Georgia Retirement Income (2024)

Quick Reference

Retirement Income Exclusion

Age-based exclusion amounts:

Age 62-64: Up to $35,000 per person

Age 65 or older: Up to $65,000 per person

Married couples: Each spouse can claim based on their own age

Social Security: Fully exempt (in addition to retirement exclusion)

Qualifying Income

Income that qualifies for exclusion: - Pensions - Annuities - Interest - Dividends - Net income from rental property - Capital gains - Income from partnerships, S corps, estates, trusts (if age 62+) - IRA and 401(k) distributions

Social Security: Separately exempt, not part of $35,000/$65,000 limit

Details

Retirement Income Exclusion - Overview

Georgia provides generous retirement exclusion:

Purpose: - Make GA attractive to retirees - Reduce tax burden on retirement income - Compete with FL (no income tax) for retirees

Eligibility: - Must be age 62 or older - No requirement to be retired from work - Can still work and claim exclusion on other income

Structure: - Subtract from federal AGI - Report on Form 500, Schedule 1 - Reduces GA taxable income

Age 62-64 Exclusion

Amount: Up to $35,000 per person

Qualifying income:

Pensions and annuities: - Private employer pensions - Government pensions (federal, state, local) - Commercial annuities - Distributions from qualified plans

IRA and retirement plan distributions: - Traditional IRA distributions - 401(k), 403(b), 457 plan distributions - Roth IRA distributions (qualified) - SEP-IRA and SIMPLE IRA

Other income CAN qualify: - Interest income - Dividend income - Capital gains - Rental income (net) - Pass-through business income (if age 62+)

Ordering: - Exclude retirement income first (pensions, IRA) - Then can apply to other income up to $35,000 limit

Example (age 63, single): - Pension: $20,000 - IRA distribution: $10,000 - Interest: $8,000 - Dividends: $5,000 - Total qualifying: $43,000 - Exclusion: $35,000 (maximum) - Taxable for GA: $8,000

Age 65+ Exclusion

Amount: Up to $65,000 per person

Qualifying income: Same as age 62-64

Increased exclusion: - Nearly doubles when reach 65 - Makes GA very tax-friendly for seniors

Example (age 68, single): - Pension: $40,000 - Social Security: $30,000 (separately exempt) - IRA distribution: $15,000 - Interest: $5,000 - Dividends: $8,000 - Total qualifying (excluding SS): $68,000 - Exclusion: $65,000 (maximum) - Taxable for GA: $3,000 - Social Security: $0 (fully exempt)

Married Couples

Each spouse claims separately:

Based on own age: - Spouse 1 age 64: $35,000 exclusion - Spouse 2 age 67: $65,000 exclusion - Total exclusion: $100,000

Income attribution: - Must attribute income to correct spouse - Pension from spouse's employment = spouse's income - Joint account interest = split 50/50 (or as appropriate) - IRA distribution = to account owner

Example (MFJ): - Husband age 66, wife age 62 - Husband's pension: $50,000 - Wife's pension: $25,000 - Joint Social Security: $40,000 (fully exempt) - Joint investment income: $30,000 - Husband can exclude: $65,000 (covers his pension + $15k investments) - Wife can exclude: $35,000 (covers her pension + $10k investments) - Total excluded: $100,000 - Remaining taxable: $5,000 investment income - Social Security: $0 (separately exempt)

Social Security Benefits

Fully exempt from GA tax:

All Social Security benefits exempt: - Retirement benefits - Disability benefits (SSDI) - Survivor benefits - Dependent benefits

Not counted toward retirement exclusion: - Social Security exempt separately - Does not use up $35,000/$65,000 limit - Significant benefit vs. federal taxation

Federal vs. GA: - Federal: up to 85% of Social Security may be taxable - GA: 0% of Social Security taxable - Major tax savings for retirees

Example: - Social Security: $30,000 - Pension: $70,000 - Age 68 - Social Security: fully exempt (not counted) - Pension: $65,000 excluded, $5,000 taxable - Net GA taxable income: $5,000

What Qualifies as Retirement Income

Pensions:

Private pensions: - Defined benefit plans - Distributions from employer plans - Lump-sum distributions qualify

Government pensions: - Federal civil service - State government - Local government - Military retirement (see below)

Railroad retirement: - Tier I and Tier II benefits

IRA and qualified plans:

Traditional IRA distributions: - Regular distributions - Required minimum distributions (RMDs) - Early distributions (before 59½) also qualify

Roth IRA distributions: - Qualified distributions - Already tax-free federally, also excluded for GA

401(k), 403(b), 457 plans: - All distributions qualify - Lump-sum and periodic

Non-retirement income that qualifies:

If age 62 or older, can also exclude: - Interest income - Dividend income - Capital gains - Net rental income - Partnership/S corp income

Up to the $35,000/$65,000 limit: - Exclude retirement income first - Then other income if room remains

Military Retirement

Special treatment:

Military retirement pay: - Qualifies for retirement exclusion - Up to $17,500 if age 62-64 - Up to $65,000 if age 65+

Combined with other retirement income: - $17,500 military + other retirement = total $35,000 (age 62-64) - $65,000 military + other retirement = total $65,000 (age 65+)

Survivor Benefit Plan (SBP): - Qualifies as retirement income - Counts toward exclusion

Disability retirement: - Military disability pay may qualify - Depends on nature of disability pay

Income That Does NOT Qualify

Wages and self-employment: - W-2 wages: do not qualify - Self-employment income: does not qualify (unless from pass-through entity and age 62+) - Cannot exclude earned income from current work

Example (age 66): - Part-time wages: $20,000 - Pension: $50,000 - Exclusion applies to: pension only (up to $65,000) - Wages: fully taxable for GA

Nonqualified deferred compensation: - May not qualify depending on plan type - Check specific plan

HSA distributions: - If for non-medical expenses - Taxable, does not qualify for exclusion

Calculation Steps

Step-by-step:

1. Determine age on December 31 of tax year: - Age 62-64: $35,000 limit - Age 65+: $65,000 limit

2. Identify qualifying retirement income: - Pensions - IRA/401(k) distributions - Annuities - If age 62+: interest, dividends, capital gains, rental, pass-through

3. Total qualifying income

4. Apply limit: - Lesser of: qualifying income OR age-based limit - This is your exclusion

5. Report on Form 500, Schedule 1: - Line for retirement income exclusion - Reduces GA AGI

6. Social Security: - Separately exclude (not part of retirement income exclusion)

Planning Strategies

Timing distributions:

Before age 62: - No exclusion available - Minimize distributions if possible - Consider Roth conversions (taxable now, tax-free later)

Age 62-64: - $35,000 exclusion available - Take up to $35,000 from retirement accounts tax-free for GA - Still owe federal tax

Age 65+: - $65,000 exclusion available - Significant opportunity for tax-free income (GA) - Consider larger distributions

Married couple timing: - When both spouses 65+: $130,000 combined exclusion - Plan distributions to maximize exclusion - May take more from retirement accounts vs. working

Roth conversions in GA:

Consider conversions before 62: - Conversion taxable for GA (no exclusion) - But future qualified distributions tax-free federal and GA

After 62: - Conversion counts as distribution - Can exclude up to $35,000/$65,000 for GA - Pay federal tax on conversion - Minimize GA tax on conversion

Move to GA in retirement:

Timing move: - If in high-tax state, consider moving to GA - Become GA resident - Take advantage of retirement exclusion

Part-year resident: - Year of move, prorate exclusion - Full exclusion in following years

Common Errors

Counting Social Security toward limit: - Error: Including Social Security in $35,000/$65,000 - Correct: Social Security separately exempt, not counted

Excluding wages: - Error: Trying to exclude W-2 wages - Correct: Wages do not qualify for exclusion

Wrong age: - Error: Using $65,000 exclusion when age 64 - Correct: Must be 65 by December 31

Each spouse separate: - Error: MFJ using combined $65,000 limit - Correct: Each spouse claims separately based on own age

Not claiming exclusion: - Error: Thinking GA taxes all retirement income - Correct: Must claim exclusion on Schedule 1

Interaction with Credits

Low Income Credit: - Retirement exclusion reduces AGI - Lower AGI may qualify for low income credit - See credits-deductions.md

Property tax credits: - Some local property tax relief programs - Income-based eligibility - Retirement exclusion reduces counted income

Reporting on Return

Form 500, Schedule 1:

Line for retirement income exclusion: - Report total qualifying income - Apply limit based on age - Enter exclusion amount

Supporting documentation: - Keep records of retirement income - 1099-R forms for pensions/IRA - SSA-1099 for Social Security - Birth certificate or ID showing age

Audit risk: - High exclusion amounts may trigger review - Must substantiate age and income type - Keep good records

Citations

Georgia Code: - O.C.G.A. § 48-7-27(a)(1)(C) - Retirement income exclusion - O.C.G.A. § 48-7-27(b)(7) - Social Security exemption

Regulations: - Ga. Comp. R. & Regs. 560-7-8-.34 - Retirement income exclusion - Ga. Comp. R. & Regs. 560-7-8-.35 - Qualified retirement income

GA Department of Revenue: - IT-511 - Information for Military Personnel and Veterans - Individual Income Tax Guide - Retirement Income Exclusion Worksheet - https://dor.georgia.gov/

Forms: - Form 500 - Individual Income Tax Return - Schedule 1 - Adjustments to Income - Retirement Income Exclusion Worksheet (in instructions)

Publications: - Instructions for Form 500 - Publication IT-RC-008 - Retirement Income Exclusion