When it comes to state income taxes, Alabama follows a progressive tax system, which means that the rate you pay goes up as your taxable income increases. In 2024, the state income tax rates are 2% on the first $500 of taxable income, 4% up to $3,000 and 5% above that. Taxpayers in the Yellowhammer State begin paying taxes on their earned income at lower thresholds than people in most other states, PARCA reports. Property taxes in Alabama are also low.
Unlike some other states, Alabama doesn’t charge an inheritance tax, which can be a big benefit for retirees who are hoping to pass on wealth to their heirs. However, the Yellowhammer State does collect a sales tax of 4% on most goods and services, including automobiles.
The amount of state and local taxes you pay is largely determined by the information you provide on your W-4 form. That’s why it’s important to update your W-4 every time you have a major life change, such as moving or getting married.
Alabama Income Tax Brackets 2024
| Tax Rate | Filing Status | Income | Taxes Due |
|---|---|---|---|
| 2% | Single or Married Filing Separately Head of Household Married Filing Jointly | $0 – $500 $0 – $1,000 | 2% within Bracket 2% within Bracket |
| 4% | Single or Married Filing Separately Head of Household Married Filing Jointly | $501 – $3,000 $1,001 – $6,000 | $10.00 plus 4% $20.00 plus 4% |
| 5% | Single or Married Filing Separately Head of Household Married Filing Jointly | $3,001 or more $6,001 or more | $110 plus 5% over $3,001 $220 plus 5% over $6,001 |
- These are just the marginal tax rates. This means the tax only applies to the income that falls within each bracket.
- Alabama has a standard deduction that helps reduce your taxable income.
- There might be other tax credits and deductions you qualify for that can further lower your tax liability.
For a more personalized estimate of your Alabama income tax, you can use an online tax calculator or consult with a tax professional.