Alabama Income Tax Calculator
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Your Alabama Take-Home Pay
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Your Alabama tax bracket breakdown
| Rate | Income range | Taxed in this band | Tax from band |
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Alabama’s unique federal tax deduction — your biggest state tax break
Alabama is one of only three states that lets you deduct your entire federal income tax payment from state taxable income. Here’s what that actually saves you.
How your federal deduction reduces Alabama tax
What if you earned more — raise or bonus?
Thinking of moving? Compare Alabama to nearby states
| State | State income tax | Take-home pay | vs. Alabama |
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Compare all Alabama filing statuses side by side
| Filing status | Standard deduction | Personal exemption | AL tax owed | Effective rate |
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Your take-home, every which way
5-year income and tax projection
Assumes a 3% annual raise and current Alabama tax rates held constant.
| Year | Gross income | Federal tax (est.) | AL tax | Take-home pay |
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Understanding Alabama State Income Tax
Alabama’s income tax structure looks simple on paper — just three brackets topping out at 5% — but beneath that simplicity sits a mechanic that surprises most newcomers to the state: your federal income tax bill directly reduces how much Alabama tax you owe. That one provision, constitutionally protected under Amendment No. 225, makes Alabama’s real effective tax burden considerably lighter than the headline 5% rate suggests, particularly for middle-income earners who pay a meaningful amount of federal tax each year.
The brackets themselves haven’t changed in decades. A single filer pays 2% on the first $500 of taxable income, 4% on the next $2,500, and 5% on everything above $3,000. Because those thresholds are extremely low by national standards — most states don’t hit their equivalent of Alabama’s 5% bracket until tens of thousands of dollars of income — virtually every Alabamian above a modest income level pays 5% on the vast majority of their earnings. Married couples filing jointly get slightly wider brackets ($1,000 at 2%, $5,000 at 4%, then 5% above $6,000), but the same pattern applies: you’re in the top bracket quickly.
The federal income tax deduction: Alabama’s biggest and most unique tax break
Alabama allows you to subtract the full amount of federal income tax you actually pay from your gross income before computing Alabama tax. If you paid $9,000 in federal taxes on a $60,000 salary, your Alabama adjusted gross income starts at $51,000 — not $60,000 — before standard deduction and exemption are even applied. For a middle-income single filer, this deduction typically saves $400 to $700 in Alabama taxes per year. For higher earners who pay more federal tax, the savings can run considerably higher.
Only three states in the country still allow this deduction — Alabama, Missouri, and Montana — so it’s worth understanding how it works when you’re comparing your Alabama tax bill to what you’d pay somewhere else. The comparison isn’t straightforward, because a state with a higher nominal rate but no federal deductibility might actually collect more from your paycheck than Alabama does.
How Alabama’s standard deduction phases out with income
Unlike the federal standard deduction, which is a fixed amount, Alabama’s standard deduction gradually shrinks as your income increases. A single filer earning under $25,500 gets the full $3,000 deduction; earn more than that and it reduces by $135 for every $500 of income above the threshold, until it floors at $2,500. Married filers enjoy a more generous starting point ($8,500 for joint filers under roughly $26,000 of income) and a higher floor ($5,000), but the same phase-out logic applies. This phase-out means that as your income climbs, both your bracket exposure and your deduction shrink at the same time — two forces pushing your tax bill higher together.
Personal exemptions, Head of Family, and dependents
In addition to the standard deduction, Alabama allows a personal exemption of $1,500 per filer ($3,000 for married couples filing jointly) and $1,000 for each qualifying dependent. Alabama also uses the term “Head of Family” rather than “Head of Household” as the federal filing uses, and the standard deduction for that status starts at $5,200, higher than single but lower than joint.
Income exempt from Alabama tax
A few categories of income escape Alabama tax entirely. Social Security retirement, survivor, and disability benefits are fully exempt — Alabama doesn’t tax a dollar of them, unlike some states that tax a portion. Military retirement pay is also completely exempt, a provision that makes Alabama genuinely attractive to retiring veterans choosing where to settle. Interest on U.S. government obligations is similarly exempt. Pension income and IRA or 401(k) distributions, however, are taxable, though filers age 65 and older qualify for an exclusion of up to $6,000 of retirement income via Schedule RS.
Does Alabama have capital gains tax or dividends tax?
Yes — Alabama taxes capital gains as ordinary income at the regular bracket rates (up to 5%), with no preferential rate like the federal long-term capital gains structure offers. Dividends from stocks are also taxed as ordinary income. The only notable capital-income exemption is interest on Alabama state and municipal bonds, which is exempt from both Alabama and federal tax.
Alabama standard deduction by filing status (current tax year)
| Filing status | Max standard deduction | Phase-out starts at AGI | Minimum (floor) |
|---|---|---|---|
| Single | $3,000 | $25,500 | $2,500 |
| Married Filing Jointly | $8,500 | $25,500 | $5,000 |
| Married Filing Separately | $4,250 | $12,750 | $2,000 |
| Head of Family | $5,200 | $25,500 | $2,500 |
Alabama income tax brackets for current tax year
| Rate | Single / MFS / Head of Family | Married Filing Jointly |
|---|---|---|
| 2% | $0 – $500 | $0 – $1,000 |
| 4% | $500 – $3,000 | $1,000 – $6,000 |
| 5% | Over $3,000 | Over $6,000 |
Frequently asked questions
What is the Alabama income tax rate?
Alabama uses a three-bracket progressive system: 2% on the first $500 of taxable income (or $1,000 for joint filers), 4% on the next band, and 5% on everything above $3,000 (or $6,000 for joint filers). Because these thresholds are so low, virtually all Alabama earners pay 5% on the large majority of their taxable income.
Can I really deduct my federal income taxes from Alabama income?
Yes. Alabama allows a full deduction for federal income tax paid, authorized under Amendment No. 225 of the Alabama Constitution. This reduces your Alabama adjusted gross income before standard deduction and brackets are applied, which meaningfully lowers what you owe the state. The calculator above estimates your federal tax and applies this deduction automatically.
Is Social Security taxed in Alabama?
No — Social Security retirement, survivor, and disability benefits are fully exempt from Alabama income tax. You will not owe Alabama state tax on Social Security income regardless of your total income level.
Does Alabama tax military retirement pay?
No. Military retirement pay is completely exempt from Alabama income tax under Alabama Code Section 40-18-20, making Alabama one of the most military-retiree-friendly states in the South from a tax perspective.
What is Alabama’s “Head of Family” filing status?
Head of Family is Alabama’s equivalent of the federal “Head of Household” status, used by unmarried filers who pay more than half the cost of maintaining a home for a qualifying dependent. It provides a standard deduction of up to $5,200 and slightly wider brackets than single filing.
Does Alabama have local income taxes?
A small number of Alabama cities and counties levy local occupational or income taxes. Birmingham, for example, has historically applied a 1% occupational tax on wages earned within the city. This calculator focuses on state-level income tax only and does not account for local occupational taxes.
Tax data on this page reflects current Alabama income tax brackets and deduction rules published by the Alabama Department of Revenue (revenue.alabama.gov) and verified against the Code of Alabama §40-18-15. Federal bracket estimates reference IRS.gov inflation adjustment guidance. This tool is for general estimation purposes only and does not constitute tax, legal, or financial advice. Consult a qualified CPA or the Alabama Department of Revenue for your specific tax situation.