Tool | August 2016

State-by-State Guide to Taxes

Compare state tax rates and rules -- on income, ordinary purchases, gas, "sin" products, property, and more -- across the U.S.

Alabama

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The Bottom Line
Map of Alabama

Most Tax-Friendly

Property taxes in the Yellowhammer State are the second-lowest in the country, helping put it among Kiplinger's top ten most tax-friendly states. Sales taxes take a bite, though — and unlike most states, food is not exempt.

Note that while Alabama's income tax rates are modest, the top rate kicks in on taxable income of more than $3,000 for single filers and $6,000 for married couples. for single filers and $6,000 for married couples. However, Alabama allows residents to deduct all federal income tax from state taxable income.

Sales Tax

4% state levy. Localities can add as much as 7% to that, and the average combined rate is 8.97%, according to the Tax Foundation. Alabama is one of the few states that does not exempt food from its state sales tax.

Income Tax Range

Low: 2% (on up to $1,000 of taxable income for married joint filers and up to $500 for all others)

High: 5% (on more than $6,000 of taxable income for married joint filers and more than $3,000 for all others)

Alabama also allows residents to deduct all of their federal income tax from state taxable income.

See Kiplinger.com’s Retiree Tax Map to learn how Alabama taxes Social Security income and other forms of retirement income.

Motor Fuel Taxes

Gasoline: $0.21 per gallon.
Diesel: $0.22 per gallon.

Property Taxes

The median property tax on Alabama's median home value of $125,000 is $539.

See Kiplinger.com’s Retiree Tax Map for details on tax breaks for seniors in Alabama.

Vehicle Taxes

Car sales are taxed at 2% by the state (half of the general tax), and municipalities can add to that, with the maximum local levy at 5.25%. Most vehicles are subject to an annual property tax, with rates set by municipality. The levy applies even to vehicles not used on the road.

Sin Taxes

Cigarettes: $0.43 per pack. Counties can add up to $0.25.
Snuff: $0.02 to $0.03 per ounce
Chewing tobacco: approximately $0.02 per ounce
Loose smoking tobacco: $0.04 to $0.06 per ounce
Cigars: $0.04 to $0.40 per 10 cigars (depending on price)

Beer: $1.05 per gallon
Wine: $1.70 per gallon (up to 14% alcohol)
Liquor: $18.25 per gallon
Alabama directly controls the distribution and sale of alcohol. Liquor tax is an estimate by the Distilled Spirits Council of the United States and published by the Tax Foundation.

Travel Taxes

Hotel: Lodging tax is charged on hotels, motels and rentals where tourists stay for less than 30 days. The state rate is 5% for the counties in the Alabama mountain lakes area (Blount, Cherokee, Colbert, Cullman, DeKalb, Etowah, Franklin, Jackson, Lauderdale, Lawrence, Limestone, Madison, Marion, Marshall, Morgan and Winston) and 4% for every other county. Additional local taxes also apply, but these vary widely.

Rental cars: 1.5% in addition to local taxes. Sales tax is also due.

Taxes On Wireless Service

9.8%

Inheritance and Estate Taxes

There is no inheritance tax or estate tax.

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