Alabama Tax Guide
Explore Alabama's state tax rates for income, sales, property, retirement, and more. Learn how Alabama compares nationwide.
Alabama state tax: Overview
Navigating the complexities of state taxes can be daunting, but understanding Alabama's tax landscape is essential for residents and newcomers alike.
In this guide, we'll explore key components of The Cotton State's tax system, from income and sales taxes to property taxes and retirement benefits.
Alabama taxpayers can pay relatively low taxes. After all, the Cotton State has one of the nation's lowest property tax rates, no state death taxes, and workers with higher earnings can expect a tolerable top income tax rate compared to other states.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
But while Alabama has a generally low statewide sales tax, localities can tack on hefty sales tax rates of their own. When you factor in those local taxes, Alabama has one of the highest sales tax rates in the U.S.
However, of the 41 states that impose an income tax, Alabama was the only one to exempt overtime pay.
Read on for the full gamut of Alabama state taxes.
[Data for this state tax guide was gathered from a number of sources, including the Census Bureau, the Tax Foundation, the state’s government website, and the Sales Tax Handbook. Property taxes are cited as a rate percentage rather than the assessed value.]
Alabama state income tax
Alabama has a graduated state individual income tax ranging from 2% to 5%.
Alabama retirement taxes
The first $6,000 of distributions from retirement plans (like IRAs and 401(k)s) are tax-exempt for retirees age 65 and older in Alabama.
Income Tax on Taxable Income: Low of 2% (on up to $500 for single filers and $1,000 for joint filers) and a high of 5% (on more than $3,000 for single filers and $6,000 for joint filers)
- Social Security: Not taxable
- Pensions: Not taxable
- 401(k) and IRA Distributions: Partially taxable
Alabama sales tax
Alabama has a 4% statewide sales tax. Localities can add as much as 8.5% to that, and the average combined rate is 9.43%, according to the Tax Foundation.
- Groceries: Taxable
- Prescription drugs: Exempt
- Motor vehicles: Exempt
However, Alabama holds two sales tax holidays every year, one of which focuses on back-to-school essentials. For more information, check out Kiplinger's report, Alabama Tax-Free Weekend 2025.
How much are property taxes in Alabama?
In Alabama, the average effective property tax rate is 0.36%, 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.
(Note: Homeowners with disabilities may also qualify for property tax exemptions.)
Alabama gas tax
Gasoline | $0.16 per gallon |
Diesel | $0.19 per gallon |
Alabama taxes on alcohol and tobacco
Product | Tax amount |
|---|---|
Cigarettes | $0.68 per pack |
Snuff | $0.02 to $0.08 per ounce |
Cigars | $0.03 to $0.405 per 10 cigars |
Medical marijuana | 18% (9% cannabis sales tax and 9% state cannabis excise tax) |
Source: Sales Tax Handbook
Product | Tax amount |
|---|---|
Wine | $1.70 per gallon |
Beer | $0.53 per gallon |
Liquor | state-controlled |
Source: Sales Tax Handbook
Alabama estate and inheritance taxes
There is no estate or inheritance tax in Alabama.
Related Content
-
4 High-End Experiences Worth the Splurge After 50These curated date ideas provide the perfect backdrop for couples ready to enjoy the very best that the world has to offer.
-
Health Care Stocks Have Sagged. Can You Bet on a Recovery?The flagging health care sector has perked up a bit lately. Is it time to invest?
-
Costco's Auto Program: Can Membership Pricing Really Save You Money on a Car?Costco's Auto Program can simplify the car-buying process with prearranged pricing and member perks. Here's what to know before you use it.
-
2026 Tax Refund Delays: 5 States Where Your Money Is StuckState Tax From New York to Oregon, your state income tax refund could be delayed for weeks. Here's what to know.
-
How One Extra Dollar of Income Can Cost You Thousands in RetirementRetirement Even modest changes in retirement income can raise Medicare premiums under IRMAA. Here’s how a small increase can affect your retirement costs.
-
First the Penny, Now the Nickel? The New Math Behind Your Sales Tax and TotalRounding Tax A new era of "Swedish rounding" hits U.S. registers soon. Learn why the nickel might be on the chopping block, and how to save money by choosing the right way to pay.
-
Trump Tariffs Supreme Court Ruling: What's Next for Consumers and RetailersTax Law This landmark decision will reshape U.S. trade policy and could define the outer boundaries of presidential economic power for years to come.
-
Over 65? Here's What the New $6K Senior Tax Deduction Means for Medicare IRMAATax Breaks A new tax deduction for people over age 65 has some thinking about Medicare premiums and MAGI strategy.
-
U.S. Congress to End Emergency Tax Bill Over $6,000 Senior Deduction and Tip, Overtime Tax Breaks in D.C.Tax Law Here's how taxpayers can amend their already-filed income tax returns amid a potentially looming legal battle on Capitol Hill.
-
How to Open Your Kid's $1,000 Trump AccountTax Breaks Filing income taxes in 2026? You won't want to miss Form 4547 to claim a $1,000 Trump Account for your child.
-
In Arkansas and Illinois, Groceries Just Got Cheaper, But Not By MuchFood Prices Arkansas and Illinois are the most recent states to repeal sales tax on groceries. Will it really help shoppers with their food bills?
