Updated for tax year 2025.
If you live or work in Alabama, you’ll likely need to file an Alabama state income tax return along with your federal return. Alabama uses a progressive income tax structure with three tax rates that depend on your filing status and Alabama taxable income.
This guide explains Alabama’s 2025 income tax rates and brackets, standard deduction and exemptions, available deductions and credits, and the updates for the current tax year. When you’re ready to file, TaxAct® automatically applies Alabama’s tax rules to help you accurately prepare your Alabama return alongside your federal return.
What is the Alabama state income tax?
Alabama state income tax is a tax on income earned by individuals. It is collected by the Alabama Department of Revenue and helps fund state services.
Alabama uses a progressive income tax structure with three rates for tax year 2025 — from 2% to 5% — depending on your filing status and Alabama taxable income. The state constitution caps the top marginal rate at 5%. Alabama taxable income is generally your Alabama adjusted gross income minus your Alabama standard deduction, personal exemption, dependent exemptions, and allowable federal income tax deduction.
Alabama income tax rates and tax brackets
To estimate your Alabama tax bill or refund, it helps to understand the state’s income tax brackets. Taxpayers in Alabama follow a progressive tax system, meaning lower-income earners are subject to a smaller state income tax rate than individuals with higher incomes. For single filers and married couples filing jointly, the tax brackets look like this, carried from the live Alabama refund page:
| Tax Rate | Single | Married filing jointly |
|---|---|---|
| 2% | Up to $500 | Up to $1,000 |
| 4% | $501–$3,000 | $1,001–$6,000 |
| 5% | Above $3,000 | Above $6,000 |
Head of family and married filing separately filers use the same bracket schedule as single filers. If you need more information on how federal tax brackets work, you can use our tax bracket calculator for federal taxes. See the Alabama Department of Revenue for official 2025 rate information.
Alabama standard deduction
Alabama does not use the federal standard deduction amounts on Form 40. Instead, Alabama taxpayers use the Alabama Standard Deduction Chart to determine their deduction based on filing status and Alabama adjusted gross income.
Maximum standard deduction amounts for 2025 are up to $3,000 for single filers, $8,500 for married filing jointly, $4,250 for married filing separately, and $5,200 for head of family. Your actual deduction may be lower depending on your Alabama adjusted gross income. Alabama does not allow federal itemized deductions on the state return.
Alabama exemptions
Alabama residents can claim a personal exemption on Form 40: $1,500 for single and married filing separately filers, and $3,000 for married filing jointly and head of family filers. Alabama also allows a $300 dependent exemption for each qualifying dependent.
Alabama is one of the few states that allows a deduction for federal income taxes paid, which can further reduce Alabama taxable income. Alabama also offers other subtractions and credits for qualifying taxpayers, such as the vehicle loan interest deduction for certain new vehicles (2025 through 2028) and expanded military income exemptions for certain National Guard and Reserve members. See the 2025 Form 40 instructions for eligibility and limits.
Alabama tax changes for 2025
For tax year 2025, Alabama continues its three-bracket progressive rate structure with a top marginal rate of 5%. Notable updates include a new vehicle loan interest deduction for qualified new vehicles purchased from 2025 through 2028, expanded military income exemptions for certain deployed National Guard and Reserve compensation, and the Sound Money Tax Neutrality Act exclusion for net capital gains from certain precious metal bullion exchanges.
Alabama also decoupled from federal Section 174 amortization rules for research and experimental expenditures, giving taxpayers an option to currently deduct or defer those costs under pre-TCJA treatment. New childcare-related credits on Schedule OC may also apply to qualifying providers and employers. See the 2025 Form 40 booklet for a full list of 2025 tax rules and credits.
FAQs
The bottom line
Alabama has a progressive state income tax for 2025 with rates from 2% to 5%, depending on your filing status and Alabama taxable income. Knowing the brackets, how the Alabama standard deduction chart works, and available exemptions and credits can help you estimate what you may owe or get back.
When you’re ready to file, TaxAct can help you prepare your federal and Alabama returns in one place so you can file with confidence.
Already filed your taxes and waiting for your refund? Learn more about where your Alabama state tax refund is.
This article is for informational purposes only and not legal or financial advice.
All TaxAct offers, products and services are subject to applicable terms and conditions.
The OBBB is now also being referred to by lawmakers as the Working Families Tax Cut Act. You may see one or both names used here, but they refer to the same set of tax changes.
Citations
Alabama Department of Revenue. “Individual Income Tax.” Accessed 17 Aug. 2026.
Alabama Department of Revenue. “2025 Form 40 Booklet and Instructions.” Accessed 17 Aug. 2026.
Alabama Department of Revenue. “2025 Standard Deduction Chart for Form 40.” Accessed 17 Aug. 2026.
TaxAct. “Working Families Tax Cuts Act: 2025 Tax Reform Explained.” TaxAct Blog.
TaxAct. “Where’s My Alabama State Tax Refund?” TaxAct Blog, 9 Feb. 2026.