Georgia lawmakers introduce bill to exempt overtime pay from state income tax

House Bill 375, introduced in the Georgia House of Representatives on February 11, 2025, aims to amend the state's income tax code by excluding overtime compensation from taxation. The bill, sponsored by Representatives Smith, Tarvin, Powell, Momtahan, Gunter, and others, seeks to provide financial relief to full-time hourly employees by ensuring that additional earnings from overtime work are not subject to state income tax.

The key provisions of House Bill 375 include a clear definition of overtime compensation and requirements for employers to report such earnings. The bill stipulates that the exclusion will apply to all taxable years beginning on or after January 1, 2026. This legislative move is designed to address concerns about the financial burden on workers who often rely on overtime pay to meet their living expenses.

Debate surrounding the bill has highlighted differing opinions on its potential economic impact. Proponents argue that the measure will enhance the disposable income of workers, thereby stimulating local economies. Critics, however, express concerns about the potential loss of state revenue, which could affect funding for public services. The bill's supporters counter that the increased spending power of workers could offset any revenue losses through enhanced economic activity.

The implications of House Bill 375 extend beyond individual financial relief. Economists suggest that by alleviating the tax burden on overtime pay, the bill could encourage more employers to offer overtime opportunities, potentially leading to increased job satisfaction and productivity. However, the bill's passage remains uncertain as lawmakers continue to weigh the benefits against the fiscal responsibilities of the state.

As the legislative session progresses, House Bill 375 will be closely monitored for amendments and discussions that could shape its final form. If enacted, it could mark a significant shift in Georgia's approach to income taxation, particularly concerning the treatment of overtime compensation.