On April 26, 2022, Governor Brian Kemp signed into law H.B. 1437, which would replace Georgia’s current income tax brackets with a flat-rate income tax. The bill also increases the state’s personal exemption amounts.
Flat-Rate Income Tax
The current income tax system in Georgia consists of six income tax brackets, ranging from 1% for single filers who earn less than $750 and joint filers who earn less than $1,000, to 5.75% for single filers who earn more than $7,000 and joint filers who earn more than $10,000. The new legislation will eliminate these brackets and all Georgia taxpayers will be subject to a flat rate of 5.49% beginning with the 2024 tax year. Each subsequent year the rate will decrease by 0.1% until it reaches 4.99% in 2029.
Please note, the legislation does include the following revenue requirements, which must be met in order for the rate changes to go into effect beginning in 2024:
- The governor’s revenue estimate for the following year must be 3% higher than the current year’s estimate;
- Actual state revenue must be higher than each of the previous five years; and
- The state’s Revenue Shortfall Reserve must be larger than the decrease in revenue expected from the following year’s cut.
The same three requirements must be met each year for the state to apply the 0.1% decrease for that year.
Personal Exemption Increases
The new legislation will also increase the personal exemption amounts for Georgia taxpayers. Current personal exemptions are $3,700 for single filers and $7,400 for joint filers. Those exemptions will increase beginning in 2024 and continue to increase every two years until they reach $12,000 for single filers and $24,000 for joint filers in 2030.