Overtime Tax Savings in Georgia

Why Georgia wrote its own, smaller version

The four OBBBA deductions are below the line. They reduce federal taxable income — Schedule 1-A totals onto Form 1040 line 13b — and they never reduce federal adjusted gross income. Georgia begins its own calculation from federal agi, which the deduction never touched.

So nothing was decoupled and no vote was held. Georgia simply carried on taxing overtime the way it always had, because from the state's point of view nothing about your income changed. This is the position most American workers are in, and it is the part of "no tax on overtime" that the name obscures.

Instead of conforming, Georgia enacted a separate exemption of $1,750 of overtime — a state break that happens to cover the same kind of income, at a small fraction of the federal ceiling. On the $4,500 in the example above it is worth about $91, and Georgia taxes the remaining $2,750 at a flat 5.19% on wage income. The calculator above applies that $1,750 ceiling, so the state figures here are what Georgia actually charges.

What $4,500 of overtime premium is actually worth in Georgia

Take a single filer with $62,400 of other wages and $4,500 of qualified overtime premium — the defaults loaded in the calculator above. Federal taxable income falls by the full $4,500, worth $580 at this filer's bracket.

Georgia taxable income falls by its own $1,750 ceiling rather than by the federal deduction, worth about $91 — so the total saving is $671 and Georgia still collects on everything above $1,750.

Move the sliders to your own numbers and the arithmetic follows. The two things that will not change are Georgia's treatment — the state taxes this money regardless of what your federal return says and the payroll tax, which applies to the first dollar and the last.

What overtime tax relief does not do, in Georgia or anywhere

Your overtime is still wages. It stays in boxes 1, 3 and 5 of your W-2 — the box 12 code TT is informational — so Social Security and Medicare are computed on exactly the same amount as before.

Only the premium half qualifies — the amount paid in excess of your regular rate, which is one third of a time-and-a-half payment. $13,500 of overtime pay produces a $4,500 deduction, not $13,500. The cap is $12,500 ($25,000 filing jointly) and it phases out above $150,000 of MAGI.

And all four OBBBA deductions expire after tax year 2028. Whatever Georgia does between now and then, the federal provision has a fixed end date.

Frequently asked questions