Sales Tax
- Statewide: 4.0%
- Counties/municipalities can levy sales tax of no more than 8.5%.
- Current average sales tax (with local taxes included): 9.1%
- Common Exceptions at State Level:
- Prescription Medicine: Exempt
- Vehicle Tax: 2%
- Gasoline Tax: 48.60 cents/gallon (Includes all state, local, and federal taxes)
- Diesel Fuel Tax: 56.35 cents/gallon (Includes all state, local and federal taxes)
Personal Income Tax
- Personal Income Tax Rate Range: 2% ($0 to $500 taxable income)/4% ($501-$3,000)/5% (on income over $3,000)
- Standard deduction: Single filing Status: $3,000/Married Filing Jointly: $8,500. Decreases as income rises but no less than $2,500 and $5,000, respectively.
- Personal Exemption Allowance: $1,500
- Dependent Exemption: $1,000 if Adjusted Gross Income is less than $50,000/$500 for AGI $50,001 to $100,000/$300 if over $100,000.
- Itemized Deductions Allowed?: Yes, subject to limitations.
- Retirement Income
- Social Security: Exempt
- IRAs: May be fully or partially taxable.*
- 401Ks/Defined contribution employer retirement plans: May be fully or partially taxable.*
- Private pensions: Exempt.
- Public Pensions: Exempt
- Military Pay
- Active Duty Pay: Taxable to the extent included in federal AGI
- Military Retirement Pay: Exempt
- Military Disability Pay: Exempt
- VA Disability Dependency & Indemnity Compensation Benefits: Exempt
- SBP/SSBP/RCSBP/RSFPP: Exempt
*The first $6,000 of retirement income is exempt for 65 and older.
Income tax comments: State allows county- and city-level income tax (example: Birmingham has a 1% income tax). Part or all of federal income tax deductible. Overtime pay for hourly workers is tax-exempt.
Property Tax
- Statewide property tax rate: Limited to $7 for every $1,000 of assessed value (takes effect October 2025).
- Local municipalities (including the state property tax) average .38% of the property's assessed value.
- Calculation of assessed value: 10% of fair market value.
- Relief programs for:
- Owner-occupied: May be eligible for up to $4,000 exemption of assessed value for state-level taxes and up to $2,000 for county.
- 65 and over: Exempt from all state-level property taxes. Exemptions available at the county level depending on income level. More information: (Alabama.gov)
- Disabled Veterans: Exempt from all property taxes with 100% disability rating.
- Veteran/Surviving Spouse: Exempt if home acquired under VA special adapted housing grant.
Inheritance & Estate Taxes: None
Department of Revenue Website: www.revenue.alabama.gov
