U.S. flag An official website of the United States government.

Dot gov

The .gov means it's official.
Federal government websites always use a .gov or .mil domain. Before sharing sensitive information online, make sure you’re on a .gov or .mil site by inspecting your browser's address (or "location") bar.

SSL

This site is also protected by an SSL (Secure Sockets Layer) certificate that's been signed by the U.S. government. The https:// means all transmitted data is encrypted  — in other words, any information or browsing history that you provide is transmitted securely.

Individual Income Tax FAQ

Does Alabama currently follow the Federal bonus depreciation provisions allowed by 26 U.S.C. §168 and 26 U.S.C. §179?
Alabama’s depreciation deduction is consistent with the federal depreciation deduction for all assets placed in service in 2009 or later. Alabama is tied to the federal depreciation rules in 26 U.S.C. §168 and 26 U.S.C. §179 except with regard to the Federal Economic Stimulus Act of 2008. See Alabama Act No. 2008-549 for more details.

How should the deduction for self-employment tax be treated with the change in the method for computing the Federal Income Tax Deduction?
The self-employment tax must be deducted as an itemized deduction on the cash basis.  The Department’s position has been that the self-employment tax is considered paid when the federal tax return is completed and filed, whether the monies used to pay it came from estimated payments, withholding or money paid with the return.  When the tax return is completed and filed the taxpayer is able to determine how much of his estimate and/or withholding is used to pay federal income tax and how much is used to pay self-employment tax, and not until then.

As an example:  A taxpayer pays $15,000 in estimated tax for 2001.  When the 2000 return is filed in 2001 the taxpayer owes $5,000 in income tax and $9,180 in self-employment tax.  His Federal Income Tax (FIT) deduction for 2000 would be his $15,000 estimated tax payments.  Any 1999 refunds received in 2000 or 1999 payments made in 2000 would be reported on the appropriate lines.  We are also assuming that there were no other refunds or liabilities received or paid in 2000.

On his 2001 return, considering that 2001 is the transition year to the accrual basis of deducting FIT, the taxpayer would report a $10,000 (9180 + 820) FIT refund and take a $9180 itemized deduction for self-employment tax on Schedule A.  He would deduct his 2001 Federal income tax liability on the appropriate line.  At the time the federal return is filed the amount of self-employment tax will have been determined and that amount would be deductible on the 2002 return as an itemized deduction, just as in prior years.

The taxpayer would not lose any self-employment tax deduction for any year.

When will I get my refund?
That depends upon several things:  Whether or not you filed electronically, how early in the tax season you filed, etc.  To get your refund faster file early or file electronically.

To check on the status of your refund, wait at least six weeks after filing your return, then go to My Alabama Taxes.

When must I file my Alabama individual income tax return?
Your 2014 Alabama individual income tax return is due April 15, 2015.

Does Alabama accept the federal extension of time for filing form?
If you know you cannot file your return by the due date, you do not need to file for an extension. You will automatically be granted an extension until October 15, 2015. If you anticipate that you will owe additional tax on your return you should submit your payment with a payment voucher (Form 40V) by April 15, 2015. Except in cases where taxpayers are abroad, no extension will be granted for more than 6 months. An extension means only that you will not be assessed a penalty for filing your return after the due date. Interest on the additional tax due from the due date of the return and any penalties will be assessed if applicable to your return..

Can I pay my income taxes due by ACH Debit?
You may pay by ACH Debit by going to My Alabama Taxes. You will need to have your bank routing number and checking account number to use this service. No fee is charged for this service. If you are paying with funds on a foreign bank, you must include an additional $25 exchange fee. Do not use Form 40V when paying by ACH Debit.

Can I pay my income taxes due with a credit card?
If you file and have a balance due, the amount owed can be charged to your American Express, Visa, Discover/Novus, or MasterCard by using Official Payments Corporation or Value Payment Systems. Value Payment Systems does not accept American Express but has a program called BillMeLater. You can pay by calling 1-800-2PAY-TAX (Official Payments Corporation, Alabama´s Jurisdiction Code is 1100). You can also pay over the Internet by visiting Official Payments Corporation or Value Payment Systems. There is a convenience fee for this service. The fee is based on the amount of your tax payment and is paid directly to Official Payments Corporation or Value Payment Systems. Do not include Form 40V with your return when you pay your taxes by credit card.

Who must file an Alabama individual income tax return?
Full year residents whose filing status is “Single” must file if gross income for the year is at least $4,000. Full year residents whose filing status is “Married Filing Separate Return” must file if gross income for the year is at least $5,250.  Full year residents whose filing status is Head of Family” must file if gross income for the year is at least $7,700.  Those whose filing status is “Married Filing Joint Return” and whose gross income for the year is at least $10,500 must file an Alabama income tax return.

Part year residents whose filing status is “Single” must file if gross income for the year is at least $4,000 while an Alabama resident.  Full year residents whose filing status is “Married Filing Separate Return” must file if gross income for the year is at least $5,250 while an Alabama resident.   Full year residents whose filing status is Head of Family” must file if gross income for the year is at least $7,700 while an Alabama resident.   Those whose filing status is “Married Filing Joint Return” and whose gross income for the year is at least $10,500 must file an Alabama income tax return while an Alabama resident.

Nonresidents must file a return if Alabama income exceeds the allowable prorated personal exemption.

What filing status should I use to file my return?
There are four different filing statuses available under Alabama law:

  1. Single
  2. Married Filing a Joint Return
  3. Married Filing a Separate Return
  4. Head of Family

Explanation of the filing statuses

To what personal exemptions am I entitled?
Taxpayers using the Single and Married Filing Separately filing statuses are entitled to a $1,500 personal exemption. Taxpayers using the Married Filing Jointly and Head of Family filing statuses are entitled to a $3,000 personal exemption.

Part year residents are entitled to the full exemption amount.  A dependent or student may claim a personal exemption even if claimed by someone else.

Would a foster child qualify as a dependent?
You cannot claim a foster child, friend, cousin, yourself, or your spouse as a dependent on your Alabama income tax return.

Is the “Head of Family” filing status in Alabama the same as the “Head of Household” filing status for federal purposes?
Yes, with a few exceptions.  In Alabama, a foster child does not qualify a taxpayer to claim “Head of Family.” Also, you must be unmarried in order to qualify for “Head of Family” filing status with the state.

How much is the Alabama standard deduction?
The Alabama standard deduction is based on the filing status used by the taxpayer. For tax years ending 12/31/2007 and forward, the Standard Deduction Chart is used to determine the Standard Deduction allowable on your return.

For tax years ending 12/31/2006 and prior, the standard deduction for taxpayers using the Single filing status, the Married Filing Separately filing status and the Head of Family filing status is the lesser of 20% of adjusted gross income or $2,000.

The standard deduction for taxpayers using the Married Filing Jointly filing status is the lesser of 20% of adjusted gross income or $4,000.

If I itemize on my federal tax return, do I have to itemize on my state return?
No.

What are Alabama’s individual income tax rates?
For single persons, heads of families, and married persons filing separate returns:

  • 2% First $500 of taxable income
  • 4% Next $2,500 of taxable income
  • 5% All taxable income over $3,000

For married persons filing a joint return:

  • 2%    First $1,000 of taxable income
  • 4%    Next $5,000 of taxable income
  • 5%    All taxable income over $6,000

What interest income is exempt from Alabama taxation?
Interest on obligations of the State of Alabama or any county, city, or municipality of Alabama, and interest on obligations of the United States or any of its possessions.

Can I deduct child care expenses on my Alabama income tax return?
No, nor does Alabama have a child care tax credit.

I am in the military and a legal resident of Alabama but I do not live in Alabama.  Do I have to pay Alabama income tax?
Military personnel who list Alabama as their home of record are required to pay Alabama income tax regardless of where they are assigned or the length of time spent in Alabama. Alabama income tax law does not exempt active duty military.

I am in the military and not a legal resident of Alabama.   If I and/or my spouse also have civilian jobs in Alabama, must we report that income to Alabama?
Yes, on Form 40NR, a copy of which is available on this web site.

Must I report the sale of my personal residence?
If your personal residence was sold prior to 1998, you would be required to report the sale of your home on federal Form 2119.

Because Alabama law is now the same as federal law in this area, the treatment of 1998 Alabama tax returns, and forward, will be the same as for your federal return. 

What are the limitations on my IRA deduction?

  • Contributions:  Contributions to an individual retirement arrangement (IRA) may be taken as an adjustment to income, the same as for federal tax purposes. These deductible contributions represent a deferral of tax on a portion of your income.
  • Distributions: At the time funds are distributed from these IRA accounts, the amount on which tax has been deferred cannot be claimed as part of the cost basis in the fund.
  • Since Alabama income tax law prior to 1982 did not conform to federal tax law in this area, you may have a cost basis in the fund for amounts contributed prior to 1982.
  • Roth IRA: Alabama recognizes Roth IRA’s.

If I file using the Married Filing Jointly filing status on my federal return, do I have to file a joint Alabama return?
No, you can use the Married Filing Separately filing status.

Should I itemize my deductions or should I use the standard deduction?
You may use either method.  Compute your deduction using both methods and compare the results. Base your deduction on the method resulting in the greatest advantage to you.

Can I have my Alabama individual income tax return filed electronically?
Check with your Authorized IRS E-file Provider to determine if this option is available to you!  Almost any return that can be filed electronically for the IRS can also be filed electronically for Alabama.

More on the Alabama Electronic Filing Program

Can I file electronically my Alabama individual income tax return from my home using my personal computer?

More on PC Online Filing.

Do you have a TTY number for the hearing impaired?
Our TTY number is (334) 242-3061.

My employer went out of business/or will not give me a W-2 form.  What can I do?
Submit a copy of the complete federal Form 4852 (Substitute W-2) and attach it to your Alabama return with copies of your pay stubs and/or leave and earnings slips.

What should I do if my Form W-2 is incorrect?
You should secure a corrected withholding statement (Form W-2C) from your employer.

Will you fax Alabama tax forms to me?

We are happy to mail or ship to you as many forms as you need. Please phone or fax your request to your nearest Taxpayer Service Center. For bulk orders, you can use can order Individual Income Tax forms. Also, most of the Alabama Individual Income Tax Forms are available in downloadable form on this web site.

What if I have any other questions about my Alabama individual income tax return?
You have several available resources for assistance:

  • Specific instructions for all three of Alabama’s income tax returns are available on this web site or in print.
  • Submit your questions via e-mail at Contact Us.
  • The Alabama Taxpayer Service Center nearest you.  Phone and fax numbers are listed on this web site.

What income must I report on my Alabama return?
All income is subject to Alabama income tax unless specifically exempted by state law.

Listing of taxable income

What income is exempt from Alabama income taxation?

Listing of exempt income items

 Who qualifies as my dependent?

Information about dependents

Oil Spill Information (Gulf of New Mexico waters)

Will I be required to pay income tax on payments received from British Petroleum (BP) for damages sustained due to loss of income (Example: Hotel/Condominium (lost rental income), Shrimp Boat Operator (lost seafood income), or Gulf Coast retailer/restaurant (lost income due to lower tourism)?
Yes, these payments are in lieu of income you would have received and under current law, are taxable and must be included on your Alabama income tax return.  The U.S. Congress or the Alabama Legislature would have to enact special relief in order for the payments not to be subject to tax.  If you are already paying estimated taxes on a quarterly basis, be sure to include the amount of the payments you receive from BP in the calculation of the amounts you need to pay each quarter.  If you don’t normally make estimated payments, you will have to file and pay quarterly estimated taxes for this income, unless taxes are withheld by BP from the payments you receive.

Will I be required to pay lodgings tax, sales tax or any other type of transactional tax on payments received due to loss of income from British Petroleum (BP) as damages due to the Gulf oil spill?
No, not unless a portion of the payment received is identified as being for sales tax, lodgings tax or any other transactional tax due the State of Alabama or the counties or municipalities thereof. The State of Alabama and the counties and municipalities will be compensated directly by British Petroleum (BP).

Are wages earned offshore in the cleanup effort taxable to Alabama?
Yes, employee wages earned within a three mile range of Alabama’s coastline are considered Alabama wages, and employers should withhold Alabama income taxes in the same manner as wages earned onshore.

Will I be required to pay income tax on payments received from British Petroleum (BP) for damages sustained due to loss of property value from the Gulf oil spill?
No, these payments will not be considered income for tax purposes.  However, you must reduce your basis in this property in the amount you receive. Example: You purchased land for $100,000 in 2009. Due to the Gulf oil spill, the estimated property value is now only $50,000. BP gives you $20,000 for damages caused by the Gulf Oil Spill. Your basis in this property is now $80,000. If you sell this property in 2011 for $110,000, you will recognize a gain for Alabama tax purposes of $30,000 ($110,000-$80,000).

When will reduced property values, as a result of the oil spill, be reflected in property tax notices?
The 2010 property valuation notices recently mailed state property values as of October 1, 2009. The notices will not reflect any impact the oil spill might have on property values since the oil spill occurred after the October 1, 2009, tax lien date. Any impact that the BP oil spill may have on property values will not be reflected until valuation notices are mailed out in the summer of 2011. These will state values as of the October 1, 2010, tax valuation date, and will reflect any impact on values if measurable at that time.

May I take a casualty loss on my tax return  for damages sustained due to the Gulf oil spill if I received payments from British Petroleum (BP) or my insurance company?
No, you may not deduct losses due to damages sustained by the Gulf oil spill if you received payments from BP or your insurance company that was equal to or greater than the amount of estimated losses.  To the extent you received payments that were less than the losses you sustained, you may deduct the balance on your Alabama tax return as a casualty loss. Example:  You sustained $50,000 of property damage from the Gulf oil spill and received $35,000 from BP. The maximum amount of casualty loss you may claim is $15,000.

If you have additional questions regarding the effect of the Gulf oil spill on your Alabama taxes, please contact the Alabama Department of Revenue at (251) 344-4737.

For more information on filing a damage claim with British Petroleum, please visit the Alabama Attorney General’s Website.

IRS tax help and guidance information for Gulf oil spill victims may be found at Gulf Oil Spill Information Center or by calling 866-562-5227.

Catastrophe Savings Account

What is a catastrophe savings account?
A catastrophe savings account is a regular savings or money market account established by an Alabama resident after May 15, 2012, at a financial institution to cover repair costs and losses relating to damage to the taxpayer’s principal residence in Alabama caused by a catastrophic storm or flood, to the extent those costs and losses are not covered by the taxpayer’s homeowner’s insurance, or to cover certain self-insured losses from damage to the taxpayer’s principal residence in Alabama caused by such catastrophic storm or flood.

How do you establish a catastrophe savings account?
A catastrophe savings account is established by:

  • Opening a separate savings or money market account at a financial institution for the sole purpose of holding catastrophe savings, AND
  • Labeling the account as a “catastrophe savings” account in the name of the account holder(s) shown in the financial institution’s records or in their own written documentation recorded contemporaneously with the opening of the account.

Can I make deductible catastrophe savings contributions to an existing savings account or money market that contains funds held for a separate purpose?
No. Catastrophe savings must be segregated into a new, separate savings or money market account and labeled as a catastrophe savings account.

How do I label a savings account or money market account a “catastrophe savings” account?
If possible, use the term “catastrophe savings” in the financial institution’s records.  If the financial institution does not provide that option, the taxpayer may label the account a “catastrophe savings” account in his or her own documentation. This documentation should be recorded contemporaneously with the establishment of the account.

How many catastrophe savings accounts can you establish?
A taxpayer may establish only one qualified catastrophe savings account, and only the funds related to the catastrophe savings account may be deposited into this account.