Some of the more common differences between the Alabama and Federal adjustments to gross income are listed below:
Federal law provides that 1/2 of any self-employment taxes reported on line 57 of Form 1040 is deducted as an adjustment to gross income. There is no corresponding Alabama adjustment. Self-employment taxes are an itemized deduction in the year paid for Alabama purposes, and the "year paid" is considered to be the year in which the return reporting the SE taxes is filed. So, assuming the returns are filed on a timely basis, an Alabama taxpayer deducts the SE taxes shown on her 2004 Federal return as an itemized deduction on her 2005 Alabama return. Is that confusing enough?
Self-employed Health Insurance Premiums
Federal law allows self-employed individuals to deduct 100% of the premiums paid for health insurance coverage for themselves and their family as an adjustment to gross income. This adjustment is not taken on the Alabama return, so all health insurance premiums must be treated as an itemized medical expense deduction, subject to the limitation based on Adjusted Gross Income.
This page updated on 5/29/03
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