Alabama State Taxes
Quick Tax Facts
Income Tax: 2% – 5%
State Sales Tax: 4%
Median Property Tax: $701
Overview
Alabama is considered one of the more tax-friendly states. It is the only state that currently allows its residents to fully deduct the amount they pay in federal income taxes from their state income tax liability. Property taxes are also some of the lowest in the United States. Although its state sales tax rate is only 4%, additional levies at the local level make the combined average of 9.24% one of the highest in the nation. Alabama is also one of only a handful of states that still imposes state sales tax on groceries, though it is slowly reducing the rate.
Alabama Income Tax
Alabama has a graduated personal income tax rate that ranges from 2% to 5%. Certain jurisdictions also collect local income taxes. Bessemer, Birmingham, and Macon County each levy an income tax of 1% in addition to the state income tax. Gadsden County levies an income tax of 2%.
| Alabama Individual Income Tax Rates By Filing Status |
|---|
| Single, Head of Household, and Married Filing Separately | 2% – First $500 of taxable income 4% – Next $2,500 of taxable income 5% – All taxable income over $3,000 |
| Married Filing Jointly | 2% – First $1,000 of taxable income 4% – Next $5,000 of taxable income 5% – All taxable income over $6,000 |
Who Must File?
Full- and part-time residents must file an individual income tax return if any of the following is true:
- Single filing status with $4,000 or more in gross income while an Alabama resident.
- Married filing separately and at least $5,250 in gross income while a resident.
- Head of Household status and $7,700 or more in gross income while residing in the state.
- Married filing jointly with at least $10,500 in gross income while living in Alabama.
Non-residents must also file an Alabama income tax return if their income from the state exceeds the allowable prorated personal exemption.
Alabama Sales Tax
Alabama’s sales tax rate is 4%. The sales and use tax on food was reduced to 2% on September 1, 2025. Each city, county, and special district may also impose an additional sales tax. The maximum allowed at the local level is 7%. Currently, the average combined state and local sales tax rate is 9.16%, one of the highest in the country.
Certain items are exempt from sales tax, including but not limited to: prescription drugs, gasoline, motor oil (excluding kerosene and fuel oil), fertilizers used for agricultural purposes, feed for livestock, as well as livestock sales.
Alabama Property Taxes
Alabama property taxes are based on property classification, millage rates, and exemptions. The median property tax for an Alabama resident is approximately $701 per year. It is one of the lowest in the country.
| Highest | $1282 |
|---|---|
| Median | $701 |
| Lowest | $222 |
Yearly Cost Per Resident
Alabama Tax Holidays
Alabama has two annual sales tax holidays.
- Severe Weather Preparedness. The Severe Weather Preparedness Sales Tax Holiday begins at 12:01 AM on the Friday of the last full weekend in February and ends at midnight on the following Sunday. You can view a list of eligible items here.
- Back-to-School Sales Tax Holiday. Held on the third Friday in July, this sales tax holiday begins at 12:01 AM and ends at midnight the following Sunday. Eligible items include clothing ($100 or less per item), computers ($750 or less), books ($30 or less per item), and school supplies ($50 or less per item).
Alabama Tax Relief
If you’re struggling to pay your Alabama state taxes, you’re not alone. Whether your tax debt stems from unexpected financial hardship, unfiled returns, or a business tax issue, ignoring the problem can lead to additional penalties, interest, and collection actions by the Alabama Department of Revenue. The sooner you address your tax debt, the more options you may have available.
Fortunately, there are several ways to resolve Alabama tax debt depending on your financial situation. From payment plans to penalty relief and other resolution options, taking action early can help you regain control of your finances and avoid more serious collection efforts.
Understanding how Alabama collects unpaid taxes and the relief options available to you is the first step toward resolving your tax issues.
Common Alabama State Tax Problems
Back Taxes
If you owe unpaid Alabama taxes, addressing your balance early may help you avoid additional penalties and collection actions.
Unfiled Tax Returns
Filing past-due Alabama tax returns is often the first step toward resolving your state tax issues.
Tax Notices
Notices from the AL Department of Revenue shouldn’t be ignored, as they often require prompt action to prevent further collections.
Liens & Levies
Unresolved tax debt may lead to liens against your property or levies on your assets as the state works to collect what is owed.
Garnishment
Alabama may garnish your wages to collect unpaid taxes, reducing the amount of each paycheck you receive.
Tax Penalties
Unpaid taxes can continue to accrue penalties and interest until your balance is resolved.
How Alabama Collects Tax Debt
If you don’t pay your Alabama tax bill by the due date, the Alabama Department of Revenue will typically begin by sending a series of notices explaining the amount you owe and requesting payment. These notices also provide information about your payment options and explain the potential consequences of failing to resolve your balance.
If the balance remains unpaid and the notices go unanswered, your account may be referred to the Alabama Department of Revenue’s Collection Services Division. At that point, the state may pursue enforced collection actions to recover the debt, including filing tax liens, garnishing wages, levying bank accounts, seizing certain assets, or intercepting state tax refunds.
Because penalties and interest continue to accrue until the balance is paid, addressing your tax debt as early as possible can help you avoid additional costs and more serious collection actions.
Taxpayer receives Balance Due Notice
Additional notices are sent requesting payment
If not paid, case referred to Collection Services Division
Alabama State Tax Relief Options
Alabama offers two state tax relief options, including:
- Income Tax Payment Plans (Collections Payment Plan) – Minimum payment is $25 per month, not to exceed 24 months.
- Penalty Abatement – The state may abate penalties if the taxpayer received erroneous written advice from a Department of Revenue employee or other good cause.
Alabama does not accept tax settlement offers (Offer in Compromise), nor does it have a formal hardship relief option (Currently Not Collectible). Taxpayers facing financial hardship and unable to pay their taxes on time should reach out to the Department of Revenue to discuss payment arrangements and collection alternatives.
When to Seek Tax Relief Help
If you’re experiencing any of the following, it may be time to explore your tax relief options:
You’re Receiving Collection Notices
Ignoring Alabama tax notices can lead to more serious collection actions, so it’s often best to address the issue early.
You Can’t Afford to Pay Your Taxes
If paying your Alabama state tax bill in full isn’t realistic, there may be payment or resolution options available.
Collection Actions Have Started
If you’re facing wage garnishments, bank levies, or tax liens, professional guidance may help you understand your options.
The sooner you address your tax debt, the more options you may have available to resolve your balance and minimize additional collection actions.
Alabama Tax Relief FAQs
Alabama Tax Resources
If you need assistance preparing your Alabama state taxes, you can speak with a tax professional from Tax Defense Network by calling 855-476-6920.
You can also visit the Alabama Department of Revenue website for additional resources.
- Alabama Tax Refund Hotline: 855-894-7391
- Individual Income Tax Phone Number: 334-242-1170, Option 1
- Corporate Income Tax Questions: 334-242-1170, Option 6
- Income Tax Payment Options
- Tax Due Dates
- Request for Waiver of Penalty
