Alabama State Tax: Overview
Alabama state tax treats is high in some areas and low in others. The state has one of the lowest property tax rates in the nation. Income taxes are also pretty tolerable, especially for workers with higher earnings.
However, while Alabama has a generally low statewide sales tax, localities can tack on hefty tax rates of their own. When considering local taxes, Alabama has one of the highest sales tax rates in the U.S.
In the News: A new Alabama overtime law allows hourly employees who work overtime to keep more of their earnings. While the overtime income tax exemption benefit is temporary (as of now), it will provide some financial relief for Alabama employees who work overtime.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Of the 41 states that impose an income tax, Alabama is the only one to exempt overtime pay.
For more information, see New Alabama Overtime Law Benefits Hourly Employees.
[Data for this state tax guide was gathered from a number of sources including the Census Bureau, the state’s government website, and the Sales Tax Handbook. Property taxes are cited as a rate percentage rather than the assessed value.]
Alabama state income tax
Alabama has three income tax brackets, but most people pay the highest rate of 5% since it applies to income over $6,000 for married couples filing jointly and income over $3,000 for all other filers. However, an Alabama overtime law enacted this year exempts overtime pay for hourly workers. Some Alabama municipalities impose additional taxes on salaries and wages.
Alabama tax on retirement benefits: Alabama does not tax Social Security retirement benefits. Income from federal government, designated Alabama state and local government, and military retirement plans is exempt. Payments from traditional pension plans (i.e., defined benefit plans) and Railroad Retirement plans are also tax-exempt.
Note: The first $6,000 of retirement income received by anyone 65 or older is exempt from Alabama income tax.
Alabama Income Tax Range: Single filers, head of household and married filing separately
| Up to $500 | 2% |
| $501 to $3,000 | 4% |
| More than $3,000 | 5% |
Alabama Income Tax Range: Married filing jointly
| Up to $1,000 | 2% |
| $1,001 to $6,000 | 4% |
| More than $6,000 | 5% |
Alabama sales tax
Alabama has a 4% statewide sales tax. Localities can add as much as 7.5% to that, and the average combined rate is 9.289%, according to the Tax Foundation. Alabama is one of the states that tax groceries, but prescription drugs are tax-exempt.
How much are property taxes in Alabama?
In Alabama, the average effective property tax rate is 0.39%, which is far below the national average.
Alabama Property Tax Breaks for Retirees
Property Tax Exemptions: All homeowners 65 or older are exempt from the state portion of property taxes.
(Note: Homeowners with disabilities may also qualify for property tax exemptions.)
Alabama motor vehicle taxes
Motor vehicle purchases are taxed at only 2%, but local taxes may apply.
Tax on gasoline: $0.29 per gallon (does not include local taxes)
Tax on diesel: $0.30 per gallon (does not include local taxes)
Alabama taxes on alcohol and tobacco
| Cigarettes | $0.68 per pack |
| Snuff | $0.02 to $0.08 per ounce |
| Cigars | $0.03 to $0.405 per 10 cigars |
| Beer | $0.53 per gallon |
| Wine | $1.70 per gallon |
| Liquor | $18.22 (State controlled estimate) |
| Marijuana | Not permitted for recreational use |
Alabama estate and inheritance taxes
There is no estate or inheritance tax in Alabama.
Related Content
-
Stock Market Today: Stocks Rally Despite Rising Geopolitical TensionThe main indexes were mixed on Tuesday but closed well off their lows after an early flight to safety.
-
What's at Stake for Alphabet as DOJ Eyes Google's ChromeAlphabet is higher Tuesday even as antitrust officials at the DOJ support forcing Google to sell its popular web browser. Here's what you need to know.
-
Premium Tax Credit: Are You Eligible For This Health Insurance Tax Break?Tax Credits The tax credit can help qualifying individuals pay for coverage from the Affordable Care Act’s health insurance marketplace.
-
FSA Contribution Limits Are Higher for 2025FSA A flexible spending account allows you to build tax-free savings for certain medical expenses.
-
Florida Tax Deadline Extension: What You Need to KnowTax Relief The IRS extended federal tax return file time due to severe storms.
-
IRS: Here’s How to Recover Your Tax Records After a Natural DisasterTax Records Your tax documents can help you get federal relief faster, the IRS says.
-
Voters Approve New Veteran Property Tax ReliefTax Relief Thanks to the election, some Veterans will soon see expanded property tax exemptions.
-
Nevada Approves Diaper Tax Relief Amid Childcare CrisisTax Relief Nevada voters have expanded sales tax relief to diapers. But are prices still too high?
-
Earned Income Tax Credit (EITC) 2024: How Much Will You Get?Tax Credits The refundable amount for workers with or without children is slightly higher this year. Here’s what you need to know.
-
IRS Expands Tax Breaks for Breast Cancer Screenings, ContraceptivesHealthcare Now you can get a tax deduction or reimbursement for certain medical expenses, like over-the-counter birth control and condoms.
