Does Georgia Tax Your Tips and Overtime in 2026? The State’s Own $1,750 Tax Break
Georgia didn’t adopt the federal OBBBA tips and overtime deductions — instead HB 463 created its own, smaller break: up to $1,750 a year each of tips and overtime pay exempt from Georgia income tax through 2028.
Georgia has not adopted the federal OBBBA tips and overtime deductions. Instead, under House Bill 463, the state created its own, much smaller break: up to $1,750 a year each of tips and overtime pay is exempt from Georgia income tax for tax years 2026 through 2028.
Key facts
- Georgia’s own tip and overtime exemption is capped at $1,750/year each (up to $3,500 combined), separate from the federal $25,000 / $12,500–$25,000 caps
- Effective January 1, 2026 (tax year 2026), enacted as HB 463
- The full federal OBBBA deduction is still available on your federal return regardless of Georgia’s rule
- The same law cuts Georgia’s flat income tax rate from 5.19% to 4.99%, effective 2026
- Runs through tax year 2028, matching the federal deductions’ sunset
Georgia’s own tip and overtime exemption
Governor Brian Kemp signed HB 463 in May 2026, and rather than simply conforming to the federal OBBBA tips and overtime deductions, Georgia wrote its own, separate exemption: up to $1,750 per year of tips and up to $1,750 per year of overtime pay excluded from Georgia taxable income, for tax years 2026 through 2028.
How this compares to the federal deduction
- Federal (OBBBA): up to $25,000 of tips and $12,500 ($25,000 married) of overtime premium, phasing out above $150,000 / $300,000 MAGI, through 2028
- Georgia (HB 463): up to $1,750 each of tips and overtime, no income-based phase-out identified in available guidance, tax years 2026–2028 only (not 2025)
Georgia tipped and overtime workers still get the full federal deduction on their 1040 — the state break is a separate, additional exemption on top of that, not a replacement.
Georgia’s flat tax rate is falling too
The same legislation lowers Georgia’s flat individual income tax rate from 5.19% to 4.99%, effective January 1, 2026, with the state aiming for further annual cuts. HB 463 also raises Georgia’s retirement income exclusion to $70,000 starting in 2027 — a separate benefit worth knowing about if you’re retired or approaching retirement in Georgia.
A worked example
Say a Georgia server earns $20,000 in qualified tips with $150,000 of MAGI — under the federal phase-out threshold. On the federal return, the full $20,000 is deductible. On the Georgia return, only $1,750 of those tips is excluded; the remaining $18,250 is taxed at Georgia’s 4.99% flat rate — roughly $910 in Georgia tax on tips that face $0 federal tax.
What this means for the calculator
Our calculator estimates your federal savings accurately no matter which state you’re in. For Georgia’s state-level exemption specifically, subtract $1,750 from your Georgia taxable tips (and $1,750 from taxable overtime, if applicable), then apply Georgia’s flat rate to the rest — the worked example above shows the math. Run the calculator for your federal numbers, then check the State Conformity Tracker for Georgia’s state details.
Frequently asked questions
Do I still get the federal $25,000 tips deduction if I live in Georgia?
Yes. Georgia’s own exemption doesn’t affect your eligibility for the full federal OBBBA deduction on your 1040.
Does the $1,750 cap apply to tips and overtime separately?
Yes — up to $1,750 for tips and up to $1,750 for overtime, so up to $3,500 combined if you qualify for both.
When does Georgia’s break start?
Tax year 2026, per HB 463 — it is not retroactive to 2025.
Is Georgia’s exemption reduced at higher incomes like the federal deduction is?
The available guidance on HB 463 does not describe an income-based phase-out for Georgia’s exemption, unlike the federal deduction’s MAGI phase-out. Confirm with the Georgia Department of Revenue or a tax professional before relying on this for your specific return.
When does Georgia’s tip and overtime break end?
It’s written to run through tax year 2028, the same sunset as the federal OBBBA deductions.
For how other states are handling the OBBBA deductions, see our State Conformity Tracker and Georgia’s state profile page.
This article is for general educational purposes and reflects guidance available as of August 2026. It is not tax advice. Georgia’s treatment of HB 463 can be refined by further Department of Revenue guidance — verify your specific situation with a qualified tax professional before filing.