Kate Schubel
Alabama state tax: Overview
Navigating the complexities of state taxes can be daunting, but understanding Alabama's tax landscape is essential for residents and newcomers alike.
In this guide, we'll explore key components of The Cotton State's tax system, from income and sales taxes to property taxes and retirement benefits.
Alabama taxpayers can pay relatively low taxes. After all, the Cotton State has one of the nation's lowest property tax rates, no state death taxes, and workers with higher earnings can expect a tolerable top income tax rate compared to other states.
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.
But while Alabama has a generally low statewide sales tax, localities can tack on hefty sales tax rates of their own. When you factor in those local taxes, Alabama has one of the highest sales tax rates in the U.S.
However, of the 41 states that impose an income tax, Alabama was the only one to exempt overtime pay.
Read on for the full gamut of Alabama state taxes.
[Data for this state tax guide was gathered from a number of sources, including the Census Bureau, the Tax Foundation, 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 a graduated state individual income tax ranging from 2% to 5%.
Alabama retirement taxes
The first $6,000 of distributions from retirement plans (like IRAs and 401(k)s) are tax-exempt for retirees age 65 and older in Alabama.
Income Tax on Taxable Income: Low of 2% (on up to $500 for single filers and $1,000 for joint filers) and a high of 5% (on more than $3,000 for single filers and $6,000 for joint filers)
- Social Security: Not taxable
- Pensions: Not taxable
- 401(k) and IRA Distributions: Partially taxable
Alabama sales tax
Alabama has a 4% statewide sales tax. Localities can add as much as 8.5% to that, and the average combined rate is 9.43%, according to the Tax Foundation.
- Groceries: Taxable
- Prescription drugs: Exempt
- Motor vehicles: Exempt
However, Alabama holds two sales tax holidays every year, one of which focuses on back-to-school essentials. For more information, check out Kiplinger's report, Alabama Tax-Free Weekend 2025.
How much are property taxes in Alabama?
In Alabama, the average effective property tax rate is 0.36%, 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 gas tax
Gasoline | $0.16 per gallon |
Diesel | $0.19 per gallon |
Alabama taxes on alcohol and tobacco
Product | Tax amount |
|---|---|
Cigarettes | $0.68 per pack |
Snuff | $0.02 to $0.08 per ounce |
Cigars | $0.03 to $0.405 per 10 cigars |
Medical marijuana | 18% (9% cannabis sales tax and 9% state cannabis excise tax) |
Source: Sales Tax Handbook
Product | Tax amount |
|---|---|
Wine | $1.70 per gallon |
Beer | $0.53 per gallon |
Liquor | state-controlled |
Source: Sales Tax Handbook
Alabama estate and inheritance taxes
There is no estate or inheritance tax in Alabama.
Related Content
-
Walmart to Pay $5.6 Million for Overcharging ShoppersThe retail giant's latest settlement highlights ongoing pricing accuracy issues and what consumers should know before their next shopping trip.
-
Ford Bets on a "Model T Moment" with $30K Electric PickupA sleek new Universal EV platform promises affordable, efficient electric pickups. Ford’s bet on streamlined manufacturing to deliver both value and profit.
-
How the 2025 Child Tax Credit Rules Impact Single ParentsTax Credits New changes to family tax credits, like the Child Tax Credit, will impact the eligibility of some households.
-
The Fall Garden Tax? What to Plant and How to PrepareTax Tips Fall gardening could increase your taxes this season. Here’s what to know while planting in 2025.
-
How Your 2025 Summer Wedding Could Save You Money on TaxesTax Breaks There are some wedding expenses that are tax-deductible, and you don’t want to miss out on savings.
-
Texas Sales Tax-Free Weekend 2025Tax Holiday Here's what you needed to know about the Texas sales tax holiday.
-
Retirees Should Watch These Four Key Tax Changes in 2025Tax Changes This year brings key tax changes that could affect your retirement taxes and income.
-
The Most Tax-Friendly State for Retirement in 2025: Here It IsRetirement Tax How do you retire ‘tax-free’? This state doesn’t tax retirement income, has a low median property tax bill, and even offers savings on gas. Are you ready for a move?
-
Virginia Tax-Free Weekend 2025 Is Here August 1–3: What to KnowSales Tax Three days, no sales tax. Here’s what qualifies for Virginia’s tax-free weekend.
-
Virginia Sales Tax Holiday 2025
Sales Tax Three days, no sales tax. Here’s what qualifies for Virginia’s tax-free weekend.
