Alabama's individual rates are established by §40-18-5 of the Alabama Code. They are extremely compressed. A single mother with Alabama taxable income of $3,001 or more, or a married couple with taxable income of more than $6,000, pay the same marginal rate on their Alabama income as someone making a six-figure income does.
There is some relief on the way for this situation, but it is only available for tax years beginning in 2007 or later. That's the effective date of legislation passed early in 2006, which adjusts the standard deduction and dependent exemption amounts available to Alabama taxpayers. When the new law kicks in, an Alabama family of four with total income of $12,500 will owe no tax at all. That same family pays tax on all income greater than $4,600 today. |
| Single, Head of Family, or Married Filing Separately | ||||
|---|---|---|---|---|
| Taxable Income Not Less Than | And Not More Than | Tax Is | Plus | Of Amount Over |
| $ 1 | $ 500 | $ 0 | 2% | $ 0 |
| 501 | 3,000 | 10 | 4% | 500 |
| 3,001 | - | 110 | 5% | 3,000 |
| Married Filing Jointly | ||||
|---|---|---|---|---|
| Taxable Income Not Less Than | And Not More Than | Tax Is | Plus | Of Amount Over |
| $ 1 | $ 1,000 | $ 0 | 2% | $ 0 |
| 1,001 | 6,000 | 20 | 4% | 1,000 |
| 6,001 | - | 220 | 5% | 6,000 |
Assume, for example, a married couple with Alabama taxable income of $25,000. Their Alabama tax on that income will be $1,170 {$220 + [(25,000 - 6,000)* 5%]}. Or, assume a single taxpayer with Alabama taxable of $70,000. Her Alabama tax will be $3,460 {$110 + [(70,000 - 3,000) * 5%]}.
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