Georgia State Income Tax: What You Need to Know

Georgia residents must understand the state’s tax laws and regulations to prevent penalties. Luckily, this state is one of the least taxed. These insights into Georgia’s Tax Structure could help you understand how these taxes work.

Who is required to Pay Income Tax in Georgia?

You must file a Georgia tax return if you earn income in the state. Georgia taxpayers fall into four categories.

• Military personnel: Those serving in the military must pay income tax on all their earnings unless exempt by state law.
• Full-year resident: Residents of Georgia must pay state taxes, irrespective of their current location or temporary absence from the state. However, one may be eligible for a tax credit for taxes paid to another state.
• Part-year residents: They are legal residents of Georgia for only a portion of the tax year and are required to file a federal return. You will need to use the Georgia Form 500 Individual Income Tax Return.
• Nonresident: If you work in Georgia or have income from sources within the state and are required to file a federal income tax return, then you must also file an income tax return with the state of Georgia. These income sources include: 
  • Wages. 
  • Georgia lottery winnings.
  • Rent.
  • Income from flow-through entities, such as estates, trusts, partnerships, limited liability companies (LLCs), and S-corporations.

What are the Tax Brackets for Georgia State Income Tax?

Here are the tax brackets for Georgia state income tax:

What is the Deadline for Filing Georgia State Income Tax Returns?

The deadline to file 2022 individual income tax returns without an extension was Tuesday, April 18, 2023. However, the Georgia income tax return was due on October 16, 2023, for those who requested an extension.  

Residents in counties affected by Hurricane Idalia may file their federal returns by February 15, 2024, if they had previously requested an extension.

The specified deadline might undergo changes based on particular circumstances. Therefore, you should verify the deadline with the Georgia Department of Revenue.

What are the penalties for late or non-payment of Georgia state income tax?

Late or non-payment of Georgia state income tax can lead to significant penalties, so prioritize settling your tax obligations. Here’s a breakdown of the critical penalties:

• Late Filing Penalty: The tax authorities will assess a 5% tax penalty due to a taxpayer who fails to file a tax return by the due date, including extensions.
  The Department of Revenue (DOR) will also impose an extra 5% each month the return is overdue. The maximum penalty for late filing is 25% of the tax due.
  In case of delinquent taxes, the General Authority applies interest every month (or part of a month) until the taxes are paid in full. The annual interest rate equals the Federal Reserve prime rate plus 3%.

• Late Payment Penalty: If taxpayers fail to pay taxes on the due date, they will face a penalty whether or not the return is filed. This penalty comprises 0.5% of the unpaid tax on the expected amount.
  An extra 0.5% of the outstanding tax is applied monthly or part thereof; the tax remains unpaid. The cumulative penalty can reach 25% of the total tax amount owed.
  The combined total of both penalties cannot exceed 25% of the tax due on the return date.

What Income is Not Taxable in Georgia?

Let’s begin with the sweet nectar of tax-free income. Several sources in Georgia offer respite from the IRS’s grasp:

• Retirement Income: Social Security and Railroad Retirement benefits are entirely exempt. A retirement exclusion is permissible if the taxpayer is completely and permanently disabled or 62 years of age or older.
  Retirement income includes dividends, interest, net rentals, royalties, pensions, annuities, capital gains, and the first $4,000 earned as income.
• Worker’s Compensation:  The state of Georgia follows the federal income tax laws, which provide that workers’ compensation benefits are not taxable. This applies to both the injured employee and the survivors of a worker who perished in a workplace accident.
• Child Support: individuals who receive child support do not have to pay taxes. The parent making the payments cannot claim it as a tax deduction.
• Gifted Money: The gift tax in Georgia is not applicable at the state level, but the government imposes a federal gift tax. Under this tax, individuals can give away a maximum of $16,000 annually. There is no limit on the number of recipients of these gifts.
  The federal gift tax prevents taxpayers from avoiding estate taxes by giving away their assets during their lifetime. Individuals who gift more than $16,000 within the calendar year will be subject to the federal gift tax.

What is the current sales tax rate in Georgia?

Georgia has a statewide sales tax rate of 4%. This rate is among the lowest 20% of all U.S. states. In addition to the state rate, localities and counties within Georgia impose their own sales taxes, reaching a maximum of 4.9%. When combined, Georgia’s average total sales tax rate comes to 7.72%, slightly exceeding the national average.

Unlike other states, Georgia includes groceries in its taxable items, which applies only to local rates. When shopping at supermarkets in Georgia, anticipate sales taxes of up to 5%.

What is a standard deduction in tax law?

In tax law, a standard deduction is a fixed amount of money that reduces the income subject to tax. A taxpayer may claim it instead of itemizing deductions to reduce their tax bill. 

When your itemized deductions are less than the standard deduction, it is more beneficial for you to claim the standard deduction. If your itemized deductions exceed what would be allowed in taking this approach—then it is advantageous to itemize them.

Here’s a summary of the two options:

• Standard Deduction: This is a fixed amount determined by the IRS based on your filing status. It reduces your taxable income by a set amount, depending on your income, age, and other factors.
• Itemized Deductions: You can subtract these expenses from your taxable income. They include mortgage interest, property taxes, medical fees, and charitable donations. Itemized deductions are subject to certain limitations and require more effort to track and document.

What is the standard deduction for Georgia state income tax?

The standard deduction amounts for different filing statuses are as follows:

• Single/Head of Household/Qualifying Surviving Spouse: $5,400
• Married filing Jointly: $7,100
• Married filing Separately: $3,550
• Taxpayers may qualify for an additional deduction of $1,300 if they are blind or 65 or older.

Georgia’s standard deduction is expected to undergo further changes due to the implementation of Georgia’s new flat income tax. The new law takes effect starting in 2024.

Can you Itemize Deductions in Georgia?

Yes, you can itemize deductions in Georgia. Georgia follows federal tax law when determining which expenses are deductible on your state return. If you take advantage of itemized deductions on your federal income taxes, you must do the same thing when filing a state return.

Consulting with a tax attorney in Atlanta, GA, is always best if you need help determining whether to itemize or take the standard deduction. They can help you determine which option will save you the most money on your taxes.

What can you itemize under Georgia tax law?

Do you want to lower your Georgia state income tax bill? Consider itemizing your deductions. Georgia ‌follows federal guidelines for itemized deductions, so understanding what qualifies at the federal level opens the door to state tax savings.

What can you claim? As of 2023, the U.S. government allows you to deduct the following itemized expenses from your taxable income:

• Medical and dental bills: exceeding a certain percentage of your adjusted gross income.
• State and local taxes: like property taxes on your home.
• Mortgage interest: paid on your primary residence.
• Casualty and theft losses: for unforeseen events like fire or burglary.
• Charitable donations to qualified organizations.
• Student loan interest: up to a certain amount.
• Certain job-related expenses, like travel or uniforms.
• Other miscellaneous deductions as listed in the IRS tax code.

Specific rules and limits apply to each deduction. It’s always wise to consult a tax‌ attorney in Atlanta for guidance to ensure you’re claiming everything you can.

Is Georgia tax-friendly to Retirees?

Yes, Georgia is moderately retiree-friendly when it comes to taxes. It offers seniors various exemptions, credits, and deductions to maximize their retirement income.

Is There a Tax-free Day in Georgia? 

Yes, indeed! Georgia’s tax-free weekend falls on July 31 and August 1, offering an opportunity for savings on back-to-school items. However, it’s important to note that only some items qualify for the tax exemption.

What is the Georgia homestead exemption?

The Georgia Homestead Exemption is a program that helps reduce the amount of property taxes homeowners owe on their primary residence. This tax break can be significant, offering financial relief to residents and making homeownership more affordable. Here’s a breakdown of the key points:

Standard Homestead Exemption

Georgia residents who use their homes as their primary residence can qualify for a $2,000 exemption from county and school taxes. The deduction applies to the 40% assessed value of the homestead.

Owners of farm-dwelling houses can claim this exemption while participating in rural housing programs under a local housing authority contract.

Exemption for Individuals 65 and Older

Residents aged 65 and above can claim a $4,000 exemption from all county ad valorem taxes, provided their income doesn’t exceed $10,000. It excludes income from pensions,  retirement sources, and disability income up to the federal Social Security Act maximum allowed to be paid to an individual and his spouse. The owner must notify the county tax commissioner if, for any reason, they no longer meet the requirements for this exemption.

Floating Inflation-Proof Exemption

Individuals 62 and older may benefit from an inflation-proof county homestead exemption triggered by natural increases in the home’s value. Should the assessed value of the residence experience an increase surpassing $10,000, the homeowner stands to gain from this exemption. However, combined income with a spouse or other residents must not exceed $30,000.

Disabled Veteran or Surviving Spouse Exemption.

Qualifying disabled veterans or their surviving spouses receive an exemption of $32,500 or the maximum federal law allows on their homestead. Surviving spouses or minor children retain the exemption as long as they occupy the home.

Homestead Exemption for Surviving Spouse of U.S. Service Member

Unmarried surviving spouses of service members killed in action receive a homestead exemption of $60,000 plus an additional sum based on the index rate set by the United States Secretary of Veterans Affairs. The exemption continues as long as the surviving spouse remains unmarried.

Homestead Exemption for Surviving Spouse of Firefighter or Peace Officer

Unmarried surviving spouses of firefighters or peace officers killed in the line of duty receive a homestead exemption for the full value of the homestead. The exemption persists as long as the surviving spouse occupies the residence as a homestead.

Is Interest Abatement a Possibility in Georgia for Unpaid Taxes?

The collection of interest charges on delinquent taxes within the State of Georgia may be subject to discretionary waiver by the Commissioner of the Department of Revenue. 

Whether partial or complete, such abatement is ‌contingent upon establishing a causal connection between the tax payment delay and the Department’s actions or omissions. The responsibility of demonstrating this lies with the taxpayer.

Need Help to Streamline Your Taxes?

If you’re seeking assistance for penalty abatement, connect with a seasoned tax professional experienced in collaborating with the Georgia Department of Revenue. Cumberland Law Group is your ally, and our commitment to treating clients like family underscores our dedication to resolving tax issues effectively. We aim to liberate you from tax complexities, allowing you to live your life.