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    Georgia Enacts Tax Refunds, Lowered Flat Rate Income Tax

    Georgia taxpayers will see money in their pockets this election year as a result of the Georgia General Assembly’s recent enactment of HB 1302, a bill to refund 2020 taxes based on the State’s 2021 revenue surplus of $3.7 billion. Georgia’s surplus largely came from federal COVID relief funds. Governor Kemp signed the legislation on March 23, 2022, which provides a maximum refund amount of $250 for single taxpayers and $500 for joint filers based on tax liability shown on the Georgia return.

    Example: A single taxpayer filed a 2020 income tax return and paid a tax liability of $300. The taxpayer files a timely 2021 return and would be eligible to receive a refund of 2020 taxes in the amount of $250.

    If taxpayers owe less than the maximum refund amounts, they will only receive a refund for the amount of the actual tax liability.

    Example: A married couple filed a 2020 income tax return with a tax liability of $400. The taxpayers file a 2021 return and are eligible to receive a refund of 2020 taxes in the amount of $400. Although the maximum allowable refund is $500 for taxpayers who file jointly, the taxpayers cannot receive a refund of more than the actual $400 tax liability.

    To get the refund, taxpayers must have filed their 2020 return and must file their 2021 return by this year’s deadline (including any extension granted by the Georgia Department of Revenue (DOR). Part-year filers and taxable nonresidents are eligible for a prorated refund based on the share of their income taxable in Georgia.

    Flat Rate Income Tax Coming

    The General Assembly did not stop with the refund. On the last day of the session, the lawmakers passed HB 1437, a bill to eliminate Georgia’s bracket system and replace it with a flat tax of 4.99%. Governor Kemp is expected to sign the bill. Georgia’s current income tax has six brackets covering very low income levels, with a maximum rate of 5.75% imposed on over $7,000 of taxable income.

    The rate reductions will be phased in yearly beginning in 2024 and extending through 2029 based on the State’s revenue estimates and revenue collections, with a 3% revenue increase required to move to the next phase. The phase-in also stops in years that revenue collections are lower than any of the previous five years.

    Along with rates, the Georgia standard exemption will be increased from $2,700 to $12,000 for single filers and from $7,400 to $24,000 for joint filers.

    Lawmakers did not release any formal revenue estimates for the tax cut although Senate Finance Committee Chairman Chuck Hufstetler, (R-Rome) estimated the cost at $455 million in its first year, and House Ways and Means Committee Chairman Shaw Blackmon, (R-Bonaire) said it would cost more than $1.2 billion. An independent think tank, the Georgia Budget and Policy Institute (GBPI) estimates the tax cut will cost the State $2 billion in revenues when fully phased in.

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