State taxes: Alabama
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Alabama collects a state income tax, with rates of 2%, 4% and 5%. In addition to a state sales tax, counties and cities are allowed to collect taxes on purchases made in their jurisdictions. More on Alabama taxes can be found in the tabbed pages below.
Personal income tax
Alabama collects income taxes from its residents at the following rates.
For single people, heads of families and married people filing separate returns:
- 2% on the first $500 of taxable income.
- 4% on taxable income between $501 and $3,000.
- 5% on all taxable income over $3,000.
For married people filing joint returns:
- 2% on the first $1,000 of taxable income.
- 4% on taxable income between $1,001 and $6,000.
- 5% on all taxable income over $6,000.
Depending on a taxpayer’s adjusted gross income and filing status, some Alabama residents can claim a standard deduction amount of up to $7,500. The standard deduction amount is reduced based on income and tops out at $4,000 for married taxpayers filing jointly and $2,000 for all other filing statuses when those taxpayers’ incomes exceed certain thresholds. Details on the change can be found in the Standard Deduction Chart.
Alabama allows a $1,500 personal exemption for each taxpayer and a $1,500 personal exemption for his or her spouse, in addition to a $300 exemption, based on the taxpayer’s adjusted gross income, for each dependent claimed. A head of family filer with a qualifying dependent is allowed a $3,000 exemption.
File Form 40 by April 15 or the next business day if the 15th falls on a weekend or holiday.
Individual income tax returns can be downloaded as online forms. Filers have the option of completing an online form in which they can enter data. It will make calculations and compute the amount of tax due. The taxpayer can then print the completed form, sign it and mail it.
All Alabama taxpayers can e-file their returns, and some might be able to e-file for free at the revenue department’s online filing page.
Alabama’s Sales & Use Tax Section administers, collects and enforces taxes in 17 different categories.
Alabama’s general tax rate is 4% on purchases of tangible property.
The state of Alabama administers more than 200 different city and county sales taxes. The collection of these additional taxes could make some jurisdictions’ overall sales tax rate substantially higher than 4%.
Search the Alabama Department of Revenue’s online database of cities and counties that levy sales, use, lodgings and rental taxes to find your local rates. Alabama’s Department of Revenue maintains updates of tax rate changes.
Personal and real property taxes
The Property Tax Division of the Alabama Department of Revenue supervises and controls the valuation, equalization and assessment of ad valorem taxes of all property in the state. Additionally, the office provides guidance to the county officials in the performance of their official duties.
See the list of exemptions to ad valorem tax collection.
Each county has its own millage rate that is used when determining property taxes. Some cities also assess separate property taxes.
A homestead exemption is granted by the state on real property taxes, with a larger exemption available to older or disabled taxpayers. View the state’s homestead summary chart. To apply for an exemption, contact either the tax assessor or revenue commissioner in your county of residence.
More information is available at the Property Tax Division’s website.
Inheritance and estate taxes
Alabama estate tax returns, affidavits of estate tax and estate tax waivers are no longer required for estates where the owners died after Dec. 31, 2004. If no filing extensions were granted, Sept. 30, 2005, was the final reporting date for any 2004 estate tax liabilities. Call (334) 242-1000 for details about Alabama’s estate tax requirements.
Alabama does not impose an inheritance or gift tax.
Other Alabama tax facts
Alabama offers its taxpayers free online filing.
Alabama taxpayers no longer have to file for an extension. Taxpayers are granted an automatic extension to Oct. 15. Details are in the Form 40 instruction book.
Alabama taxpayers can get additional information and help at one of the state’s Taxpayer Service Centers.
Effective beginning in 2006, Alabama law provides for an annual sales tax holiday that begins at 12:01 a.m. on the first Friday in August and ends at midnight the following Sunday. Counties and cities may choose whether to participate, as noted on the state’s sales tax holiday Web page.
For more information, contact the Alabama Department of Revenue at (334) 242-1170.
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