Georgia taxpayers will pay a lower income tax rate starting in January 2026, after the state locked in a permanent flat rate of 5.19 percent for both individuals and corporations. The cut, down from 5.39 percent, is part of a broader package that state officials have valued at more than $1 billion in relief. The move also resets the timeline for additional reductions that could bring the rate to 4.99 percent in coming years, though revenue-based conditions still apply.
How HB 111 rewrites Georgia’s income tax schedule
The rate change traces back to two pieces of legislation. In 2022, Georgia created a flat-tax structure and a multi-year schedule of reductions through HB 1437, which charted a path from 5.75 percent toward 4.99 percent over several years. That original schedule relied on revenue triggers, meaning each annual reduction could be delayed if state collections fell short of certain thresholds. The trigger-dependent design introduced uncertainty: taxpayers and businesses could not predict the exact rate they would face in any given year until the state confirmed whether revenue conditions had been met.
House Bill 111, signed into law this year, changed that dynamic. The enrolled version of the measure, available through the governor’s signed legislation archive, shows that lawmakers accelerated the next scheduled reduction and locked it in, rather than waiting for another trigger test. The bill also appears in the Department of Revenue’s 2025 legislative summary, which notes that it amends O.C.G.A. Section 48-7-20(a.1) to set the individual income tax rate at 5.19 percent for taxable years beginning on or after January 1, 2026.
Under HB 1437, the flat tax was designed to fall in a series of small steps, each conditioned on whether revenues met a specified growth benchmark. HB 111 effectively skipped one of those steps. Instead of waiting to see if fiscal conditions justified a move from 5.39 percent to 5.29 percent, lawmakers jumped directly to 5.19 percent and made that rate permanent unless and until a later statute changes it. The law also recalibrates the step-down schedule: annual reductions of 0.10 percentage points will continue from the new 5.19 percent baseline until the rate reaches 4.99 percent, still subject to statutory triggers and possible delays.
The practical difference is that HB 111 brought part of the future tax relief forward and removed one layer of uncertainty. Georgia filers now have a fixed number to plan around for 2026 tax-year withholding and estimated payments, rather than waiting for a state revenue certification. For employers that handle payroll for workers in multiple states, a known rate also simplifies compliance and software updates heading into the 2026 tax year.
Revenue projections and the path to 4.99 percent
Fiscal notes from the Georgia Office of Planning and Budget analyze the impact of HB 111 across several years. The official revenue estimate projects the bill’s effects through fiscal year 2031, taking into account both the immediate reduction to 5.19 percent and the possibility of future step-downs to 4.99 percent if triggers are satisfied. Those projections assume that the lower rate will modestly reduce state income tax collections compared with a no-change baseline, but they also reflect Georgia’s recent pattern of strong revenues and sizable reserves.
The 5.19 percent rate applies to both individual and corporate income, a point confirmed by current Department of Revenue guidance listing the same rate for corporate taxable net income. Aligning the two rates keeps Georgia’s structure relatively simple: businesses organized as corporations and pass-through entities whose owners pay individual income tax will face the same top rate, even though they file under different sections of the code.
By locking in 5.19 percent rather than letting each reduction depend on whether collections hit a trigger, the state reduced one source of year-to-year budgeting uncertainty. Legislators and budget writers can now build future spending plans around a known baseline rate for 2026, instead of maintaining separate scenarios for different possible tax outcomes. That clarity may also help when they decide whether revenue conditions justify authorizing the next 0.10-percentage-point cut.
The path to 4.99 percent, however, is not automatic. The trigger language carried forward from HB 1437 still requires that revenues meet or exceed certain benchmarks before each additional reduction takes effect. If collections slow, the rate can remain at 5.19 percent for longer than originally anticipated, stretching the timeline to reach 4.99 percent. In that sense, HB 111 front-loads part of the tax relief but preserves the state’s ability to pause further cuts if fiscal conditions deteriorate.
For taxpayers, the immediate effect is relatively straightforward: starting with the 2026 tax year, less income will be withheld or paid in estimated installments at the state level, leaving more take-home pay for households and more after-tax profit for businesses. For the state, the change represents a calculated trade-off between offering near-term relief and maintaining enough flexibility to respond to future economic swings. How quickly Georgia ultimately arrives at a 4.99 percent rate will depend on whether revenues continue to track the optimistic assumptions embedded in the latest projections.
