An Alabama grocery tax reduction is now in effect, but Alabamians will only pay slightly less when they check out at the grocery store. That’s because the legislation only reduces the state tax by 1% for 2023, and food items will still be subject to local sales taxes.
When legislation for the tax reduction was finalized early this summer, Gov. Kay Ivey told reporters she is hopeful that the “decision by the Legislature to slightly reduce the sales tax on certain food items will be truly felt by Alabama families.”
The state can further reduce its portion of the grocery tax next year, but that additional reduction is not guaranteed. However, some taxpayers can look forward to additional relief in the form of Alabama tax rebate checks that have already started going out. (more on that below).
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Alabama grocery tax
Alabama is one of only 13 states that still tax groceries. Before September 1, the state taxed groceries at a 4% sales tax rate.
The new law reduces the tax on certain food items to 3% through August 2024. This means shoppers may save $1 for every $100 spent on groceries. However not all items qualify for the grocery tax reduction. Here are some items still taxed at 4%:
- Any prepared foods (for example, warmed slices of pizza)
- Pet foods
- Vitamins and supplements
- Household items (such as toilet paper and laundry detergent)
- Personal care items (for example, shampoo)
Alabama residents will still need to pay applicable state and local taxes on groceries, which can reach 7.5% in some areas of the state, according to the Tax Foundation.
That means that even with the reduced grocery tax, some shoppers will pay a 10.5% tax on grocery items (or $105 in taxes for every $1,000 spent on groceries).
Is Alabama getting rid of the grocery tax?
There is a possibility for another Alabama grocery tax reduction in September 2024. If enacted, the grocery tax will drop another 1%, making the state sales tax on food 2%. However, it’s unclear whether this reduction will happen. That’s because the reduction depends on tax revenue for the state’s Education Trust Fund. If the fund doesn’t grow by at least 3.5% from the previous fiscal year, the additional grocery tax reduction will not happen.
Even if the additional Alabama grocery tax cut becomes effective in 2024, shoppers will still pay local taxes on food items. Here’s how much Alabamians would pay in taxes in the highest-taxed cities, even with a state grocery tax of 2%:
- $9.50 on every $100 grocery purchase
- $95 on every $1,000 spent on groceries
- Approximately $895.28 per year (based on average yearly grocery costs for middle-class families as previously reported by Kiplinger).
Residents in lower-taxed parts of Alabama will pay less sales tax on groceries, but if the additional tax reduction isn’t enacted in 2024, some Alabamians could pay even more in taxes than the amounts listed above.
Stimulus check for Alabama in 2023
Although Alabama’s reduced grocery tax may only provide slight relief for residents, more relief is now on the way for many Alabama taxpayers. Income tax rebate checks of up to $300 ($150 for single filers) have started going out to eligible Alabamians. To qualify for the Alabama rebate check, taxpayers must meet the following criteria:
- You must have filed a personal Alabama income tax return for the 2021 tax year.
- You cannot have been claimed as a dependent on a tax return for the 2021 tax year.
- Estates and trusts do not qualify for a tax relief check.
If you are due a rebate payment, you could see a deposit hit your account as early as Dec. 1, 2023. Taxpayers who did not list a bank account on their 2021 tax return will receive their rebate payment via a paper check in the mail.
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