How Alabama taxes wages
Three brackets (2%–5%). Alabama is one of the few states that lets you deduct federal income tax paid.
At $65,000 of wages, that is the 28th-lowest estimated bill of the 42 jurisdictions (including DC) that tax wages.
Its top rate of 5% is the 20th-highest among the 26 jurisdictions with progressive brackets.
Rates range from 2% to 5%. We don’t list the full bracket schedule here yet; for exact thresholds, see the official Alabama tax agency website.
Example: $65,000 salary, single filer
| Wages | $65,000 |
|---|---|
| Income not taxed (approx. deduction, exemptions, 0% bracket) | −$4,000 |
| Income taxed | $61,000 |
| Average rate used for the estimate | × 4.4% |
| Estimated Alabama income tax | $2,684 |
That works out to about $224 a month, or an effective rate of 4.13% of wages.
Calculators for Alabama
- Paycheck calculator
Take-home pay after federal income tax, Social Security, Medicare, and Alabama income tax, with Alabama selected.
- Tips and overtime calculator
Your federal deduction for qualified tips and overtime, with Alabama selected and its state rules applied to the Alabama estimate.
- Senior deduction calculator
A federal deduction of up to $6,000 for each person 65 or older, after the income phase-out.
- Car loan interest calculator
A federal deduction for interest on a loan for a new, U.S.-assembled vehicle.
Does Alabama tax tips and overtime?
Alabama doesn’t follow the federal deduction, but it has its own break. Act 2026-604 lets you deduct the premium part of qualified overtime, up to $1,000 per taxpayer, for 2026 through 2028. Tips stay taxable.
The example on this page taxes full wages. The tips and overtime calculator subtracts Alabama’s own break for your tips and overtime before it estimates your Alabama tax.
Source: Alabama Department of Revenue: Overtime Premium Deduction, Act 2026-604; HB 527 (2026), enrolled (PDF). Checked . See how every state treats tips and overtime
To see your federal deduction and Alabama tax together, open the tips and overtime calculator with Alabama selected.
Local income taxes in Alabama
Some cities (e.g., Birmingham) levy a 1% occupational tax.
These local taxes are not included in the estimate above.
Alabama vs. neighboring states
Alabama has the highest estimated bill among its neighbors. Workers in Florida, Tennessee, Mississippi, and Georgia would owe less on the same salary.
| State | Est. tax on $65,000 | vs. Alabama |
|---|---|---|
| Florida | $0 | −$2,684 |
| Tennessee | $0 | −$2,684 |
| Mississippi | $1,868 | −$816 |
| Georgia | $2,495 | −$189 |
Official source
For forms, exact brackets, and filing deadlines, go to the official Alabama tax agency website.
Related states
- FloridaNo state income tax
- Georgia4.99% flat tax
- Mississippi4% flat tax
- TennesseeNo state income tax