Retirement tax questions

2019 UPDATE for 2018 Tax Yead

Individual Retirement Accounts. 

• The provisions concerning taxability and conversion from a traditional IRA to a Roth IRA are the same for Georgia and the Internal Revenue Service.

Georgia does not tax Social Security retirement benefits and provides a deduction of $65,000 per person on all types of retirement income for anyone 64 or older.

The Sick pay (that was mentioned in the opriginal question) on the W-2 would not appear to be relevant to discussion of Retirement Income. The Social Security Disability benefit - that is not clear in Georgia documentation.

For married couples filing joint returns with both members receiving retirement income, the maximum adjustment for that year may be up to twice the individual exclusion amount. Retirement income exceeding the maximum adjustable amount will be taxed at the normal rate.

When calculating Georgia income taxes, both Georgia pensions and out-of-state pensions count as sources of income, which means these funds are subject to taxation. Georgia offers a large retirement exclusion, which allows you to deduct a portion of your retirement income from your taxable income to help lower your tax burden. As of 2015, you can deduct up to $35,000 of retirement income if you are between the ages of 62 and 64 or permanently disabled. At age of 65, you can deduct up to $65,000. 

If you are married, both you and your spouse can qualify for this deduction, but you must qualify separately based on age or disability.

Georgia Dept of Revenue: Retirement Income Exclusion

Taxpayers who are 62 or older, or permanently and totally disabled regardless of age, may be eligible for a retirement income adjustment on their Georgia tax return. Retirement income includes:

• Income from pensions and annuities
• Interest income
• Dividend income
• Net income from rental property
• Capital gains income
• Income from royalties

RETIREMENT INCOME EXCLUSION 

Social security and railroad retirement paid by the Railroad Retirement Board, exempt interest, or other income that is not taxable to Georgia should not be included in the retirement income exclusion calculation. Income or losses should be allocated to the person who owns the item. If any item is held jointly, the income or loss should be allocated to each taxpayer at 50%. Part-year residents and nonresidents must prorate the retirement income exclusion. The earned income portion and the unearned income portion must be separately prorated. The earned income portion shall be prorated using the ratio of Georgia source earned income to total earned income computed as if the taxpayer were a resident of Georgia for the entire year. The unearned portion shall be prorated using the ratio of Georgia source unearned retirement income to total unearned retirement income computed as if the taxpayer were a resident of Georgia for the entire year. *Retirement income does not include income received directly or indirectly from lotteries, gambling, illegal sources or similar income. ** Rental, Royalty or Partnership income that is subject to FICA tax or Self employment tax should be included on line 2 not line 13. Trade or business income from an S Corp in which the taxpayer or their spouse materially participated should be included on line 2 not line 13. 

See Form IT-511 to obtain the worksheet for calculating the maximum allowable adjustment.
2018: https://dor.georgia.gov/documents/it-511-individual-income-tax-booklet