Calculate Alabama income tax using 2024 rates, deductions, and personal exemptions.
Alabama's individual income tax system looks deceptively simple — three brackets, low top rate — but two structural quirks make it unlike any other state: the top 5% bracket kicks in at incomes under $3,001, and federal income tax paid is deductible against state taxable income. The first feature makes the tax look more progressive than it is; the second makes it less so.
Roughly 95% of Alabama wage earners pay the top marginal rate of 5% on the bulk of their income — the brackets are simply too narrow to provide meaningful progressivity. State Department of Revenue collections data for FY 2024 show individual income tax contributing about $5.7 billion, the second-largest state revenue source behind sales tax.
| Taxable income | Single rate | MFJ rate |
|---|---|---|
| First $500 / $1,000 | 2% | 2% |
| $501–$3,000 / $1,001–$6,000 | 4% | 4% |
| Above $3,000 / $6,000 | 5% | 5% |
Alabama is one of only six states that allow taxpayers to deduct federal income tax paid against state taxable income, and uniquely among them imposes no cap. A married couple paying $20,000 in federal tax shaves $20,000 off Alabama taxable income — worth roughly $1,000 in saved state tax at the 5% marginal rate. The mechanic is the reason Alabama's effective rate runs noticeably below the top statutory 5%, especially for upper-middle-income households where the federal tax bill is large in absolute terms.
| Filing status | Std deduction | Personal exemption | Dependent exemption |
|---|---|---|---|
| Single | $2,500 | $1,500 | $1,000/dep |
| Married filing jointly | $7,500 | $3,000 | $1,000/dep |
| Head of household | $4,700 | $3,000 | $1,000/dep |
Several Alabama jurisdictions add a local payroll/occupational tax on top of state income tax. Birmingham levies 1% on wages earned within city limits. Bessemer 1%. Gadsden 2%. Macon County 1%. These taxes apply to where the work is performed, not where the worker lives, so a Hoover resident commuting into Birmingham pays the city's 1% on Birmingham-earned wages.
Yes — the standard deduction begins phasing down at modest AGI levels (roughly $20,500 single, $30,000 MFJ) and reaches a floor of $2,000-$4,000 at high incomes. The published amounts in the table apply only to lower- and middle-income filers.
Yes — taxpayers can itemize on Schedule A of Form 40 if itemized exceeds the (phased) standard. Common itemizables include mortgage interest, charitable contributions, and medical expenses above the threshold.
No — Alabama is one of about 19 states without a state-level EITC. Low-income filers rely on the federal EITC only.
Capital gains are taxed as ordinary income at the same 2/4/5% brackets — no preferential long-term rate at the state level.
April 15 — same as the federal deadline. Form 40 is the main individual return; Form 40A is the simplified short form for filers with W-2 income only and no dependents.
Online at myalabamataxes.alabama.gov or by mail to the Alabama Department of Revenue. Most refunds are issued within 8-12 weeks for paper returns and 1-3 weeks for e-filed returns.
Educational only; not tax advice. Reviewed by Marcus Tan, CPA, on March 1, 2026.