Income Exempt from Alabama Income Taxation - Alabama Department of Revenue (2024)

FAQs

What income is exempt from Alabama income tax? ›

Income that is not reported to Alabama includes:

Retirement benefits. Unemployment. Life Insurance (proceeds received because of a person's death)

Tax-exempt entities include those organizations or charities which are specifically exempted from Alabama sales and use taxes as well as the federal government, the State of Alabama, the counties of the State of Alabama, and the incorporated municipalities of the State of Alabama, and the agencies, departments, and ...

Taxpayers using the Single and Married Filing Separately filing statuses are entitled to a $1,500 personal exemption. Taxpayers using the Married Filing Jointly and Head of Family filing statuses are entitled to a $3,000 personal exemption.

Generally, you don't have to pay taxes if your income is less than the standard deduction, you have a certain number of dependents, working abroad and are below the required thresholds, or are a qualifying non-profit organization.

Exempt income is any income that can't be taxed. Government pensions and retirement plans such as IRAs are examples of exempt income, as are gifts and inheritances. You may also qualify for an exemption if you receive disability payments or alimony.

You must complete the appropriate application found on the website at www.revenue.alabama.gov. The applicable form will be ST: EX-A1 (For Wholesalers, Manufacturers, and Other Product Based Exemptions) or ST: EX-A1-SE (For Statutorily Exempt Entities).

Taxpayers age 65 and older with net taxable income of $12,000 or less on the combined (taxpayer and spouse) Federal Income Tax Return – exempt from all ad valorem taxes. Taxpayer is permanently and totally disabled – exempt from all ad valorem taxes. There is no income limitation.

Alabama sales tax

Alabama has a 4% statewide sales tax. Localities can add as much as 7.5% to that, and the average combined rate is 9.237%, according to the Tax Foundation. Unlike many states, Alabama taxes groceries, but prescription drugs are tax-exempt.

On November 9, 2023, Alabama Governor Kay Ivey signed into law a bill that beginning on January 1, 2024, will make compensation received by full-time hourly wage-paid employees for overtime work performed in excess of 40 hours in a workweek exempt from Alabama state income tax.

How much money do you have to make to file taxes Alabama? ›

Filing Requirements are based off of Residency, filing status and gross income: Full Year Residents: Single, $4,500. Head of Household, $8,200.

So, if you earn an income and live or work in the state, you must pay AL state tax. As a traditional W-2 employee, your Alabama tax will be drawn on each payroll automatically. You will see this on your paycheck, near or next to the federal taxes.

A certificate of exemption is issued on application to prospective students who have obtained a Senior Certificate without endorsem*nt or equivalent foreign school-leaving qualification, which meets the requirements of the published regulations and wishes to pursue first degree studies at a South African university.

A personal exemption is an amount of money that you could deduct for yourself, and for each of your dependents, on your tax return.

Alabama requires people who have lived or worked in the state for a full year and earned incomes that are above the stipulated amounts for their filing statuses to file state income tax returns. People who are single and have earned over $4000 must file if they have lived in the state for a full year.

Alabama exempts Social Security benefits from state income tax, regardless of income level. This can save retirees a significant amount of money, as Social Security benefits can be subject to state income tax in other states.

All income is subject to Alabama income tax unless specifically exempted by state law. The term “income” includes, but is not limited to: Wages including salaries, fringe benefits, bonuses, commissions, fees, and tips.

According to Alabama Form 40 Instructions, "Individual taxpayers who are residents of Alabama are subject to tax on their entire income whether earned within or outside of Alabama. This is true regardless of their physical presence within Alabama at any time during the taxable year."