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Alabama taxes at a glance (2026)

Alabama has a graduated income tax with a standard deduction of $3,000 (single) / $8,500 (married). Graduated 2%/4%/5% on Alabama taxable income; top 5% rate applies above $3,000 (single) / $6,000 (MFJ). Standard deduction is income-based and phases down (Ala. Code 40-18-15): Single max $3,000 for AGI under $25,500, reduced $25 per $500 of AGI above $25,500, floor $2,500; MFJ max $8,500 for AGI under $25,500, reduced $175 per $500 of AGI above $25,500, floor $5,000. (MFS floor $2,500; Head of Family floor $2,000.) Personal exemption: $1,500 single / $3,000 MFJ; dependent exemption $1,000 (AGI <=$20k), $500 ($20,001-$100k), $300 (>$100k). Alabama uniquely allows deducting federal income tax paid from AL taxable income, lowering effective rates. Social Security fully exempt; all defined-benefit pension/retirement income exempt (federal, state, military, qualifying private/DB pensions). First $6,000 of defined-contribution distributions (401k/IRA) exempt for those 65+. Overtime-wage exemption expired June 30, 2025 (overtime fully taxable in 2026). Local occupational/wage taxes apply in some municipalities (e.g., Birmingham); no statewide county add-on to the income tax.