Georgia Enacts Income Tax Reduction Bill

Gov. Brian Kemp has signed H.B. 463, which makes many taxpayer-favorable changes to the state’s income tax code.

H.B. 463 reduces Georgia’s personal and corporate income tax rates from 5.19% to 4.99% for 2026, with potential further annual rate reductions of 0.125% down to a floor of 3.99%, pending the state meeting revenue collection targets. The bill also increases the standard deduction and dependent exemptions for individual income tax purposes for tax years beginning on or after January 1, 2026, and provides a temporary reduced exclusion of overtime pay and tips subject to state tax as compared to the amounts exempt from federal income tax under the One Big Beautiful Bill Act.

Taxpayers subject to ASC 740 should account for the currently effective 2026 tax rate change in their income tax provisions under the accounting standard. For deferred income tax purposes, taxpayers should be mindful that ASC 740 requires deferred income taxes to be measured using enacted rates expected to apply to taxable income in the periods in which the deferred tax items are expected to reverse. The contingent nature of the subsequent years’ tax rate reductions in the bill leaves open whether and when such reduced rates will go into effect. As such, taxpayers should be cognizant of the deferred income tax implications associated with tax rates that have yet to be enacted and therefore have uncertain effective dates.