There is no tax on overtime in Georgia at the state level. Georgia taxes every dollar of overtime pay the same as regular wages, at the state’s flat 5.19% income tax rate. A bill that would have exempted overtime from Georgia income tax, House Bill 375, died in the 2025–2026 legislative session. What did change is federal: a new deduction signed into law on July 4, 2025 lets qualifying workers deduct part of their overtime pay from federal taxable income for tax years 2025 through 2028. Because Georgia starts its tax calculation from your federal adjusted gross income, that federal deduction quietly lowers your Georgia bill too.
What the Federal Overtime Deduction Actually Covers
The One Big Beautiful Bill Act, Public Law 119-21, created the deduction. It is available whether you itemize or take the standard deduction, and it runs for tax years 2025 through 2028.1Internal Revenue Service. One, Big, Beautiful Bill Act: Tax Deductions for Working Americans and Seniors
The deduction covers only the premium portion of overtime pay, not the whole overtime paycheck. If your regular rate is $25 an hour and your overtime rate is $37.50, only the $12.50 premium per hour is deductible. The base-rate portion of each overtime hour is still taxed normally. In practical terms, that is roughly one-third of your total overtime earnings, not all of them.
The caps are firm. The maximum annual deduction is $12,500 for single filers and $25,000 for married couples filing jointly. It phases out once modified adjusted gross income exceeds $150,000, or $300,000 for joint filers. You must include your Social Security number on your return, and married filers have to file jointly to claim it.1Internal Revenue Service. One, Big, Beautiful Bill Act: Tax Deductions for Working Americans and Seniors
Who Qualifies
Only overtime “required by the Fair Labor Standards Act” qualifies. That means you have to be a non-exempt worker entitled to time-and-a-half pay under federal law. Salaried employees classified as exempt from overtime do not qualify, even if they work more than 40 hours a week. Independent contractors typically sit outside the FLSA framework, though the IRS notes qualifying compensation can be reported on a W-2, 1099, or other specified statement.1Internal Revenue Service. One, Big, Beautiful Bill Act: Tax Deductions for Working Americans and Seniors
The FLSA line is basic: if you are non-exempt, your employer must pay at least 1.5 times your regular rate for hours worked beyond 40 in a single workweek.2U.S. Department of Labor. Overtime Pay Workers in executive, administrative, professional, computer, or outside sales roles can be classified as exempt if they earn at least $684 per week on a salary basis and their actual duties match the specific criteria for their category.3U.S. Department of Labor. Fact Sheet 17A: Exemption for Executive, Administrative, Professional, Computer and Outside Sales Employees Under the Fair Labor Standards Act Below that salary threshold, you are almost certainly non-exempt and entitled to overtime.
Why Georgia Still Taxes Overtime
Georgia House Bill 375 would have excluded overtime compensation from Georgia income tax starting in 2026. It died without passing in April 2026. Overtime is pooled with your base salary when Georgia calculates your tax. There is no separate line item, no special rate, and no state-level deduction for working extra hours.
Georgia moved to a flat income tax starting in 2024, with the law calling for 0.10% reductions each year until the rate reaches 4.99%. The 2024 rate was 5.39%, and both scheduled reductions have taken effect so far, bringing the rate to 5.19% for 2026.4Justia. Georgia Code 48-7-20 – Individual Tax Rates; Credit for Withholding and Other Payments; Applicability to Estates and Trusts Future reductions can be delayed if state revenue conditions are not met.
One small silver lining of the flat structure: overtime can never push you into a higher state bracket, because there are no brackets. Whether you earn $40,000 or $140,000, every taxable dollar is assessed at 5.19%. Under the old graduated system that topped out at 5.75%, workers occasionally saw overtime hit a higher marginal rate. That concern is gone.
Georgia’s Standard Deduction
The state’s standard deduction shields the first portion of your income from tax. The current amounts are $12,000 for single or head of household filers, $24,000 for married filing jointly, and $12,000 for married filing separately. Those figures were significantly increased as part of the flat-tax transition. Under the old system a single filer received only $5,400 and a joint filer just $7,100.5Georgia Department of Revenue. Georgia Standard Deductions Increases
How the Federal Deduction Lowers Your Georgia Bill
Georgia Form 500 starts with your federal adjusted gross income on Line 8, then applies state-specific adjustments on Line 9 to arrive at Georgia adjusted gross income on Line 10.6Georgia Department of Revenue. Georgia Form 500 – Individual Income Tax Return Because the new federal overtime deduction reduces your federal AGI before it ever reaches the Georgia return, it should lower your Georgia taxable income automatically.
Georgia has not announced any plan to add the federal overtime deduction back as a state adjustment. If that changes in a future legislative session, the state savings could disappear. For now, the federal deduction does double duty.
Why Your Overtime Paycheck Looks Smaller Than Expected
The IRS classifies overtime as supplemental wages. Employers can withhold federal income tax on overtime at a flat 22% rate rather than using the graduated method they apply to your regular wages.7Internal Revenue Service. Publication 15 (2026), (Circular E), Employer’s Tax Guide If your effective tax rate for the year is lower than 22%, you get the excess back as a refund when you file. Combined with Georgia’s 5.19% state withholding, Social Security at 6.2%, and Medicare at 1.45%, roughly 35% of your overtime pay may be withheld before it reaches your bank account. The actual tax you owe could be significantly less, particularly after claiming the new federal overtime deduction.
If you regularly work substantial overtime, your withholding may not match your true liability. The IRS Tax Withholding Estimator at irs.gov/W4App can help you check. Step 4(c) of Form W-4 lets you request a specific additional amount withheld from each paycheck, useful if you would rather fine-tune your withholding than wait for a large refund or face a surprise in April.8Internal Revenue Service. Employee’s Withholding Certificate (Form W-4)
What to Watch For at Tax Time
Employers now have to file information returns with the IRS showing total qualified overtime compensation paid to each worker during the year, and furnish a corresponding statement to the employee. The IRS announced transition relief for tax year 2025 while these new reporting procedures are implemented.1Internal Revenue Service. One, Big, Beautiful Bill Act: Tax Deductions for Working Americans and Seniors If your employer has not broken out overtime premium pay on your year-end documents, watch for updated IRS guidance before filing.
Keep your own records too. Federal law already requires your employer to track your daily and weekly hours, regular rate, and overtime earnings, and to retain payroll records for at least three years and time cards for at least two.9U.S. Department of Labor. Fact Sheet 21: Recordkeeping Requirements Under the Fair Labor Standards Act Save your pay stubs anyway. If your W-2 or the new overtime statement misreports qualified overtime, your own records are the backup. That documentation also matters if the IRS questions your deduction or you ever need to file a wage complaint.