Alabama Tax Guide 2025
Explore Alabama's 2025 state tax rates for income, sales, property, retirement, and more. Learn how Alabama compares nationwide.
Kate Schubel
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.
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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.
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