Graduated BracketsTop Rate: 5%Local Occupational TaxLast reviewed June 2026

Alabama State Income Tax 2026

Alabama's top marginal rate is 5.0% applied to income above $3,000 (single). Effectively, almost all Alabama earners pay the 5% rate on most of their income because the brackets are so compressed at the low end. Major cities (Birmingham, Bessemer, Gadsden) levy additional occupational taxes of 1.0-2.0%. Alabama uniquely allows a deduction for federal income tax paid.

Alabama 2026 Quick Facts

Tax type	Graduated (3 brackets)
Top marginal rate	5% (above $3,000 single, $6,000 MFJ)
Lowest bracket	2% (up to $500 single)
Standard deduction (single, max)	$2,500 (phases out)
Standard deduction (MFJ, max)	$7,500 (phases out)
Dependent exemption	$1,500 per dependent
Local income tax	Yes - Birmingham 1.0%, Gadsden 2.0%, others
Federal tax deduction	Yes (unusual; lowers effective rate)
Social Security taxed	No
Military pension taxed	No (fully exempt)
2026 changes	No rate change

2026 Alabama Income Tax Brackets

Rate	Single Filer Income	Married Filing Jointly
2%	$0 - $500	$0 - $1,000
4%	$500 - $3,000	$1,000 - $6,000
5%	Above $3,000	Above $6,000

Sources: Alabama Department of Revenue (revenue.alabama.gov), Tax Foundation 2026 State Tax Guide, IRS Publication 17. Data verified May 2026.

Alabama Effective Rate Calculator

Annual Gross Income

Filing Status

Standard deduction: $2,500 applied before tax calculation.

Effective Rate

4.78%

State Tax Due

$3,585

Marginal Bracket

State income tax only. Does not include federal income tax, Social Security, Medicare, or local income tax. Calculations are estimates for educational purposes. Verify with a licensed CPA before filing.

What You Actually Pay: Worked Examples

$50,000 income

State tax due$1,738

Effective rate3.5%

Marginal bracket5%

After state tax$48,263

$75,000 income

State tax due$2,988

Effective rate4.0%

Marginal bracket5%

After state tax$72,013

$100,000 income

State tax due$4,238

Effective rate4.2%

Marginal bracket5%

After state tax$95,763

$250,000 income

State tax due$11,738

Effective rate4.7%

Marginal bracket5%

After state tax$238,263

Single filer, standard deduction. Does not include federal tax, Social Security, or Medicare.

Local Income Tax in Alabama

Alabama allows municipalities to levy occupational taxes on wages earned within city limits. Unlike most state-level systems, the occupational tax is paid by the employee on wages from work performed inside the city, regardless of where the employee lives.

Major Alabama cities with occupational taxes include:

Birmingham: 1.0% on wages earned in the city
Bessemer: 1.0%
Macon County: 1.0% county-wide
Gadsden: 2.0% (one of the highest in Alabama)
Various smaller cities: 0.5% to 2.0% range

Birmingham residents working in Birmingham face a combined state plus city rate of approximately 6% before federal tax. Gadsden workers face approximately 7%.

See the full local income tax guide for all US cities →

Alabama Filing Requirements

Residents: File Alabama Form 40 if gross income exceeds the filing threshold (typically $5,250 for single filers under 65). Residents are taxed on all income.

Part-year residents: File Form 40NR for the portion of the year you lived in Alabama.

Non-residents: File Form 40NR for Alabama-source income.

Federal income tax deduction: Alabama is one of only a few states that allows you to deduct federal income tax paid. This makes the effective Alabama rate notably lower than the headline 5% for high-income filers.

Filing deadline: April 15. Extensions available.

Retirement Income Treatment in Alabama

Social Security benefits	Exempt	Alabama does not tax Social Security
Traditional pension income	Exempt	Defined-benefit pension income fully exempt in Alabama
Government pension	Exempt	Federal, state and local government pensions exempt
Military pension	Exempt	Fully exempt from Alabama state income tax
401(k) and IRA withdrawals	Taxed	Taxed at graduated rates as ordinary income
Roth IRA withdrawals	Exempt	Qualified distributions are tax-free

Alabama is one of the better states for retirees who rely on defined-benefit pensions (federal, state, local, military all exempt) combined with Social Security. 401(k) and IRA distributions are taxed, however. See the full 50-state retirement income scorecard.

Alabama Income Tax: FAQs

What are Alabama's 2026 income tax brackets?

Alabama uses a 3-bracket graduated income tax for 2026 (single filers): 2% on income up to $500, 4% on income from $500 to $3,000, and 5% on income above $3,000. For married filing jointly, brackets are doubled. The top rate kicks in at very low income levels, so most Alabama filers pay the 5% rate on most of their income.

Does Alabama have a local income tax?

Yes. Alabama allows municipalities to levy occupational taxes on wages earned within the city limits. Major cities include Birmingham (1.0%), Bessemer (1.0%), Macon County (1.0%), Gadsden (2.0%), and others. The occupational tax is paid by employees on wages earned in the city, regardless of where they live. Some smaller municipalities also levy these taxes.

Does Alabama tax Social Security?

No. Alabama does not tax Social Security benefits. Alabama also fully exempts traditional pension income, military pension, and certain other retirement income from state taxation, making it one of the more retirement-friendly states despite its low standard deduction.

What is Alabama's standard deduction?

Alabama's standard deduction varies by adjusted gross income (AGI). At lower AGI levels, the maximum standard deduction is $2,500 for single filers and $7,500 for married filing jointly. The deduction phases down as AGI increases. Alabama also allows a $1,500 dependent exemption per dependent.

Does Alabama have a federal income tax deduction?

Yes. Alabama is one of a small number of states that allows taxpayers to deduct federal income tax paid from their Alabama taxable income. This makes Alabama's effective rate noticeably lower than the headline 5% might suggest, particularly for high-income filers who pay substantial federal tax.

Sources: Alabama Department of Revenue (revenue.alabama.gov), Tax Foundation 2026 State Tax Guide, IRS Publication 17. Data verified May 2026. Not tax advice. Always confirm current figures with the Alabama Department of Revenue or a licensed CPA or Enrolled Agent before filing.