Standardized and Itemized Deductions Under New Georgia Tax Laws

Freeways in Georgia

As a Georgia resident, it is essential to keep up to date with recent developments in Georgia’s tax laws—particularly how best to apply Georgia’s itemized and standard deductions.

In this article, we’ll walk you through your frequently asked questions regarding Georgia state tax exemptions, including standard and itemized deductions, and how to maximize your credits and deductions—especially in light of recent changes to Georgia’s tax law.

What is a standard deduction in tax law?

In tax law, a standard deduction reduces the taxable portion of your income by a fixed dollar amount, lowering your overall tax liability. A standard deduction is a simpler, easier-to-use alternative to itemized deductions, in which you calculate and list specific expenses, such as mortgage interest, medical expenses, or charitable contributions.

Depending on how many expenses you can deduct, itemized deductions may reduce your taxable income more than the standard deductions, at the cost of being less straightforward. If you don’t have very many expenses you can deduct, choosing the standard deduction can save you time and money. You can’t claim both the standard and itemized deductions, though—you have to choose one.

The standard deduction amount often depends on the taxpayer’s filing status, such as single, married filing jointly, married filing separately, or head of household. The amount usually varies from state to state and can change with the passage of new laws or to account for inflation.

Why You Need to Know About Georgia’s Standard Deduction

If you are a full-time Georgia resident who meets certain income thresholds and are required to file a federal tax return, you are also required to file state taxes, so it’s important to keep up to date with tax laws as they change.

Recently, the Georgia legislature made some alterations to Georgia’s tax law. In an earlier blog, we covered the recent pledge to switch to a flat income tax, but that’s not all. Georgia’s state legislature has also decided to increase the amount of the standard deduction, in addition to providing more flexibility for taxpayers in choosing between the standard deduction and itemized deductions.

What is Georgia’s standard deduction?

In 2022, Georgia’s standard deduction increased for single taxpayers, married taxpayers filing jointly, and other taxpayers.

The individual standard deduction for full-time Georgia residents is now:

  • $5,400 for single/head of household taxpayers and qualifying surviving spouses
  • $7,100 for married couples filing jointly
  • $3,550 for married couples filing separately

In addition, taxpayers may qualify for an additional deduction of $1,300 if they are 65 or older or blind.

Starting in 2024, with Georgia’s new flat income tax going into effect, Georgia’s standard deduction is likely to see further change in the future.

Can you itemize deductions in Georgia?

In addition to taking a standard deduction, Georgia tax law also lets taxpayers itemize their deductions, potentially saving more money by further reducing their taxable income. As of 2023, Georgia tax law follows federal tax law to determine which items are deductible, so you can deduct the same items on your Georgia taxes as you would on your IRS forms.

What qualifies as itemized deductions under Georgia tax law?

Since Georgia follows federal tax law to determine what is eligible for an itemized deduction on your state taxes, you can tell what qualifies as Georgia state tax exemptions for individuals simply by following federal law.

As of 2023, the U.S. federal government considers the following itemized deductions eligible for reducing your overall taxable income, with no limitation on itemized deductions:

  • Unreimbursed medical and dental expenses that exceed a certain percentage of your adjusted gross income
  • State and local taxes, including property taxes on real estate
  • Mortgage interest
  • Casualty and theft losses
  • Contributions to qualifying charities
  • Student loan interest
  • Certain job expenses
  • Other miscellaneous deductions

Keep in mind that there are specific thresholds, rules, and limitations regarding whether an expense can be itemized and deducted from your taxable income, so always make sure to consult with a trusted tax professional when itemizing your deductions.

Can you itemize deductions in Georgia and take the standard deduction in federal taxes?

Until recently, if you took the standard deduction on your federal taxes, you would have to take the standard deduction on your Georgia state taxes as well, and vice versa. Likewise, if you itemized deductions on your federal taxes, you would have to do the same in Georgia.

This doesn’t always save you the most on your taxes—for example, the standard deduction might save you more money on your federal taxes than itemized deductions, but save you less money on your state taxes.

That’s changing, though. The Georgia legislature’s recent omnibus tax bill, SB 56, includes a provision to allow taxpayers to take Georgia’s standard deduction on their state taxes while itemizing deductions on their federal taxes.

How to Maximize Credits and Deductions in Georgia

Getting the most out of Georgia state tax exemptions means carefully evaluating how applying different strategies may reduce your overall taxable income, such as choosing between the standard deduction or itemized deductions.

Should you itemize or claim the standard deduction?

To make sure you make the best decision regarding your Georgia state tax exemptions, consult with a trusted tax professional and follow the outlined steps to choose between Georgia’s itemized deductions and its standardized deduction:

  1. Collect the relevant documentation for any potential itemized deductions, such as medical expenses, state and local taxes, mortgage interest, charitable contributions, and other eligible expenses.
  2. Add up your eligible deductions to get an estimate of your itemized deduction.
  3. Compare your estimate with Georgia’s standard deduction for your filing status.
  4. Decide which option reduces your taxable income the most.

Make sure to keep in mind, though, the following considerations:

  • Georgia’s itemized deductions require significantly more record-keeping and can complicate preparing your tax return. If you’re only saving a little bit of money by choosing itemized deductions over the standard deduction, it might not be worth it compared to the labor cost.
  • Be aware of any limitations on itemized deductions or specific criteria they must meet for you to be eligible.
  • Consider how expected changes to your financial situation, such as buying a home, getting married, having significant medical expenses, getting a pay raise or pay cut, or increases or decreases in mortgage interest or charitable contributions, might affect your deductions.

The decision between choosing the standard deduction or itemized deductions isn’t cut-and-dried in any state, and especially not in Georgia. One isn’t necessarily better than the other for reducing your tax burden. It all depends on your unique financial circumstances.

After all, one of the reasons Georgia has opted to change its tax laws to enable taxpayers to choose one option for their state taxes and another for their federal taxes is to make it easier for Georgia residents to maximize their tax benefits, thereby making the state more attractive to prospective residents, business owners, and investors alike.

That’s why it’s crucial to consult with a trusted tax professional to make sure you are following all the right rules and guidelines to make the right decisions regarding Georgia’s itemized deduction policies and maximize credits and deductions on your taxes.

Whatever state you live in, untangling thorny questions about tax law can be challenging. If you’re facing issues with taxes, from unfiled state or federal taxes to audits to collection actions, we’re here to help. At Wiggam Law, we treat our clients like family to resolve tax issues and get you out of the mess so you can move on with your life.