Taxpayers in Georgia will see a reduction in their state income tax rate beginning in 2024.
Governor Brian Kemp signed the Tax Reduction and Reform Act of 2022, which reduces over a period of seven years the current tax rate of 5.75% to 4.99%. The actual reduction will be subject to a one year delay for each year that certain revenue estimates and collections are not met.
In addition to the tax rate reduction, the new law also increases the personal exemption and retirement amounts, repeals the standard and additional deductions, and requires an add back of taxes deducted for federal purposes over a set threshold.
Tax rate reduction Individual income tax rates will be reduced as follows:
- The rate will be 5.49% for tax years beginning on or after January 1, 2024;
- The rate will be 5.39%; for tax years beginning on or after January 1, 2025;
- The rate will be 5.29% for tax years beginning on or after January 1, 2026;
- The rate will be 5.19% for tax years beginning on or after January 1, 2027;
- The rate will be 5.09% for tax years beginning on or after January 1, 2028; and
- The rate will be 4.99% for tax years beginning on or after January 1, 2029.
Each prospective change in the tax rates will be delayed by one year if, as of December 1 of each year,
- 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 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.
Personal exemptions. Effective for the 2024 tax year and after, each taxpayer will be allowed as a personal income tax deduction as follows:
For each married couple filing a joint return:
- For tax years beginning on or after January 1, 2024, $18,500;
- For tax years beginning on or after January 1, 2026, $20,000;
- For tax years beginning on or after January 1, 2028, $22,000; and
- For tax years beginning on or after 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.
Retirement income. 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 new tax law 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.
Our tax advisors are here to answer any questions for you.
Article courtesy of Vidor A. Noscoe, Esq., RIA Checkpoint