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


Alabama State Tax: Overview
Alabama state tax treats is high in some areas and low in others. 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, 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.
In the News: A new Alabama overtime law allows hourly employees who work overtime to keep more of their earnings. While the overtime income tax exemption benefit is temporary (as of now), it will provide some financial relief for Alabama employees who work overtime.

Sign up for Kiplinger’s Free E-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.
Of the 41 states that impose an income tax, Alabama is the only one to exempt overtime pay.
For more information, see New Alabama Overtime Law Benefits Hourly Employees.
[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.]
Alabama state income tax
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, an Alabama overtime law enacted this year exempts 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
Up to $500 | 2% |
$501 to $3,000 | 4% |
More than $3,000 | 5% |
Alabama Income Tax Range: Married filing jointly
Up to $1,000 | 2% |
$1,001 to $6,000 | 4% |
More than $6,000 | 5% |
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 9.289%, according to the Tax Foundation. Alabama is one of the states that tax groceries, but prescription drugs are tax-exempt.
How much are property taxes in Alabama?
In Alabama, the average effective property tax rate is 0.39%, 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 motor vehicle taxes
Motor vehicle purchases are taxed at only 2%, but local taxes may apply.
Tax on gasoline: $0.29 per gallon (does not include local taxes)
Tax on diesel: $0.30 per gallon (does not include local taxes)
Alabama taxes on alcohol and tobacco
Cigarettes | $0.68 per pack |
Snuff | $0.02 to $0.08 per ounce |
Cigars | $0.03 to $0.405 per 10 cigars |
Beer | $0.53 per gallon |
Wine | $1.70 per gallon |
Liquor | $18.22 (State controlled estimate) |
Marijuana | Not permitted for recreational use |
Alabama estate and inheritance taxes
There is no estate or inheritance tax in Alabama.
Related Content
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Katelyn has more than 6 years of experience working in tax and finance. While she specialized in tax content while working at Kiplinger from 2023 to 2024, Katelyn has also written for digital publications on topics including insurance, retirement, and financial planning and had financial advice commissioned by national print publications. She believes knowledge is the key to success and enjoys providing content that educates and informs.
-
Customer Services are Strained at the SSA, You Should Plan Around These Federal Holidays
If you have a question or need information from a federal agency, check the federal holiday schedule to make sure you get your business done before they close.
By Donna LeValley
-
Stock Market Today: No 'Powell Put'? No Problem
Investors, traders and speculators look beyond both another Trump post and more signs of slowing economic activity.
By David Dittman
-
Which Generation Pays the Most Tax in the US?
Tax Burden Polls show that most people feel like taxes are unfair. But which age group bears the brunt of the tax burden in the United States?
By Kelley R. Taylor
-
Tax Day 2025: Don’t Miss These Freebies, Food Deals and Discounts
Tax Day You can score some sweet deals on April 15 in some select restaurants like Burger King, Shake Shack, and more.
By Gabriella Cruz-Martínez
-
Tax Time: Does Your Kid Influencer Owe Taxes?
State Tax Some minors are making big money on social media. Here’s how to know if they need to file taxes.
By Gabriella Cruz-Martínez
-
Trump Plans to Terminate IRS Direct File program
Tax Filing Direct File was piloted last year in 12 states and has since expanded to 25. But some wonder whether the program will last under the Trump administration.
By Gabriella Cruz-Martínez
-
How Caregivers for Adults Can Save on Taxes in 2025
Tax Breaks Caring for your parent or spouse can be stressful, but the IRS offers tax breaks for qualifying taxpayers. Here they are.
By Kate Schubel
-
U.S. Treasury to Eliminate Paper Checks: What It Means for Tax Refunds, Social Security
Treasury President Trump signed an executive order forcing the federal government to phase out paper check disbursements by the fall.
By Gabriella Cruz-Martínez
-
IRS Layoffs Spark Delays, Doubt This Tax Season
Tax Season Tax experts say Trump’s downsizing of the IRS is already causing problems.
By Gabriella Cruz-Martínez
-
States with the Highest Income Tax Rates for Retirees
State Tax You may reconsider living and retiring in one of these states due to high taxes.
By Kate Schubel