The Ultimate Guide to Georgia State Taxes

What You Should Know Before You Start Filing Taxes in Georgia

If you’re like most Americans, you probably dread the process of doing your taxes. What’s worse is that it’s often difficult to understand what taxes are taxable in Georgia and what are not.

In Georgia, there are two different types of tax rates – the individual income tax rate and the sales and use tax rate. The individual income tax rate ranges from 1% to 6%. The sales and use taxes range from 4% to 7%.

The first step in filing your state taxes is determining which form you need to file. You can find this information on the Georgia Department of Revenue website. There, you’ll find a list of all the forms that need to be filed as well as instructions for filling them out.

Taxable Income

You have probably heard the term “taxable income” but you may not know what it includes. Taxable income is any money that is taxable for your federal taxes. This includes:

Wages
Interest from savings accounts, stocks, and bonds
Dividends from stocks or mutual funds
Capital gains from selling investments
Rents, royalties, and pensions.

Total taxable income is the sum of all of these factors and can be found on your W2 form if you are an employee or on your tax return if you are self employed.

Who has to Pay Georgia State Taxes

You are required to file a Georgia tax return if you receive income from Georgia and you fall into one of the following categories:

Full-year resident: Your legal residence is in Georgia, even if you are absent from it or live out of state temporarily during the year.
Part-Year resident: You were a legal resident of Georgia for only a portion of the tax year.
Nonresident: You didn’t live in Georgia but received income from Georgia sources, such as wages, lottery winnings and rent.

What Tax Brackets are There in Georgia?

According to WalletHub, Georgia ranks as the 21st lowest of the 50 states in its effective tax rate, putting it near the middle of the list of states.

The Georgia state tax brackets are based on the income of the individual. The following charts illustrate the tax brackets

Charts: Forbes

Georgia’s Personal Exemptions and Dependent Deduction

The Georgia personal exemptions and dependent deductions as of 2022 are:

$5,400 for Single or Head of Household
$3,550 for Married Filing Separate or a Joint Return where both Spouses are working
$7,100 for Married Filing Joint Return where one spouse is working

How Are Tax Deductions Calculated In Georgia?

Every year, the government calculates the amount of taxes that you owe them, and they take deductions from your income to determine how much you’ll owe.

Deductions are expenses that can be subtracted from your gross income to lower your taxable income. These deductions can include things such as business expenses, charitable donations, and mortgage interest payments.

Generally, if you itemize your deductions on your federal return, you must itemize them on your Georgia return.

Credits are amounts that can be subtracted from your tax bill to reduce the total amount of taxes you owe. These credits can include things such as the child and dependent care credit, the earned income tax credit, or tuition and fees deduction.

Georgia State Income Tax Credits

Child and Dependent Care Expense Credit

Taxpayers with dependents are eligible for a credit on care expenses. That includes any money spent on care outside the home worth 30% of a qualified federal income tax return.

Disabled Person Home Purchase or Retrofit Credit

A person who is permanently disabled (and buys a single-family home that has accessibility features) can claim a tax credit of up to $500. A person who is permanently disabled can get a tax credit up to $125 by retrofitting an existing single-family home with accessibility features This credit can be carried forward for three years.

Disaster Assistance Credit

If you qualify for disaster relief during the tax year, you can receive a tax credit of up to $500. This credit is not refundable, which means you can’t receive a tax refund but can use it to offset your taxes until you’ve reached the limit.

Eligible Single-Family Residence Tax Credit

If you purchased a house in the state of Georgia, you may be eligible for a tax credit. The percentage of the credit offered is less than 1.2% of purchase price or $1,800. This credit is nonrefundable, which means it can’t trigger a tax refund, but it can be carried forward until it’s completely claimed.

Other States Tax Credit

Full-year and part-year residents can claim a credit for income tax paid to another state to avoid paying tax on it twice.

Qualified Caregiving Expense Credit

If you paid for caregiving expenses (e.g. adult day care, equipment for the disabled) for a qualifying family member (e.g. yourself or a close relative), you can claim 10% of the costs, up to a $150 threshold on your taxes. The credit is nonrefundable, which means it can’t trigger a tax refund, and it can’t be carried over to the next year.

Qualified Education Expense Credit

Qualified education expenses, such as tuition and student activity fees, can be claimed on your Georgia state tax return. You must request pre-approval electronically to claim the credit. The state of Georgia will only give out up to $100 million in this credit per year, so it’s on a first-come, first-serve basis—which means you’ll want to take action as soon as possible to claim it.

Qualified Education Donation Tax Credit

Those who make qualified education donations can claim a credit for them on their Georgia state tax return. The state of Georgia will only allow $5 million in this credit each year (through 2023) and you must request pre-approval electronically before claiming it. This credit is on a first-come, first-serve basis—which means you’ll want to take action as soon as possible to claim it.

Low-Income Credit

If your federal adjusted gross income is less than $20,000, then you are eligible for Georgia’s low-income tax credit. Part-year residents can only claim this credit if they were residents at the end of the tax year. This credit is nonrefundable, which means it can’t trigger a tax refund.

Additional Tax Exemptions

Property Tax Exemptions

Georgia provides property tax exemptions for homeowners, people aged 62 and older, disabled veterans and the surviving spouses of U.S. service members and peace officers or firefighters. The exemption amount varies.

Capital Gains Taxes

Georgia doesn’t have a capital gains tax.

Inheritance and Estate Tax and Inheritance and Estate Tax Exemption

Georgia doesn’t have an inheritance or estate tax.

New Cryptocurrency Taxes for Georgia

Few states have attempted to address cryptocurrency in tax laws or other state taxation regulations. Cryptocurrency is a form of digital money recorded in public, decentralized ledgers. Some taxpayers hold cryptocurrency for investment. Some people use it to make purchases of both goods and services online. A variety of state tax laws potentially apply to transactions involving cryptocurrency.

Generally, the IRS treats virtual currency such as Bitcoin as property, which has been crypto’s federal classification since 2014. At that time, the agency announced that Bitcoin would be treated as property, with loss or gains being treated as capital loss or capital gains for tax purposes.

State tax agencies generally follow this same approach for cryptocurrency, but may determine the value of the cryptocurrency differently than the IRS. Have your accountant check on the latest Georgia State Tax regulations on cryptocurrency.

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