Alabama State Tax Guide

Alabama state tax rates and rules for income, sales, property, fuel, cigarette, and other taxes that impact residents.

Alabama state flag
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Alabama State Tax: Overview

Alabama state tax treats homeowners well. The state has one of the lowest property tax rates in the nation. Income taxes are also pretty tolerable, especially for workers with higher earnings. 

However, Alabama has its share of high taxes, too. While Alabama has a generally low statewide sales tax, localities can tack on hefty tax rates of their own. When considering local taxes, Alabama has one of the highest sales tax rates in the U.S.

[Data for this state tax guide was gathered from a number of sources including the Census Bureau, the state’s government website, and the Sales Tax Handbook. Property taxes are cited as a rate percentage rather than the assessed value.] 

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Alabama income taxes

park bench along a trail in Alabama

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Alabama has three income tax brackets, but most people pay the highest rate of 5% since it applies to income over $6,000 for married couples filing jointly and income over $3,000 for all other filers. However, a new Alabama overtime law will exempt overtime pay for hourly workers. Some Alabama municipalities impose additional taxes on salaries and wages.

Alabama tax on retirement benefits: Alabama does not tax Social Security retirement benefits. Income from federal government, designated Alabama state and local government, and military retirement plans is exempt. Payments from traditional pension plans (i.e., defined benefit plans) and Railroad Retirement plans are also tax-exempt.

Note: The first $6,000 of retirement income received by anyone 65 or older is exempt from Alabama income tax.

Alabama Income Tax Range: Single filers, head of household, and married filing separately

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Up to $5002%
$501 to $3,0004%
More than $3,0005%

Alabama Income Tax Range: Married filing jointly

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Up to $1,0002%
$1,001 to $6,0004%
More than $6,0005%

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.

How much are property taxes in Alabama?

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In Alabama, the average effective property tax rate is 0.41%, which is far below the national average.

Alabama Property Tax Breaks for Retirees

Property Tax Exemptions: All homeowners 65 or older are exempt from the state portion of property taxes. Taxpayers age 65 and older with net taxable income of $12,000 or less on their combined (taxpayer and spouse) federal income tax return are exempt from all property taxes on their principal residence.

(Note: Homeowners with disabilities may also qualify for property tax exemptions.)

Alabama motor vehicle taxes

Motor vehicle purchases are taxed at only 2%, but local taxes may apply.

The gas tax is $0.28 per gallon (does not include local taxes).

Alabama taxes on alcohol and tobacco

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Cigarettes$0.68 per pack
Snuff$0.02 to $0.08 per ounce
Cigars$0.03 to $0.405 per 10 cigars
Beer$1.05 per gallon
Wine$1.70 per gallon
Liquor$18.22 (State controlled estimate)
MarijuanaNot permitted for recreational use

Alabama estate and inheritance taxes

There is no estate or inheritance tax in Alabama.

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Katelyn Washington
Tax Writer

Katelyn has more than 6 years’ experience working in tax and finance. While she specializes in tax content, Katelyn has also written for digital publications on topics including insurance, retirement and financial planning and has had financial advice commissioned by national print publications. She believes that knowledge is the key to success and enjoys helping others reach their goals by providing content that educates and informs.

With contributions from