Alabama State Taxes: What You’ll Owe in the 2026 Tax Season

Alabama has no tax on Social Security income or military retirement pay, and the state doesn’t have an estate or inheritance tax. Alabama has a graduated individual income tax, with rates ranging from 2 percent to 5 percent. Alabama also has one of the lowest property tax rates in the country on owner-occupied housing.

• Income tax: 2 percent to 5 percent. For single people, the first $500 of taxable income is taxed at 2 percent, the next $2,500 is taxed at 4 percent, and anything beyond $3,000 is taxed at 5 percent. For married people filing jointly, the first $1,000 of taxable income is taxed at 2 percent, the next $5,000 is taxed at 4 percent, and anything above $6,000 is taxed at 5 percent. There are also jurisdictions that collect local income taxes.
• Property tax: 0.36 percent on the value of an owner-occupied house.
• Sales tax: 9.44 percent (average combined state and local sales tax rate). The state levies a 4 percent sales tax, and municipalities levy sales tax on top of that. Those municipal taxes run as high as 11 percent and average 5.44 percent.

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Alabama has a graduated individual income tax. For single people, the first $500 of taxable income is taxed at 2 percent, the next $2,500 is taxed at 4 percent, and anything beyond $3,000 is taxed at 5 percent. For married people filing jointly, the first $1,000 of taxable income is taxed at 2 percent, the next $5,000 is taxed at 4 percent, and anything above $6,000 is taxed at 5 percent. To find out what Alabama defines as income, check the state’s Department of Revenue website.

Pensions are taxable in Alabama, although retirement income for many public sector employees is exempt. For example, state employee retirement income and that for teachers, military and federal railroad workers is exempt from Alabama state income tax. A list of what retirement income is exempt can be found here, while a list of income that is subject to tax can be found here.

Alabama does not tax Social Security benefits. You may pay federal taxes on a portion of those benefits, depending on your total provisional income in the year. In most cases, provisional income is equal to half of your Social Security benefits, combined with your adjusted gross income (not including any Social Security benefits) and any tax-exempt interest for the year.

Alabama taxes capital gains as income at the same graduated rates as other income.

The average property tax rate in Alabama was 0.36 percent of an owner-occupied home’s assessed value in 2023, according to the Tax Foundation.

Property taxes vary widely by county, with rates ranging from 0.18 percent in Choctaw County to 0.6 percent in Jefferson County. The lowest median property tax was $199 in Choctaw County, while the highest median property tax was $1,343 in Shelby County, according to 2023 data from the Tax Foundation.

• Sales tax: 9.44 percent (average combined state and local), according to 2025 data from the Tax Foundation. The state levies a 4 percent sales tax, and municipalities levy sales tax on top of that. Those municipal taxes run as high as 11 percent and average 5.44 percent. Exempt items include prescription drugs, seeds for planting purposes, feed for livestock and poultry, and food purchased with food stamps. For a complete list, visit the state's Department of Revenue’s website.
• Gas and diesel: Gasoline is taxed at 30 cents per gallon, while diesel is taxed at 31 cents per gallon, as of July 1, 2025.
• Vehicle tax: Alabama has a 2 percent consumer sales tax on automobile purchases. Alabama also has an annual ad valorem property tax on vehicles, which is a fraction of 15 percent of the assessed value of automobiles weighing 8,000 pounds or less, as well as a fraction of 20 percent on trucks weighing more than 8,000 pounds, commercial vehicles, motorcycles, utility trailers and recreational vehicles.
• Alcohol: Beer is taxed at 5 cents for each 12 fluid ounces, wine that is 16.5 percent or less alcohol by volume is taxed at 38 cents per liter, and wine that is greater than 16.5 percent taxed at $2.42 per liter. The retail price of liquor products includes the cost of the product, a 35 percent markup, an additional 56 percent state tax, and sales tax.
• Lottery: Alabama’s constitution doesn’t allow the state to have a lottery, although residents must pay income taxes on any lottery winnings they receive from another state. Lottery winnings are taxed like other income.

Alabama does not have an inheritance or estate tax.

• Homestead exemption: If you are over 65, permanently and totally disabled (regardless of age), or blind (regardless of age), you are exempt from the state portion of property tax. County taxes may still be due. People younger than 65 may be entitled to a tax exemption on a maximum of $4,000 of assessed home value. Visit your local county office to apply for a homestead exemption.
• Certain retirement income: Certain retirement income — such as for teachers, U.S. civil service workers and federal railroad workers — is exempt from income tax in Alabama.
• Retirement income paid by the U.S. government for service in the reserves or National Guard: This income is exempt from individual income tax.
• Social Security benefits: These are exempt from state individual income tax.

Military retirement benefits are not taxed in Alabama.

The deadline to file your 2025 tax return is Wednesday, April 15, 2026.

Valerie Bauman is a journalist and author with two decades of experience working for media outlets, including Newsweek, Bloomberg and The Associated Press. Throughout her career, she’s covered politics and the law, including pharmaceutical litigation, mass torts and election law.