Primer on Tax Breaks for Georgia’s Senior Taxpayer – February 2011 Newsletter

Primer on Tax Breaks for Georgia’s Senior Taxpayers

With a mix of Georgia laws governing tax breaks for senior taxpayers, we at Redwood want to provide a quick guide on what retirement income can and cannot be excluded from taxation.

Since 1990, the Georgia Retirement Income Exclusion has allowed Georgia residents who are 62 years of age and older or permanently and totally disabled to exclude some retirement income from taxation.  For 2010 and 2011, eligible taxpayers can exclude $35,000 of unearned income (interest, dividends, capital gains, pensions and annuities) and $4,000 of earned income (salary and business income) on their state income taxes.  House Bill 1055, signed in 2010, increases the amount of retirement income not subject to Georgia income tax.  Retirement income includes – but is not limited to— IRA withdrawals, interest, dividend, rent and royalty income, capital gains, pensions, annuities, other unearned income and up to $4,000 of earned income. 

Under this new law, the retirement income exclusion for tax years 2012 through 2015 will increase according to the schedule below for taxpayers who are age 65 or older: 

  • 2012 – $65,000 exclusion
  • 2013 – $100,000 exclusion
  • 2014 – $150,000 exclusion
  • 2015 – $200,000 exclusion

Beginning in 2016, the new law allows UNLIMITED exclusion of all retirement income for taxpayers who are age 65 or older.  The retirement exclusion for taxpayers who are age 62 to 64 will remain at $35,000. 

For example, Jay, 68, is retired and receives a pension of $25,000 per year.  His wife Gloria, 62, is employed and earns $50,000 per year. 

With the 2010 maximum exclusion amount of $35,000, Jay can exclude his entire $25,000 pension.  Gloria can exclude $4,000 of her salary (earned income).  Thus, their combined taxable income of $75,000 is reduced to $46,000 for state income tax purposes. 

Retirement income exceeding the maximum exclusion will be taxed at regular income tax rates that top out at 6 percent.  Additionally, Social Security income is exempt from state taxes in Georgia.

As always, do not hesitate to contact us here at Redwood about any questions or comments about taxes, investment or your portfolio.

A Quick Word on Homestead Exemptions:

The state of Georgia along with many other states offer homestead exemptions to persons that own and occupy their home as a primary residence. These exemptions can provide considerable tax benefits. Also, many counties offer their own homestead exemptions that provide additional benefits to those offered by the state.  For more information on homestead exemptions in Georgia, click here.

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