The Georgia Retirement Income Exclusion: A Tax Break Every Retiree Should Understand

By Cecil Staton, CFP®
Arch Financial Planning, Athens, GA

Planning for retirement in Georgia comes with more than just sunny afternoons in the Peach State—it also comes with a valuable tax break that too many retirees overlook: the Georgia Retirement Income Exclusion. This provision of Georgia’s income tax law allows seniors to exclude a significant portion of their retirement income from state taxes.

If you’re a Georgia resident (or considering becoming one), understanding how this works—and how to coordinate it with Social Security, pensions, IRA distributions, and Roth conversions—can make a huge difference in your financial plan.

What Is the Georgia Retirement Income Exclusion?

The retirement income exclusion is Georgia’s way of reducing income taxes for retirees. Starting at age 62 (or at any age if you are permanently disabled), you can exclude up to $35,000 of retirement income per year from Georgia state income taxes. At age 65 and older, this amount jumps to $65,000 per person.

For married couples filing joint returns, this means that both spouses can claim the exclusion, potentially sheltering up to $130,000 of retirement income annually from Georgia state income tax.

Eligible forms of retirement income include:

• Social Security benefits (already tax-free at the state level)

• Pension income (including military retirement income)

• IRA distributions and retirement accounts (401(k), 403(b), etc.)

• Capital gains

• Interest income and dividend income

• Rental property net income

• Other taxable income sources

The Georgia Department of Revenue provides the full details on eligible income sources, but the key takeaway is that most common retirement accounts and investment income qualify.

How to Maximize the Georgia Retirement Income Exclusion

1. Coordinate With Other Income Sources

If you’re receiving Social Security retirement benefits, pension income, or distributions from IRAs, it’s important to layer those income streams strategically. Social Security income is already excluded from Georgia state income tax, which means you may want to time IRA distributions or pension withdrawals to stay within the exclusion limits.

Example:

• A 66-year-old Georgia resident receives $40,000 in Social Security benefits and takes $50,000 from an IRA.

• The Social Security is already state-tax-free.

• $65,000 of the combined total can be excluded from the IRA withdrawals, leaving only $−15,000 subject to Georgia tax. In this case, you may not owe any Georgia state income tax at all.

2. Consider Roth Conversions

Roth conversions can be a smart way to manage lifetime taxes. Converting IRA dollars to a Roth account increases taxable income today but can save you from higher federal taxes later.

Here’s where Georgia’s retirement exclusion helps:

• If you’re over age 65, you can convert up to $65,000 per year (or $130,000 for couples) and use the exclusion to wipe out much of the state tax liability.

• You’ll still owe federal taxes, but at least at the state level, your conversions may be effectively tax-free.

This is especially powerful before Required Minimum Distributions (RMDs) kick in at age 73. By strategically converting before RMDs begin, you reduce future taxable income while leveraging Georgia’s tax system.

3. Don’t Forget About IRMAA

The Income-Related Monthly Adjustment Amount (IRMAA) is a Medicare surcharge based on your taxable income. Even though Georgia allows generous state exclusions, your federal adjusted gross income (AGI) determines IRMAA.

This means Roth conversions or large IRA distributions could push you into higher Medicare premiums, even if Georgia excludes much of it from state tax.

Pro Tip: Always model the impact of Roth conversions and large distributions on both your federal taxes and Medicare costs. A financial advisor can help you avoid surprises.

4. Coordinate With Property Taxes and Other State Benefits

Georgia is already tax-friendly for retirees:

• No estate taxes or inheritance taxes

• Homestead exemption for property taxes

• Relatively low state sales tax and average local sales tax rates compared to national averages

When combined with the retirement income exclusion, Georgia offers retirees one of the most favorable overall tax systems at the state level.

Real-World Example: How a Retired Couple Uses the Georgia Retirement Income Exclusion

Let’s look at a practical example from a recent client scenario (names changed).

Meet David and Susan, a married couple living in Athens, Georgia. Both are 67 years old and fully retired. Their annual income sources look like this:

Under Georgia’s retirement income exclusion, each spouse age 65 or older can exclude $65,000 of eligible retirement income.

• David’s eligible income: $90,000 → first $65,000 excluded → $25,000 taxable to Georgia

• Susan’s eligible income: $90,000 → first $65,000 excluded → $25,000 taxable to Georgia

That means only $50,000 total is subject to Georgia state income tax, and the rest—$130,000—is completely tax-free at the state level.

Because their Social Security income is already excluded, much of their retirement income escapes Georgia tax entirely.

Now, let’s take it one step further. Suppose David and Susan also want to convert $50,000 from David’s traditional IRA to a Roth IRA this year. Because of the Georgia exclusion, they can apply part of their unused exclusion amount to the conversion—effectively making the Roth conversion state-tax-free.

This approach helps them:
✅ Reduce future Required Minimum Distributions (RMDs)
✅ Lower future federal taxable income
✅ Avoid higher IRMAA surcharges later in retirement
✅ Take full advantage of the Georgia retirement income adjustment each year

For many retirees, the key is knowing when and how to combine income streams—Social Security, pensions, IRA withdrawals, and Roth conversions—to make the most of Georgia’s favorable tax system.

How the Georgia Retirement Income Exclusion Fits Into Your Plan

Your net income in retirement depends not just on investment returns, but also on tax efficiency. By understanding the Georgia exclusion, you can:

• Time IRA distributions for maximum advantage

• Use Roth conversions to reduce long-term federal taxes while shielding conversions at the state level

• Avoid unnecessary IRMAA surcharges by watching your AGI

• Optimize income sources so your Georgia tax return reflects the best possible outcome

This coordination requires planning. It’s not just about knowing the rules—it’s about applying them to your personal information, your retirement plans, and your unique mix of income sources.

Frequently Asked Questions About Georgia Retirement Income Taxes

What is the tax exemption for seniors in Georgia?
Starting at age 62, you can exclude up to $35,000 of retirement income per year. At age 65, the exclusion increases to $65,000 per person.

How much will my pension be taxed in Georgia?
Pension income is eligible for the retirement income exclusion. Depending on your age and total income, much or all of your pension may be excluded from Georgia state income tax.

What is the retirement income exclusion?
It’s a Georgia state tax provision that allows seniors to exclude retirement income (IRA distributions, pensions, capital gains, etc.) from state income taxes, up to $35,000 or $65,000 per person depending on age.

How does the Georgia retirement income exclusion work?
You calculate all eligible retirement income, subtract the exclusion amount, and only the remainder is taxable at the state level.

How much of my retirement income is taxable?
That depends on your age, your income sources, and whether you’re single or filing jointly. Many retirees in Georgia pay little or no state income tax once the exclusion is applied.

Do I have to pay taxes on Social Security income in Georgia?
No. Social Security retirement benefits are fully exempt from Georgia state income tax.

What is the most tax-friendly state for retirees?
Georgia consistently ranks as one of the most tax-friendly states, thanks to its retirement income exclusion, low property tax rates, no estate taxes, and moderate state sales tax.

How do I know if my retirement income is taxable in Georgia?
Check your income sources (IRA distributions, pensions, dividends, rental income, etc.) against Georgia’s list of eligible retirement income. The Georgia Department of Revenue website and your financial advisor can help determine how much qualifies.

Final Thoughts: Don’t Leave This Tax Break on the Table

The Georgia Retirement Income Exclusion is a powerful tool for retirees—but only if used strategically. Whether it’s coordinating Roth conversions, planning pension income, or reducing IRMAA exposure, the right moves can help you keep more of your retirement income.

At Arch Financial Planning, we specialize in helping Georgia retirees make sense of these rules and build tax-smart retirement plans. If you’re ready to maximize your retirement exclusion and reduce unnecessary income taxes, schedule a complimentary Retirement Strategy Session today.

⚠️Disclaimer: This article is for educational purposes only and should not be considered investment advice. Past performance is not a guarantee of future results. Every retiree’s situation is unique — consult with a qualified financial planner or registered investment adviser before making decisions about your retirement plan.

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