Georgia's House and Senate approved House Bill 463 on April 3, 2026, the final day of the legislative session, cutting the state's flat income tax rate to 4.99% from 5.19% and setting a faster path toward an eventual 3.99% rate, according to CBS News Atlanta. The bill pairs the rate cut with a larger standard deduction and a new, temporary exclusion for tips and overtime pay, while repealing several narrower tax credits to help offset the revenue loss.
What changed
Georgia moved to a flat income tax structure in 2024 and has been cutting the rate roughly 0.1 percentage point a year since. HB 463 speeds that up to 0.125 points a year until the rate reaches 3.99%, and it takes the immediate rate to 4.99% for 2026. The standard deduction rises to $30,000 for married couples filing jointly (from $24,000) and $15,000 for single filers and heads of household (from $12,000), with additional automatic increases of $750 and $375 a year respectively if state revenue grows at least 3% annually. The dependent deduction rises from $4,000 to $5,000, eventually reaching $6,000. Separately, the bill excludes up to $1,750 of tips and overtime pay from state income tax from January 2026 through 2028, mirroring a federal deduction created by the One Big Beautiful Bill Act.
Who is affected
Every Georgia taxpayer sees the lower flat rate and the larger deduction, but the credits the bill repeals — for teleworking expenses, electric and hybrid vehicle purchases, and medical equipment manufacturers — mostly benefited narrower groups, including some higher-income filers who had structured purchases around them. Personal income tax generates roughly $16.5 billion for Georgia, about 44% of general revenue, so lawmakers built in the revenue-trigger mechanism to keep future deduction increases from outrunning the state's budget. High earners relocating from higher-tax states, a group Georgia has actively courted alongside neighbors like Florida, North Carolina and Tennessee, are the most likely to notice the rate change immediately, since the savings scale with income under a flat-rate structure rather than tapering off as they would under a graduated bracket system.
The after-tax math
Example: a married couple in Georgia earning $500,000 in wages.
| Item | 2025 law | 2026 law (HB 463) |
|---|---|---|
| Georgia tax rate | 5.19% | 4.99% |
| Standard deduction | $24,000 | $30,000 |
| Approximate taxable income | $476,000 | $470,000 |
| Approximate Georgia tax | ~$24,700 | ~$23,450 |
The combined effect of the lower rate and the bigger deduction saves this household roughly $1,250 a year, before accounting for any tips or overtime income, which would be excluded separately up to the $1,750 cap per filer. The savings scale with income until the state reaches its 3.99% target, at which point a flat-rate state like Georgia delivers proportionally larger dollar savings to higher earners than a graduated-rate state would.
Moves to discuss with your advisor
- Households considering a move within the Southeast should compare Georgia's new 4.99% flat rate against neighboring states, several of which have no income tax at all or are also cutting rates.
- Business owners who used the teleworking or vehicle credits should model the after-tax cost of those purchases going forward without the credit.
- Households with tip or overtime income should track the $1,750 state exclusion separately from the federal deduction created by the 2025 tax law, since the caps and mechanics differ.
- Business owners with pass-through income should confirm whether Georgia's entity-level pass-through election, which lets many owners work around the federal SALT cap, still pencils out at the new lower rate.
What to watch
The rate is scheduled to keep falling toward 3.99% as long as Georgia's revenue growth supports it, and the standard deduction increases carry the same revenue trigger. Whether the state's coffers keep pace after several years of tax cuts will determine how quickly, and whether, the 3.99% target is actually reached. Georgia joins a broader trend among Southeastern states of competing on income tax rates to attract residents and businesses relocating from higher-cost coastal states, a competition that has accelerated since remote work loosened the tie between where people live and where they work.
Sources
- First reported Georgia legislature approves state income tax cut, raising deductions while dropping some credits — CBS News Atlanta
- 2026 State Income Tax Rates and Brackets — Tax Foundation
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