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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.

When will I get my refund?
The Department will not start approving refunds until March 1st of each year. The speed in which you receive your refund depends on several things. For a faster refund you should both file your return early and file your return electronically. To check on the status of your refund please wait at least six weeks after filing your return and verify the status using My Alabama Taxes.

When must I file my Alabama individual income tax return?
Generally your Alabama individual income tax return is due on April 15th, unless the 15th is a weekend or holiday, then the return is due the next business day.  .

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.  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.  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?

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.  Part 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.   Part 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.

How can I get Alabama tax forms?

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:

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

Does Alabama have a simplified or EZ form?

The Simplified Short Form or 40EZ is available to taxpayers who meet all of the following requirements:
• Is an Alabama resident
• Has filed an Alabama Income Tax Return in a prior year or has a valid Alabama Driver’s License
• Has a filing status of either Single or Married Filing Jointly
• Has not made any estimated tax payments for the tax year
• Has a total combined wage income of less than $100,000
• Has no reportable income other than wages (no interest, dividends, retirement, pension, rents, gains, losses, etc.)
• Will claim no Dependents
• Will claim no itemized deductions
• Will claim no federal income tax deduction
• Will claim no income tax credits or adjustments to income

Since the only deductions allowed filing the simplified short form are the optional increased standard deduction and personal exemption, a taxpayer may benefit from filing a Form 40 rather than a Form 40EZ. The Form 40EZ is beneficial to those who have only wages and meet the requirements shown above. If you need to amend your Form 40EZ for any reason you will need to submit a paper Form 40 or Form 40A. Additionally, by filing a Form 40EZ you agree to the following statement before submitting your return.
“Pursuant to Act 2017-405, Ala. Acts 2017, by claiming the optional, increased standard deduction, I acknowledge that I am knowingly and voluntarily foregoing any right to claim the federal income tax deduction otherwise allowed by section 40-18-15, Ala. Code 1975. I also acknowledge that I am knowingly and voluntarily foregoing the right to claim any and all other deductions, credits, and exemptions that would otherwise be available to me.”

What is the Alabama first-time and second chance home buyer savings account?

Information about the Alabama First-Time and Second Chance Home Buyer Savings Account

What deductions are allowable for certain retrofitting or upgrades to homes in Alabama?

Information about deductions for certain retrofitting or upgrades to homes in Alabama

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.

Job Related Expenses

The Federal Tax Cuts and Jobs Act did not limit who may deduct job related expenses for Alabama Income Tax purposes. Alabama uses the Federal Form 2106 to compute the amount of Employee Business Expenses deductible.  Taxpayers claiming employee business expenses on their Alabama Income Tax Return should ignore the statement on the 2018 Federal Form 2106 that  indicates that form is “for use only by Armed Forces reservists, qualified performing artists, fee-basis state or local government officials, and employees with impairment-related work expenses”.  This statement only applies to the Federal Income Tax Return.

The Federal Form 2106 should be used to compute the amount of Employee Business Expenses deductible for Alabama if:

  1. You claim any travel, transportation or meal expenses for your job; OR
  2. Your employer paid you for any of your job expenses.

If 1 or 2 above applies, Federal Form 2106 should be completed and the net deductible amount should be entered on line 20 of the Alabama Schedule A.

Other unreimbursed job related expenses may be listed on the space provided on Alabama Schedule A Line 20. If you need more space, attach a statement showing the type and amount of the expense.