Alabama Income Tax Rates and Brackets

Tax Rates

Alabama Income Tax Rates

Alabama's three individual income tax rates are 2%, 4%, and 5%. Married Filing Jointly taxpayers use one bracket schedule, while Single, Married Filing Separately, and Head of Family taxpayers use the other schedule. For easier comparison, the table gives each filing status its own column, even when multiple statuses use identical thresholds. Each rate applies only to the portion of taxable income within that bracket. Reaching a higher bracket does not cause all of your income to be taxed at the higher rate.

Alabama's rate percentages and bracket thresholds are not adjusted annually for inflation. The current 2%, 4%, and 5% schedule has applied to tax years beginning after December 31, 1981. As a result, the top 5% rate begins at $3,001 of taxable income for most filing statuses and $6,001 for joint filers. When thresholds are not indexed, inflation can cause a larger share of nominal income to fall within the top bracket over time.

Deductions

Alabama Income Tax Deductions

Alabama deductions and exemptions reduce the taxable income to which the state's tax brackets and rates are applied. Taxpayers generally claim either the Alabama standard deduction or eligible itemized deductions. Alabama also provides personal and dependent exemptions that reduce taxable income before the state tax is calculated.

Alabama deduction and exemption amounts do not always match federal amounts or rules. The state also allows a deduction for qualifying federal income tax liability and, beginning in 2026, a limited deduction for the qualifying premium portion of overtime pay. The following sections explain these deductions and exemptions under current Alabama law for 2026.

Alabama Standard Deduction

Alabama's standard deduction uses a sliding scale based on Alabama adjusted gross income and filing status. The deduction generally decreases as income rises. Under the current schedule, the available amounts range from:

• Single: $2,500 to $3,000
• Married Filing Jointly: $5,000 to $8,500
• Married Filing Separately: $2,500 to $4,250
• Head of Family: $2,500 to $5,200

The maximum deduction applies at lower Alabama adjusted gross income levels, and the minimum applies after income reaches the upper limit for the filing status. Taxpayers who itemize deductions cannot also claim the Alabama standard deduction.

Alabama Personal Exemptions

Alabama provides a $1,500 personal exemption for a Single or Married Filing Separately taxpayer. Married Filing Jointly and Head of Family taxpayers generally receive a $3,000 personal exemption. These exemptions reduce Alabama taxable income rather than directly reducing the calculated tax.

Alabama Dependent Exemptions

Alabama provides an exemption for each qualifying dependent, with the amount determined by Alabama adjusted gross income. The exemption is $1,000 per dependent when Alabama adjusted gross income is $50,000 or less, $500 when income is from $50,001 through $100,000, and $300 when income exceeds $100,000. The exemption reduces taxable income before the Alabama income tax is calculated.

Alabama Federal Income Tax Deduction

Alabama allows residents to deduct qualifying federal income tax when calculating Alabama taxable income. The deductible amount is based on net federal income tax liability after applicable federal credits, not the amount of federal tax withheld from wages. The calculation may require adjustments when a taxpayer's federal and Alabama filing statuses differ.

Alabama Overtime Premium Deduction

For the 2026 through 2028 tax years, Alabama allows a deduction for qualifying overtime premium pay. The deduction is limited to the lesser of the actual overtime premium or $1,000 per taxpayer and may be claimed whether the taxpayer uses the standard deduction or itemizes. Only the premium paid above the regular rate qualifies. For example, when an employee receives time-and-a-half pay, only the additional half-rate is deductible, not all wages earned during the overtime hours.

Alabama Itemized Deductions

Alabama taxpayers may claim eligible itemized deductions instead of the standard deduction. Eligible Alabama Schedule A deductions may include qualifying medical expenses, taxes, interest, charitable contributions, and other expenses allowed under state law. Alabama does not follow every federal deduction rule, so the state itemized total may differ from the amount reported on federal Schedule A.

Alabama generally allows medical expenses only to the extent they exceed 4% of Alabama adjusted gross income. The state also permits certain deductions that differ from federal treatment, including qualifying employee business expenses and federal Social Security or self-employment taxes. Married Filing Separately taxpayers generally must use the same standard-versus-itemized deduction method as their spouse unless they lived apart for the entire tax year.

Credits

Alabama State Tax Credits

Alabama offers refundable and nonrefundable tax credits that directly reduce state income tax. A refundable credit can produce or increase a refund even when no Alabama income tax is owed. A nonrefundable credit can reduce tax to zero but cannot by itself create a refund. Eligibility depends on residency, income, filing status, qualifying expenses, and other program requirements. Several important Alabama tax credits available under current law for 2026 include:

Alabama Adoption Tax Credit

The refundable Alabama Adoption Tax Credit is available to Alabama resident taxpayers for the year a qualifying adoption becomes final. The credit is $2,000 for each qualifying adoptee who was an Alabama resident and $1,000 for each qualifying adoptee adopted through an out-of-state adoption or otherwise not an Alabama resident. Taxpayers calculate the credit on Alabama Schedule AAC, report it through Schedule OC, and must retain documentation supporting the completed adoption.

Credit for Taxes Paid to Other States

An Alabama resident whose income is taxed by both Alabama and another state or territory may qualify for a nonrefundable credit using Alabama Schedule CR. The credit is intended to prevent the same income from being taxed twice and is generally limited to the lesser of the income tax actually due to the other jurisdiction or the Alabama tax attributable to the same income. Taxpayers claiming the credit must complete Schedule CR and attach a copy of the other jurisdiction's return or other required supporting documentation.

Alabama Storm Shelter Tax Credit

An Alabama taxpayer who installs a qualifying storm shelter at a primary residence may claim a nonrefundable credit equal to the lesser of $3,000 or 50% of the qualifying cost. The credit is available through the 2028 tax year and cannot be carried forward. The taxpayer must obtain a credit certificate from the Alabama Emergency Management Agency and submit the claim through My Alabama Taxes before reporting it on Schedule OC.

Alabama Accountability Tax Credit

An Alabama resident who transfers a child from a failing public school to a qualifying nonfailing public or nonpublic school may claim the Alabama Accountability Tax Credit. The credit is limited to the lesser of 80% of the average annual state cost of attendance for an Alabama public K-12 student or the taxpayer's actual qualifying attendance cost. Taxpayers calculate the credit on Schedule AATC and report it through Schedule OC.

Due Dates

Alabama State Income Tax Deadline

The deadline to file a 2026 Alabama individual income tax return and pay any balance due is April 15, 2027. Alabama provides an automatic six-month filing extension through October 15, 2027, but the extension does not postpone the April payment deadline. Interest and penalties may apply to unpaid balances after the original due date.

If you missed an Alabama filing deadline, do not assume it is too late. You may still be able to file a 2025 or 2024 return and claim any refund due. Alabama generally requires a late return to be filed within two years of the original due date to receive a refund of withheld or estimated taxes. Visit our Alabama state tax forms page to find Form 40, instructions, and other forms for current and prior tax years.