If you are of retirement age in the state of Georgia, making a responsible financial strategy to ensure your welfare is an absolute must. Fortunately, many individuals have access to a reliable pension plan that will provide them monthly payments for the rest of their life. Depending upon the specific size of your pension, you may qualify for the Georgia retirement income exclusion, which effectively exempts a portion of your earnings from taxation. However, understanding the fine details of these pension exemptions will help ensure that you are on the right fiscal path for the golden years of your life.
While Georgia pensions are taxable, retirees may qualify for the retirement income exclusion program, which will help reduce their tax liability.
Claiming a Pension Exemption
Individuals over the age of 62 living in the state of Georgia qualify for what is known as the Georgia retirement income exclusion. Between the ages of 62–64, retirees are able to avoid taxes on up to $35,000 of their annual retirement income. When a retiree reaches age 65, the size of their exclusions expands to $65,000. This is particularly helpful for pensioners who may be dealing with higher medical expenses and costs associated with assisted living that become increasingly common during this period of life.
Georgia Retirement Income Exclusion Exceptions
When an individual signs up for the Georgia pension tax exemption, they are also eligible to include their spouse and combine their exemptions. With that in mind, couples that file joint taxes will be able to utilize these valuable tax breaks. That being said, both parties must qualify for these savings separately. If one spouse has not earned the retirement exclusion, they will not be able to claim these exemptions. Also, each spouse will only be eligible for retirement exclusions based on their specific age, rather than the age of their partner. For example, if one individual is 62 and their spouse is 80, they will be able to qualify for a combined tax exemption of $100,000 ($35,000 + $65,000).
Claiming the Exemption on 2018 Taxes
It is important to remember that these tax exemptions only apply to Georgia income tax. Such exemptions will not affect federal tax debt. Qualifying individuals will effectively exempt the mandated sum from their pension and ensure that this money does not factor into their Georgia income tax. In order to claim the Georgia retirement income exclusion, individuals can use Form IT-511. This is the same form that they will use to calculate the rest of their state taxes and other qualifying exemptions/deductions.
Changes from 2017 Taxes
Pensions claiming income on their Georgia tax return will be able to benefit from reduced personal income tax rates when compared to the previous year. The Georgia pension tax exemptions have remained unchanged between these two filing years.
Ryan Cockerham is a nationally recognized author specializing in all things business and finance. His work has served the business, nonprofit and political community. Ryan's work has been featured on PocketSense, Zacks Investment Research, SFGate Home Guides, Bloomberg, HuffPost and more.