The State of Georgia has announced critical individual income tax updates and state-specific information reporting requirements for Tax Year 2026, primarily driven by House Bill 463 (HB 463).
1. Key Individual Income Tax Changes
- Rate Reduction: The state individual income tax rate decreases from a flat 5.19% to a flat 4.99%, retroactive to January 1, 2026. Note: Employers must transition withholding systems to the new 4.99% rate starting May 11, 2026.
- Increased Standard Deductions:
- $30,000 for Married Filing Jointly
- $15,000 for Single, Head of Household, and Married Filing Separate filers.
- Dependent Exemption: The deduction per dependent has been raised from $4,000 to $5,000.
2. Overtime & Cash Tips Reporting (HB 463)
House Bill 463 establishes temporary Georgia income tax subtractions for specific qualified overtime compensation and qualified cash tips. These rules apply to taxable years beginning on or after January 1, 2026, and ending on or before December 31, 2028.
- Withholding Impact: These subtractions do not change standard state income tax withholding or the total wages reported on Form W-2, Box 16.
- Form G-7 Reporting: Do not report these totals on Form G-7 for tax year 2026. However, starting in 2027, Form G-7 will be updated to track quarterly employer totals and employee counts.
- Year-End Reporting Requirements: Qualified compensation must be detailed on 2026 year-end statements (Forms W-2 and 1099) submitted alongside Form G-1003 using specific codes:
- Hourly Overtime (FLSA): Use Form W-2, Box 12, code TT.
- Railway Labor Act (RLA) Employees: Report full qualifying overtime compensation on Form W-2, Box 14a, using code GA OT.
- Qualified Cash Tips: Report using federal guidelines via Form W-2, Box 12, code TP or applicable Treasury Tipping Occupation Codes (TTOCs).
3. Electronic Filing Format Changes
Following the retirement of the IRS Filing Information Returns Electronically (FIRE) system and the discontinuance of Publication 1220, the Georgia Department of Revenue will adopt the IRS Information Returns Intake System (IRIS) schema format for federal Forms 1099.