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.
The tax reform legislation passed early in 2006 didn't make any adjustments to the rate schedule, but it did expand the standard deduction and personal exemption credits that are available to lower income Alabama taxpayers for tax years beginning in 2007. As a result, a family of four can have income of as much as $12,500 before they incur any Alabama income tax liability. This is still a very low threshold, of course, but it is definitely an improvement. |
| 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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