

Worked Examples Comparing Federal and Georgia Treatment

Example 1: Hairdresser with $10,000 in annual tips (no overtime income)

Federal return:
Qualified tip income: $10,000
Tips deduction claimed: $10,000 (capped at $25,000)
Estimated federal tax savings: $1,200.00

Georgia return:
State tax savings from deduction: $87.33
GA excludes only $1,750 under HB 463 (not the full $10,000). The remaining $8,250 in tips is still taxed at 4.99% = $411.68 in GA tax on the non-excluded portion.

Example 2: Restaurant server with $20,000 in annual tips (no overtime income)

Federal return:
Qualified tip income: $20,000
Tips deduction claimed: $20,000 (capped at $25,000)
Estimated federal tax savings: $4,400.00

Georgia return:
State tax savings from deduction: $87.33
GA excludes only $1,750 under HB 463. The remaining $18,250 in tips is still taxed at 4.99% = $910.67 in GA tax. The federal deduction saves far more ($4400.00) than GA's exclusion ($87.33).

Georgia-Specific Rules for Tipped Workers

Combined cap for tips AND overtime. The $1,750 HB 463 exclusion covers both tips and overtime income combined. If you earn $1,000 in tips and $1,000 in overtime premium, you can exclude $1,750 total across both - not $1,750 for each. Workers with both types of income must allocate the exclusion.

Georgia standard deduction still applies. In addition to the HB 463 exclusion, Georgia provides a standard deduction of $12,000 for single filers ($24,000 MFJ) for 2026. This deduction applies to all income, not just tips. The HB 463 exclusion is an additional benefit on top of the standard deduction.

Flat rate simplifies the math. Georgia's 4.99% flat rate means the state savings from the $1,750 exclusion is straightforward: $1,750 × 4.99% = $87.33 maximum state savings per taxpayer.

Sunset provision. The HB 463 exclusion is set to expire after tax year 2028. Unless renewed by the General Assembly, tips will revert to being fully taxable at the Georgia state level beginning in TY2029.

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Frequently Asked Questions

Does Georgia follow the federal 'no tax on tips' deduction?
Partially. Georgia does not adopt the federal $25,000 tips deduction. Instead, HB 463 (signed May 2026) creates Georgia's own tips and overtime income exclusion of up to $1,750 combined for tax years 2026 through 2028. This state exclusion is far smaller than the federal cap.
What is the $1,750 Georgia exclusion under HB 463?
HB 463 allows Georgia taxpayers to exclude up to $1,750 of combined tips and overtime income from Georgia taxable income for TY2026–2028. This is a combined cap - if you have both tip income and overtime premium income, the total exclusion across both categories cannot exceed $1,750.
How does Georgia's $1,750 exclusion compare to the federal $25,000 deduction?
The federal OBBBA tips deduction allows up to $25,000 in deductions per taxpayer per year. Georgia's HB 463 exclusion is only $1,750 - about 7% of the federal cap. For a worker with $20,000 in tips, the federal deduction saves approximately $4,400 at the 22% bracket, while Georgia's exclusion saves only $87.33 at the 4.99% state rate.
What is Georgia's income tax rate on tip income in 2026?
Georgia taxes income at a flat 4.99% rate for 2026 (reduced from 5.39% under HB 463). Tips above the $1,750 exclusion are taxed at this rate after accounting for Georgia's standard deduction ($12,000 for single filers, $24,000 MFJ).
Is the $1,750 exclusion per person or per couple?
The $1,750 exclusion is per taxpayer. For married filing jointly, each spouse may claim up to $1,750 if each has qualifying tips and/or overtime income. However, each individual's combined tips and overtime exclusion cannot exceed $1,750.
Does the Georgia exclusion apply to the same income as the federal deduction?
Not exactly. The federal deduction under IRC §224 applies to qualified tip income from customarily tipped occupations. Georgia's HB 463 exclusion applies to tips and overtime income but has its own eligibility rules. Both are limited to W-2 employees, but the Georgia exclusion has the much lower $1,750 combined cap.
Will Georgia's exclusion increase in future years?
As enacted, the $1,750 exclusion applies for tax years 2026, 2027, and 2028 at the same amount. The exclusion is set to expire after TY2028 unless the General Assembly renews it. There is no inflation adjustment built into the provision.