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Alabama State Income Tax

Alabama Residents and Non-Residents need to pay tax on their income obtained from any trade or services conduted within the state of Alabama. Alabama State tax return should be filed using appropriate filing status. For married taxpayers Alabama follows a ioint filing system under which the incomes of both spouses are added together and taxed as a single amount. They have the option of filing separate return, but will generally result in a lesser tax refund or higer tax due. You can find below the major differences between the tax treatement of various taxes by Fedeal and Alabama State Taxes.

Interest/Divident Income: Interest and Divident income from U.S. government bonds are exempt from State Taxes.

Rent Income: You should use the Alabama State Tax schedule to figure the state tax for rental income.

Capital Gain: The Capital Gains are treated similar to Federal Taxes, except that all gains are taxable and all losses are deductible in the year incurred.

Unemployment Income: Unemployment income is exempt from state taxes.

Social Security Benefits: All social security income is exempt from state taxes.

State Bond Interest: Interest income from other state bonds are taxable and those from Alabama obligations are exempt from state taxes.

Health Savings Accounts: There is no provision for state tax tax deduction from for the Health Saving Accounts.

Disability: Same as federal

Lottery: Lottery winnings are fully taxable in Alabama

Federal Income Tax: You can deduct the federal taxes paid while calculating the state taxes. You need to attach federal tax form 1040 along with the state tax form.

Other Taxes: Moving expenses are 100% deductible if new job is in Alabama. Certain adoption expenses are deductible. All benefits from Alabama prepaid tuition contracts are exempt from state taxes. Up to $25,000 in severance pay is exempt if a result of administrative downsizing.

Check other state tax links below.

Last Updated ( Friday, 11 September 2009 04:56 )