On April 26, 2022, Governor Brian P. Kemp signed the Tax Reduction and Reform Act of 2022 which reduces the current tax rate of 5.75% that most Georgians pay to just 4.99% over a period of seven years. The Act repeals the standard and additional deductions, increases the personal exemption and retirement amounts, and requires an add back of taxes deducted for federal purposes over a set threshold. The reduction will be subject to a one-year delay for each year that certain revenue estimates and collections are not met.
Tax rate reduction
Individual income tax rates will be reduced as follows: for tax years beginning on or after (TYBOA) January 1, 2024, the rate will be 5.49%; for TYBOA January 1, 2025, the rate will be 5.39%; for TYBOA January 1, 2026, 5.29%; for TYBOA January 1, 2027, 5.19%; for TYBOA January 1, 2028, 5.09%; and for TYBOA January 1, 2029, 4.99%.
Contingencies in rate reduction
Each prospective change in the tax rates that would otherwise occur will be delayed by one year for each year that any of the following are true as of December 1: the governor’s revenue estimate for the succeeding fiscal year is not at least 3% above the governor’s revenue estimate for the present fiscal year; the prior fiscal year’s net revenue collection was not higher than each of the preceding five fiscal years’ net tax revenue collection; or the Revenue Shortfall Reserve in Ga. Code Ann. § 45-12-93 does not contain a sum that exceeds the amount of the decrease in state revenue projected to occur as a result of the prospective reduction in the tax rates set to occur the following year.
Effective for the 2024 tax year and after, each taxpayer will be allowed as a deduction in computing his or her Georgia taxable income a personal exemption in an amount as follows: For each married couple filing a joint return: for TYBOA January 1, 2024, $18,500; for TYBOA January 1, 2026, $20,000; for TYBOA January 1, 2028, $22,000; and for TYBOA January 1, 2030, $24,000. For each married taxpayer filing a separate return, one-half of the amount of the personal exemption allowed for married couples filing a joint return for each of the given year will be allowed. For each single taxpayer or head of household, $12,000; and for each dependent of a taxpayer, $3,000.
The maximum retirement income amount not subject to tax is increased from $4,000 to $5,000 of an individual’s earned income.
Repeal of standard and additional deductions
Taxpayers will only be allowed the sum of all itemized nonbusiness deductions used in computing their federal taxable income. The standard deductions for each filing status, the additional deductions for those 65 years or older, or for those who are blind, are repealed effective January 1, 2024.
Add back of taxes deducted for federal income tax
The Act provides that a taxpayer must add back to Georgia taxable income any amount deducted under IRC § 164 that exceeds $10,000 for a single taxpayer, a taxpayer filing as head-of-household, or a married taxpayer filing jointly; or an amount that exceeds $5,000 for a married taxpayer filing separately.