Written by Eamonn McElroy, CPA, Atlanta
Published July 4, 2025
During May 2025, Governor Brian Kemp signed two pieces of tax legislation into law that introduce tax incentives for Georgia residents preparing for natural disasters and for Georgia families with dependent children. Below is a summary of these developments and their potential impact.
House Bill 511 (Catastrophe Savings Accounts)
House Bill 511 ("HB 511") establishes Catastrophe Savings Accounts, allowing Georgia taxpayers to save money for certain expenses related to natural disasters in tax efficient manner.
A "Catastrophe Savings Account" is defined as a regular savings account or money market account established by a resident taxpayer to pay for qualified catastrophe expenses. Qualified catastrophe expenses include: 1) the deductible for the homeowner's insurance policy of the taxpayer covering catastrophic event damage for his or her primary residence, and 2) expenses incurred in repairing or replacing damage to a taxpayer's primary residence as a result of a catastrophic event that are not covered by a homeowner's insurance policy.
“Catastrophic events” are defined broadly—ranging from hurricanes and tornadoes to floods and earthquakes—so long as the event is officially declared a disaster or emergency by the Governor.
Other important information includes:
- No more than one Catastrophe Savings Account may be established for a primary residence.
- Contributions to the account are tax-deductible for Georgia income tax purposes (but not federal).
- Any interest earned is tax-exempt for Georgia income tax purposes (but not federal).
- Withdraws from the account are tax-free if used for qualified catastrophe expenses.
- Contribution limits vary:
- If the insurance deductible is $1,000 or less, the contribution limit is $2,000.
- If the insurance deductible is more than $1,000, the contribution limit is the lesser of: 1) 2x the deductible, or 2) $25,000.
- If the taxpayer doesn't have insurance, the contribution limit is the lesser of: 1) the fair market value of the residence, or 2) $250,000.
- If an owner of an account passes away, the account is included in taxable income of the individual who receives the account for Georgia income tax purposes (but not federal), unless that individual is a surviving spouse.
- The bill is effective for tax years beginning on or after January 1, 2026.
The goal of HB 511 is to encourage proactive financial preparedness, reducing the long-term financial and governmental burden when disasters strike.
House Bill 136 (Child and Family Tax Credit Overhaul)
House Bill 136 ("HB 136") delivers a suite of tax credits to support Georgia families with young children or involved in foster care.
Child and Dependent Care Tax Credit Increase
Georgia taxpayers will now be allowed to claim 50% of the federal child and dependent care credit as a credit on their Georgia return. Prior to this bill, Georgia taxpayers were allowed to claim 30% of the federal child and dependent care credit as a credit on their Georgia return.
Tax Credit for Children Under Age Six
Families will now receive a $250 credit per dependent child under age six on their Georgia return, with specific rules to avoid duplicate claims by separated or divorced parents. There isn't an income phase-out for this credit, and the credit is nonrefundable.
Employer Child Care Incentives
Businesses offering direct child care support for employees' children under age six can claim a maximum Georgia tax credit of:
- $500 per child annually, or
- $1,000 per child in the first year of participation.
The program is capped at $20 million in credits annually. The per child tax credit is limit to the lesser of the amount paid for that child or the applicable amount above.
Expanded Tax Credit for Foster and Justice-Involved Youth Support
Existing credits for contributions to organizations aiding foster children and young people involved in the justice system are expanded and refined.
The Child and Dependent Care Tax Credit increase is effective for tax years beginning on or after January 1, 2025. All other provisions are effective for tax years beginning on or after January 1, 2026.
Copyright © Eamonn McElroy CPA, LLC.
Disclaimer: Tax law, regulation and procedure are constantly changing. Eamonn McElroy CPA, LLC has provided this article as general information only and is under no obligation to update the article for future changes, including but not limited to changes in tax law or procedure. The information contained in the article is not tax, investment or legal advice, nor should it be construed as tax, investment or legal advice. You should consult with your advisors to determine how the information in this article affects you and what actions you may take and should take.