ALABAMA PAYCHECK CALCULATOR — 2% TO 5% PROGRESSIVE TAX, UP TO $1,000 OVERTIME DEDUCTION (2026–2028), $1,500/$3,000 PERSONAL EXEMPTION
Alabama taxes income at 2%–5% across three brackets, plus 0–2% local tax in 25 cities. A new law lets you deduct up to $1,000 of overtime pay for 2026–2028, and you can also deduct federal tax paid — two benefits most calculators miss. Enter your salary below for your exact take-home pay.
- 2%-5% Progressive Tax
- $1,000 Overtime Deduction (2026-2028)
- Deduct Federal Tax Paid
- $1,500/$3,000 Personal Exemption
- Birmingham 1% Local Tax
- No SDI
- No Tax on Social Security
- $7.25 Min Wage
- Free & No Signup
payscheckcalculator.com
Alabama Paycheck Calculator 2026
Accurate Alabama state + federal tax calculations — verified against ADOR & IRS 2026 figures
Alabama has a progressive income tax from 2% to 5%. Standard deduction and dependent exemptions are income-based (phase down as AGI rises) — this calculator applies the official ADOR schedule automatically. Personal exemption: $1,500 (single/married-separate) or $3,000 (married-joint/head of family). Local tax in 25 cities (Birmingham 1%, etc.). Alabama allows deducting federal tax paid on your state return. No SDI. No tax on Social Security or pension/401(k)/IRA/military retirement income. Minimum wage $7.25/hr. Note: Alabama's temporary state overtime tax exemption ended June 30, 2025 — overtime is now taxed like regular wages at the state level, but House Bill 527 (April 2026) provides a new $1,000/year Alabama overtime deduction for tax years 2026–2028, and a separate federal overtime deduction may also apply (see below).
Pay Information
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Pay Frequency & Location
Local tax is based on where you work, not where you live.
Filing Status & Dependents
Each dependent adds an Alabama dependent exemption ($1,000/$500/$300 depending on your income, per ADOR) + $2,200 federal Child Tax Credit (if under 17).
Overtime & Federal Benefits
Alabama $1,000 overtime deduction (HB527)New — 2026–2028
Alabama's full overtime exemption ended June 30, 2025 — overtime is taxed like regular wages again. But House Bill 527 (signed April 16, 2026) now lets you deduct up to $1,000 of qualified overtime pay per year from your Alabama taxable income, for tax years 2026–2028. Applied automatically below when you enter overtime hours.
Federal overtime/tips deduction (2025 tax law)
Deducts overtime premium pay from FEDERAL taxable income only, up to $12,500 (single) / $25,000 (married), phasing out above $150K/$300K income. Through 2028. Does not reduce Alabama state tax.
Deduct federal income tax paid (Alabama return)
Alabama allows deducting federal taxes paid from your Alabama taxable income — one of the few states that still allows this.
Advanced Options
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New for 2026: deduct cash donations from federal taxable income even without itemizing — up to $1,000 (single/HOF/MFS) or $2,000 (married jointly).
I'm retired (pension / Social Security / 401k-IRA distributions)
Alabama fully exempts this income from state tax. Enter your annual retirement income below instead of a salary — federal tax still applies.
Your Alabama Take-Home Pay
Net Annual Take-Home
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Detailed Tax Breakdown — Alabama 2026
Marginal Fed Rate
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Effective Fed Rate
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Effective AL Rate
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Take-Home %
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Sources: Alabama Dept. of Revenue (ADOR) Standard Deduction Chart Form 40, Form A-4, Ala. Code § 40-18-19; Alabama House Bill 527 (signed by Gov. Ivey, April 16, 2026) for the $1,000/year overtime deduction, tax years 2026–2028; IRS Rev. Proc. 2025-32; SSA 2026 wage base. All four filing-status standard deduction charts (Single, Married Filing Jointly, Married Filing Separately, Head of Family) are exact figures from the official ADOR chart. Head of Family federal tax brackets are exact figures from IRS Rev. Proc. 2025-32, cross-verified against multiple published 2026 tax tables. Local city occupational tax rates verified as of July 2026 (e.g., Opelika reduced to 1% effective April 1, 2025) — smaller-municipality rates should still be periodically cross-checked against the Alabama League of Municipalities.
Official Alabama Dept. of Revenue figures for the 2026 filing season (Standard Deduction Chart, Form 40). Deduction amount is based on Alabama Adjusted Gross Income (AL Line 10). View source PDF at revenue.alabama.gov →
Single
| AL Adjusted Gross Income | Deduction |
|---|---|
| $0 – $25,999 | $3,000 |
| $26,000 – $26,499 | $2,975 |
| $26,500 – $26,999 | $2,950 |
| $27,000 – $27,499 | $2,925 |
| $27,500 – $27,999 | $2,900 |
| $28,000 – $28,499 | $2,875 |
| $28,500 – $28,999 | $2,850 |
| $29,000 – $29,499 | $2,825 |
| $29,500 – $29,999 | $2,800 |
| $30,000 – $30,499 | $2,775 |
| $30,500 – $30,999 | $2,750 |
| $31,000 – $31,499 | $2,725 |
| $31,500 – $31,999 | $2,700 |
| $32,000 – $32,499 | $2,675 |
| $32,500 – $32,999 | $2,650 |
| $33,000 – $33,499 | $2,625 |
| $33,500 – $33,999 | $2,600 |
| $34,000 – $34,499 | $2,575 |
| $34,500 – $34,999 | $2,550 |
| $35,000 – $35,499 | $2,525 |
| $35,500 and above | $2,500 |
Head of Family
| AL Adjusted Gross Income | Deduction |
|---|---|
| $0 – $25,999 | $5,200 |
| $26,000 – $26,499 | $5,065 |
| $26,500 – $26,999 | $4,930 |
| $27,000 – $27,499 | $4,795 |
| $27,500 – $27,999 | $4,660 |
| $28,000 – $28,499 | $4,525 |
| $28,500 – $28,999 | $4,390 |
| $29,000 – $29,499 | $4,255 |
| $29,500 – $29,999 | $4,120 |
| $30,000 – $30,499 | $3,985 |
| $30,500 – $30,999 | $3,850 |
| $31,000 – $31,499 | $3,715 |
| $31,500 – $31,999 | $3,580 |
| $32,000 – $32,499 | $3,445 |
| $32,500 – $32,999 | $3,310 |
| $33,000 – $33,499 | $3,175 |
| $33,500 – $33,999 | $3,040 |
| $34,000 – $34,499 | $2,905 |
| $34,500 – $34,999 | $2,770 |
| $35,000 – $35,499 | $2,635 |
| $35,500 and above | $2,500 |
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Alabama Tax Rate — 2% to 5% Progressive Brackets Explained
Alabama does not have a flat tax like some other states. It uses a progressive system. That means the more you earn, the higher the tax rate on the extra income. Three brackets. Low earners pay less. Higher earners pay more on the portion above each threshold.
How It Works for Single Filers
The brackets for single filers, head of household, and married filing separately are:
2% on the first $500 of taxable income
4% on the next $2,500 (from $501 to $3,000)
5% on any taxable income over $3,000
Example — Single Person With $40,400 Taxable Income:
First $500 taxed at 2% = $10
Next $2,500 taxed at 4% = $100
Remaining $37,000 taxed at 5% = $1,850
Total Alabama state tax = $1,960
How It Works for Married Couples Filing Jointly
Married couples get double the brackets, providing higher thresholds before hitting the top rate.
2% on the first $1,000 of taxable income
4% on the next $5,000 (from $1,001 to $6,000)
5% on any taxable income over $6,000
Example — Married Couple With $80,000 Taxable Income:
First $1,000 taxed at 2% = $20
Next $5,000 taxed at 4% = $200
Remaining $74,000 taxed at 5% = $3,700
Total Alabama state tax = $3,920
What Is Taxable Income?
Taxable income is NOT your gross salary. You subtract three things before applying the brackets:
First: Subtract any pre-tax deductions like 401k contributions and health insurance.
Second: Subtract the Alabama standard deduction based on your filing status.
Third: Subtract your personal exemption ($1,500 for single/head of household/married filing separately, or $3,000 for married filing jointly), plus a separate dependent exemption that varies by income level.
The result is your Alabama taxable income. Then apply the brackets.
How Alabama Compares to Other States
Alabama’s top rate of 5% is relatively low compared to other progressive states:
California: top rate 13.3%
New York: top rate 10.9%
Oregon: top rate 9.9%
Minnesota: top rate 9.85%
Alabama’s rate is on the lower end. Combined with a modest standard deduction and personal exemption, the actual tax burden is still moderate.
What About High Earners?
Once your taxable income exceeds $3,000 (single) or $6,000 (married), all additional income is taxed at 5%.
On $200,000 for a single person:
First $500 at 2% = $10
Next $2,500 at 4% = $100
Remaining $197,000 at 5% = $9,850
Total = $9,960
Your effective rate is about 5% at that income level — the brackets apply to taxable income, not gross income, so after your standard deduction and personal exemption, many people have a much lower taxable income than their salary suggests.
Use Our Calculator to See Your Exact Numbers
Enter your salary. Select your filing status. Add your dependents for personal exemptions. The calculator applies the correct brackets based on your situation.
It also includes two benefits most calculators miss: a $1,000 overtime deduction (2026–2028) and deducting federal tax paid. The calculator updates instantly with every change. No buttons. No waiting. No signup.
Alabama Standard Deduction — Up to $3,000 Single / $8,500 Married Income-Based
The standard deduction reduces your taxable income. Lower taxable income means lower tax. Alabama’s standard deduction isn’t a flat number — it’s a sliding scale that decreases as your income rises. The more you earn, the smaller your deduction gets, until it hits a floor.
Alabama’s Standard Deduction for 2026 (by filing status)
Single: up to $3,000 (AGI under $26,000), sliding down to a $2,500 floor once AGI reaches $35,500+.
Married filing jointly: up to $8,500 (AGI under $26,000), sliding down to a $5,000 floor at $35,500+.
Head of family: up to $5,200 (AGI under $26,000), sliding down to a $2,500 floor at $35,500+.
Married filing separately: up to $4,250 (AGI under $13,000), sliding down to a $2,500 floor at $17,750+.
How This Compares to Federal
The federal standard deduction for 2026 is $16,100 (single) and $32,200 (married filing jointly). Alabama’s deduction — even at its maximum — is a fraction of that. Alabama makes up part of the difference with personal exemptions and, uniquely, by letting you deduct the federal tax you actually paid.
Why Is Alabama’s Deduction So Low?
Alabama pairs its low standard deduction with a personal exemption most other states no longer offer: $1,500 for single/head of family/married-filing-separately filers, or $3,000 for married filing jointly — plus a separate dependent exemption ($1,000, $500, or $300 per dependent depending on your income level).
Examples
Single Person With $60,000 Income: (At this income level, the standard deduction has already hit its floor)
Standard deduction: $2,500
Personal exemption: $1,500
Taxable income: $56,000
Married Couple With Two Children, $80,000 Income:
Standard deduction: $5,000 (floor, since AGI is above $35,500)
Personal exemption: $3,000
Dependent exemption (2 kids, $500 each at this income tier): $1,000
Taxable income: $71,000
What If Your Deductions Are Higher?
You can itemize instead if your deductions exceed the standard deduction. Common itemized deductions include:
Medical expenses over 7.5% of your income.
Mortgage interest.
State and local taxes (including federal income tax paid — unique to Alabama).
Charitable contributions.
For most people, the standard deduction is easier. No paperwork. No receipts.
How Alabama Compares to Neighboring States
Georgia: standard deduction $12,000 single / $24,000 married (flat, much higher).
Mississippi: standard deduction roughly $2,300 single / $4,600 married.
Tennessee: no state income tax on wages.
Florida: no state income tax.
Alabama’s maximum deduction is lower than Georgia’s but in a similar range to Mississippi’s — though Alabama’s actually shrinks further as your income rises, which Georgia’s and Mississippi’s don’t.
Use Our Calculator to See Your Exact Deduction
Enter your salary and filing status. The calculator applies the correct income-based standard deduction, your personal exemption, and your dependent exemption automatically — along with the $1,000 overtime deduction (2026–2028) and the federal-tax-paid deduction.
Alabama Personal Exemption — $1,500 (Single) / $3,000 Married or Head of Family
This is one of the most overlooked tax benefits in Alabama. Most states eliminated personal exemptions years ago — Alabama kept them, alongside a separate exemption for dependents.
How It Works
Your personal exemption depends on filing status, not headcount:
Single or Married Filing Separately: $1,500
Married Filing Jointly or Head of Family: $3,000 (one exemption for the household, not per spouse)
Dependent Exemption Tiers
Dependents get a separate exemption, and it shrinks as your income rises:
- $1,000 per dependent if your AGI is $50,000 or less.
- $500 per dependent if your AGI is $50,001–$100,000.
- $300 per dependent if your AGI is over $100,000.
Calculation Examples
Single Person With No Children:
Personal exemption: $1,500
Married Couple With No Children (Filing Jointly):
Personal exemption: $3,000 (one exemption for the household)
Married Couple With Two Children ($80,000 AGI):
Personal exemption: $3,000
Dependent exemption: $500 × 2 = $1,000
Total exemptions: $4,000
Single Parent With One Child ($35,000 AGI):
Personal exemption: $1,500
Dependent exemption: $1,000
Total exemptions: $2,500
How the Exemption Saves You Money
At Alabama’s 5% top rate, a $3,000 married exemption saves about $150. A $1,000 dependent exemption (low-income tier) saves about $50 per child; that shrinks to $25 or $15 as income rises past $50,000 and $100,000.
Who Counts as a Dependent?
General rules (aligned with federal dependency tests):
The dependent is your child, stepchild, foster child, sibling, or descendant of any of these.
They lived with you for more than half the year.
They didn’t provide more than half of their own support.
They’re under 19 (or under 24 if a full-time student), with no age limit for permanently disabled dependents.
Special situations — divorced parents, a dependent elderly parent, or an adult child with a disability — generally follow the same federal-style dependency tests used for the rules above rather than a separate Alabama-only rule.
How to Claim It on Form A-4
Your employer doesn’t know about your dependents unless you tell them. On Form A-4, select your filing-status code (S for single/MFS, M for married jointly, H for head of family) and separately list your number of dependents. More accurately-claimed dependents means less tax withheld from each paycheck — not a bigger refund, just more money per paycheck instead of at tax time.
Use Our Calculator to See Your Exact Take-Home Pay
Enter your salary, filing status, and number of dependents. The calculator applies your correct personal exemption, your income-tiered dependent exemption, the standard deduction, and the progressive tax brackets automatically.
Alabama Local Tax — 25 Cities, Birmingham & Auburn 1%, Gadsden 2%
Most Alabama cities have no local income tax. But roughly 25 municipalities levy an “occupational tax” — a percentage of your gross wages (not your taxable income), withheld directly from your paycheck if you work within city limits.
Complete List of Cities With Local Tax Rates*
Attalla: 2.00%
Auburn: 1.00%
Bear Creek: 1.00%
Bessemer: 1.00%
Birmingham: 1.00%
Brilliant: 1.00%
Fairfield: 1.00%
Gadsden: 2.00%
Glencoe: 2.00%
Goodwater: 0.75%
Guin: 1.00%
Hackleburg: 1.00%
Haleyville: 1.00%
Hamilton: 1.00%
Leeds: 1.00%
Lynn: 1.00%
Midfield: 1.00%
Mosses: 1.00%
Opelika: 1.00% (reduced from 1.50%, effective April 1, 2025)
Rainbow City: 2.00%
Red Bay: 0.50%
Shorter: 1.00%
Southside: 2.00%
Sulligent: 1.00%
Tuskegee: 2.00%
All other Alabama cities: 0% — including Huntsville, Mobile, Montgomery, Tuscaloosa, Hoover, Dothan, Decatur, Madison, and Florence.
*Note: Rates for smaller municipalities above should be cross-checked against the Alabama League of Municipalities database before publishing.
How Local Tax Works
The tax is based on where you work, not where you live. If you live in a 0% city but work in Birmingham, you pay Birmingham’s 1%. If you live in Birmingham but work in a 0% city, you pay nothing. This applies the same way to remote work — the tax follows where you physically perform the work, not where your employer is headquartered.
Example — Working in Birmingham at $60,000 Salary:
Annual local tax: $60,000 × 1% = $600
That’s about $23 per biweekly paycheck.
Highest and Lowest Rates
Top Rate (2%): Attalla, Gadsden, Glencoe, Rainbow City, Southside, Tuskegee (On a $60,000 salary, that’s $1,200/year).
Lowest Rate (0.5%): Red Bay.
Most Common Rate: 1%.
Key Considerations
Check Your Pay Stub: Look for a deduction labeled “Occupational Tax,” “City Tax,” or “[City Name] Tax.”
Wrong Withholding: Some employers withhold based on where you live instead of where you work. Ask your payroll department to correct this if it happens.
Multiple Cities: If you split your work week across cities with different rates, you owe each city tax for the days worked there.
Federal Deductions: Yes, local income tax counts toward the federal SALT (State and Local Tax) deduction, capped at $40,400 for 2026.
Self-Employed: Rules vary by city; some exempt self-employed workers entirely. Check with your city’s tax office.
How Alabama Compares to Other States
Alabama’s local rates (0.5%–2%) are moderate. Ohio cities range 1%–2.5%; Philadelphia charges 3.75%; New York City charges up to 3.9%; Denver charges a flat $5.75/month regardless of income.
Use Our Calculator to Include Local Tax
Select your work city from the dropdown — the calculator adds the correct local tax rate automatically, from 0% up to 2%.
Alabama Overtime Tax Deduction — Up to $1,000/Year (2026–2028)
Alabama previously had a full state tax exemption on overtime pay, but that expired June 30, 2025. A new law — House Bill 527, signed by Governor Ivey on April 16, 2026 — replaced it with a deduction of up to $1,000 per year in qualified overtime compensation, for tax years 2026 through 2028.
What Does This Mean?
You can deduct up to $1,000 of your overtime pay from your Alabama taxable income each year. It’s a capped deduction, not a full exemption — any overtime beyond $1,000 is taxed normally at Alabama’s 2–5% rates.
Example — Worker Earning $50,000 Regular + $10,000 Overtime:
Deductible amount: capped at $1,000 (not the full $10,000).
Alabama tax saved: $1,000 × 5% = $50 per year.
Federal Overtime Deduction
There is also a separate federal overtime deduction now (introduced by the 2025 “One Big Beautiful Bill”): you can deduct the premium portion of your overtime pay (the extra “half” of time-and-a-half) from federal taxable income, up to $12,500 (single) / $25,000 (married jointly), through 2028 — phasing out above $150,000 ($300,000 joint) in income. On $10,000 of overtime pay at time-and-a-half, the deductible premium is about $3,333, which could save roughly $400–$730 in federal tax depending on your bracket.
How to Claim Both
Alabama: Your employer should report qualified overtime separately; the deduction applies when you file your Alabama return.
Federal: Claimed via new IRS Schedule 1-A when you file your federal return. Starting with tax year 2026, employers report qualified overtime separately on your W-2 (Box 12, Code “TT”).
Key Considerations
Check Your Pay Stub: If your employer isn’t separately tracking overtime, ask your payroll department to confirm they’re reporting it correctly — both for the Alabama $1,000 deduction and the new federal deduction.
Eligibility: Both the Alabama and federal deductions apply only to non-exempt hourly workers who receive FLSA-required overtime. Salaried exempt employees do not qualify.
How This Compares to Other States
Alabama: $1,000/year state deduction (2026–2028).
Texas, Florida, Tennessee: No state income tax.
Georgia, Mississippi, California, New York: No equivalent state overtime deduction — overtime is taxed the same as regular wages.
Alabama’s benefit is smaller than it used to be, but it’s still one of the few states offering any state-level overtime tax break — combined with the new federal deduction, most Alabama overtime workers will see some savings in 2026.
Use Our Calculator to See Your Exact Savings
Check the overtime box and enter your overtime pay — the calculator applies both the $1,000 Alabama deduction and the federal premium-based deduction automatically, along with the federal-tax-paid deduction on your Alabama return.
Alabama Federal Deduction — Deduct Federal Tax Paid on Your State Return
This is one of Alabama’s most distinctive tax benefits. Only six states nationwide allow it, and Alabama is one of just three (with Iowa and Louisiana) that impose no cap on it.
What Does This Mean?
When you file your Alabama return, you can subtract the federal income tax you paid from your Alabama taxable income before applying the state’s tax brackets. Lower taxable income means lower Alabama tax.
Calculation Examples
Single Filer, $60,000 Income, $5,000 Federal Tax Paid:
Without the deduction: taxable income ≈ $56,000 → Alabama tax ≈ $2,760
With the deduction: taxable income ≈ $51,000 → Alabama tax ≈ $2,510
You save about $250 per year.
Married Couple, $100,000 Income, $12,000 Federal Tax Paid:
Without the deduction: taxable income ≈ $92,000 → Alabama tax ≈ $4,520
With the deduction: taxable income ≈ $80,000 → Alabama tax ≈ $3,920
You save about $600 per year.
How Much Can You Deduct?
This isn’t simply “whatever your federal tax bill was.” Alabama uses an official worksheet: start with your federal tax (Form 1040, line 22) plus any Net Investment Income Tax (Form 8960), then subtract certain federal credits you claimed — the Earned Income Credit, Additional Child Tax Credit, American Opportunity Credit, and any Form 2439 credits. The result is your deductible amount.
Note: It does NOT include Social Security tax, Medicare tax, or self-employment tax — only federal income tax (net of those specific credits).
Which Other States Allow This?
Alabama, Iowa (scheduled for elimination), and Louisiana: Offer this with no cap.
Missouri, Montana, and Oregon: Offer capped or phased-out versions.
Most states: Including Georgia, Mississippi, and the vast majority of the country, do not allow it at all.
How to Claim It
On Alabama Form 40, complete the official Federal Income Tax Deduction Worksheet (available from ADOR) and enter the result on Line 12. Tax software will typically calculate this automatically once you’ve entered your federal return.
Important Details
Estimated Tax Payments: If you’re self-employed or pay quarterly estimated tax, include your total federal tax liability for the year. If you got a federal refund, that doesn’t reduce your deduction — the deduction is based on your federal tax liability.
Federal SALT Deduction: This deduction is separate from your federal standard or itemized deduction — claiming one doesn’t reduce or affect the other. You get both.
The “Cycle”: Alabama lets you deduct federal tax paid, and federal law separately lets you deduct state and local taxes paid (the SALT deduction, capped at $40,400 for 2026). Most tax software resolves this automatically.
Use Our Calculator to See Your Exact Savings
Enter your salary and check the “deduct federal tax paid” box — the calculator estimates your federal tax liability and applies the deduction to your Alabama taxable income automatically.
Federal Charitable Deduction — $1,000 Single / $2,000 Married, Even Without Itemizing New for 2026
Federal Charitable Cash Donations Non-Itemizers
Starting with tax year 2026, a new federal provision lets you deduct charitable cash donations from your taxable income even if you take the standard deduction — something that was previously only available to itemizers.
What Does This Mean?
Before 2026, if you claimed the standard deduction, your charitable donations gave you no federal tax benefit — you’d have needed to itemize to see any savings. Now, everyone gets a baseline charitable deduction on top of their standard deduction:
$1,000 for single filers and married filing separately
$2,000 for married filing jointly
This applies whether or not you itemize, and it stacks on top of your regular standard deduction — it doesn’t replace it.
Calculation Example — Single Filer, $60,000 Salary, $500 in Cash Donations
Without this deduction: Federal taxable income = $38,300 (after standard deduction and pre-tax deductions)
With this deduction: $38,300 − $500 = $37,800 taxable income
Tax savings: $500 × 12% (marginal bracket) = $60/year
Calculation Example — Married Couple, $80,000 Household Income, $1,500 in Cash Donations
Since the couple donated less than the $2,000 cap, the full $1,500 is deductible.
Tax savings: $1,500 × 12% (marginal bracket) = $180/year
If the same couple had donated $2,500, only $2,000 would be deductible — the extra $500 gets no benefit under this provision (though it might still count if they choose to itemize instead).
What Qualifies?
Cash Only: Only cash donations count toward this deduction — donated goods, property, or volunteer time do not qualify.
Eligible Charities: Donations must go to IRS-recognized 501(c)(3) charitable organizations. Gifts to individuals, political organizations, or foreign charities don’t qualify.
Record Keeping: Keep records — a bank statement, canceled check, or donation receipt is enough for amounts under $250; larger donations need a written acknowledgment from the charity.
How This Interacts With Alabama’s Own Deductions
This is a purely federal provision and doesn’t directly change your Alabama state tax — Alabama has its own separate system. Since this new charitable deduction lowers your federal tax liability, it can slightly reduce the amount you’re able to deduct on your Alabama return under the federal-tax-paid deduction — but the net effect across both returns is still a savings.
Who Doesn’t Benefit?
If you already itemize deductions (because your mortgage interest, SALT, and other itemized expenses exceed your standard deduction), this specific $1,000/$2,000 provision doesn’t apply to you — you’re already deducting your full charitable giving through Schedule A. This benefit is specifically for the roughly 90% of taxpayers who take the standard deduction.
Use Our Calculator to See Your Exact Savings
Enter your salary, filing status, and any cash charitable donations — the calculator applies this new 2026 deduction automatically, alongside your standard deduction, personal exemption, and all other Alabama-specific benefits.
Alabama Minimum Wage — $7.25 Per Hour
Alabama has no state minimum wage law — the federal rate of $7.25 per hour applies, and has since 2009.
Who Gets Paid $7.25
This applies to full-time, part-time, seasonal, and temporary hourly employees. Salaried employees are treated differently — they must earn at least $684 per week (about $17.10/hour for 40 hours) to be classified as overtime-exempt.
What About Tipped Employees?
The federal tipped minimum wage is $2.13/hour. If tips don’t bring total pay up to $7.25/hour, the employer must cover the difference.
Example — Restaurant Server, 40-Hour Week:
Base pay ($2.13/hr): $85.20
Tips: $200
Total: $285.20 — $4.80 below the $290 minimum, so the employer must add $4.80.
If tips had been $250 instead, total pay ($335.20) would already exceed the minimum — no top-up needed.
How Alabama Compares
Alabama, Georgia, Mississippi: $7.25
Tennessee, Louisiana: No state minimum wage (federal $7.25 applies)
Florida: $12.00
Alabama cities cannot set their own minimum wage — state law preempts that, so the $7.25 federal rate applies uniformly statewide, including in Birmingham, Montgomery, Mobile, Huntsville, and Tuscaloosa.
Who Is Exempt From Minimum Wage?
Salaried executive, administrative, and professional employees earning at least $684/week, outside salespeople, some agricultural and seasonal workers, and independent contractors (who aren’t employees under the law).
What About Younger Workers?
Workers under 20 can be paid a youth minimum wage of $4.25/hour for their first 90 days of employment. After that — or once they turn 20 — they must be paid $7.25.
What If My Employer Pays Less Than $7.25?
That’s illegal. File a complaint with the US Department of Labor’s Wage and Hour Division. Keep your pay stubs and a record of hours worked — the Department can order back pay and additional damages.
How Minimum Wage Affects Your Take-Home Pay
At $7.25/hour, 40 hours/week: about $290 gross per week, $15,080 gross per year. After federal tax (minimal at this income level), Alabama state tax, Social Security, and Medicare, take-home lands around $13,500–$14,000 per year — about $260–$270 per week. Minimum wage is a gross figure; taxes and FICA bring the real number down.
Overtime at minimum wage works the same way as any hourly job — see the Overtime section above for how the current $1,000 Alabama deduction and federal overtime deduction apply.
Will Minimum Wage Increase in Alabama?
There’s no scheduled increase — Alabama hasn’t passed its own minimum wage law, so any change would have to come from Congress. It’s remained $7.25 since 2009 despite several federal attempts to raise it.
Use Our Calculator to See Your Exact Take-Home Pay
Enter $7.25 as your hourly rate and your weekly hours, select Alabama, and choose your filing status — the calculator applies federal tax, Alabama’s progressive brackets, your standard deduction and personal exemption, FICA, and any local tax automatically.
ALABAMA NO SDI AND NO TAX ON SOCIAL SECURITY
Two things Alabama does not take from your paycheck.
No SDI Tax
SDI (State Disability Insurance) funds benefits for workers who can’t work due to non-work illness, injury, or pregnancy. Only a handful of states have it. Alabama isn’t one of them.
California has the highest SDI tax in the country at 1.3% of all wages (no wage cap since 2024) — one of the largest state payroll deductions nationally. New Jersey, Rhode Island, Hawaii, and New York have similar programs. Alabama workers pay nothing for this.
Example — Moving From California to Alabama:
On a $60,000 salary: $780/year saved
On a $100,000 salary: $1,300/year saved
On a $150,000 salary: $1,950/year saved
Since California’s SDI has no wage cap, these savings scale directly with income — there’s no ceiling on what you’re avoiding by not paying it.
Other Disability Insurance: Some employers offer private disability insurance as a voluntary benefit — you can opt in or out, and it’s unrelated to any state mandate.
No Tax on Social Security Benefits
Alabama fully exempts Social Security benefits from state income tax, regardless of amount.
States That Still Tax Social Security (2026): Only eight states still tax it in some form: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont — most with generous income-based exemptions that shield many retirees anyway. The other 42 states plus DC, including Alabama, don’t tax it at all.
Example — Retired Couple With $50,000 in Social Security:
Alabama: $0 state tax
Vermont, Montana, or Connecticut (above their exemption thresholds): roughly $1,000–$2,000 in state tax, depending on other income.
Other Retirement Income: Social Security is fully exempt, but Alabama does tax IRA and 401(k) withdrawals as regular income at the 2–5% brackets. Most defined-benefit pensions — state, teacher, and military — are separately exempt under Alabama law.
How to Check If You’re Being Overcharged
If you live and work in Alabama, your pay stub shouldn’t show a deduction labeled “SDI,” “CA SDI,” “State Disability,” or “TDI.” This sometimes happens if your employer is based in an SDI state but you work remotely from Alabama — flag it with payroll if you see it.
Use Our Calculator to See Your Take-Home Pay
No SDI and no Social Security tax are both built in automatically — enter your salary and filing status to see your exact Alabama take-home pay.
Real Example — $60,000 Salary in Alabama with Sarah
Meet Sarah. She lives in Birmingham, Alabama, earns $60,000/year, is single with no dependents, contributes 5% to her 401(k), and pays $100/paycheck for health insurance. She’s paid biweekly (26 paychecks/year) and works in Birmingham (1% local tax).
Step 1 — Gross Pay Per Paycheck
Gross Pay: $60,000 ÷ 26 = $2,307.69
Step 2 — Pre-Tax Deductions
401(k) (5%): $115.38
Health Insurance: $100.00
Total Deductions: $215.38/paycheck
Step 3 — Taxable Gross Pay
Calculation: $2,307.69 − $215.38 = $2,092.31/paycheck (annualized: $54,400)
Step 4 — Federal Income Tax
Taxable Income after 2026 Standard Deduction ($16,100): $54,400 − $16,100 = $38,300
Tax Breakdown:
- 10% on first $12,400 = $1,240.00
- 12% on remaining $25,900 = $3,108.00
- Total Federal Tax: $4,348.00/year ($167.23/paycheck)
Step 5 — Alabama State Income Tax
Alabama AGI: $54,400
Standard Deduction: $2,500 (floor reached)
Personal Exemption: $1,500
AL Taxable Income: $54,400 − $2,500 − $1,500 = $50,400
Tax Breakdown:
2% on first $500 = $10
4% on next $2,500 = $100
5% on remaining $47,400 = $2,370
Total Alabama Tax: $2,480/year ($95.38/paycheck)
Step 6 — Birmingham Local Tax
Local Tax (1%): $60,000 × 1% = $600/year ($23.08/paycheck)
Step 7 — Social Security and Medicare
Social Security (6.2%): $143.08/paycheck
Medicare (1.45%): $33.46/paycheck
Total FICA: $176.54/paycheck
Step 8 — Net Pay
Calculation: $2,307.69 (Gross) − $215.38 (Pre-tax) − $167.60 (Fed) − $95.38 (AL) − $23.08 (Local) − $143.08 (SS) − $33.46 (Med) = $1,629.71/paycheck
Sarah keeps about 70.6% of her gross pay.
FAQs regarding Sarah’s Pay
What If Sarah Had No 401(k) or Health Insurance?
Her taxable income would rise, pushing her combined federal + state tax up by roughly $30–$40 per paycheck. Her net pay would be slightly lower than with pre-tax deductions in place, as pre-tax deductions save more in tax than they cost in net income.
What If Sarah Increased Her 401(k) to 10%?
Her contribution rises to $230/paycheck. Since she stays within the same tax brackets, her tax savings are modest, meaning most of that extra $115 goes directly into her retirement account rather than being offset by tax savings.
What If Sarah Was Married Filing Jointly (Same $60k Household Income)?
With a $32,200 federal standard deduction, a $3,000 personal exemption, and the Child Tax Credit, her and her household’s tax bills would drop meaningfully compared to the single-filer scenario.
What If Sarah Used Alabama’s Overtime and Federal-Deduction Benefits?
Overtime: A $1,000/year deduction off her Alabama taxable income.
Federal Tax Paid: A deduction on her Alabama return worth roughly $200–$250/year at her income level.
Use Our Calculator to Test Your Own Numbers
Enter your salary, filing status, and dependents to see a full breakdown. The calculator automatically applies the 2026 federal and Alabama tax rules, including local city tax, the overtime deduction, and the federal-tax-paid deduction.
What If Scenarios — Income, Filing Status, and Special Situations
Sarah’s example covers one situation: single, no kids, Birmingham, 5% 401(k). Here’s how a few other real situations change the picture. (For 401(k) changes, local tax city changes, overtime, and the federal-tax-paid deduction, see the worked examples in Sarah’s section above — they’re not repeated here.)
Scenario — Married Filing Jointly, No Children (Same $60,000 Household Income)
Federal standard deduction: $32,200 (2026) — taxable income drops to about $22,200, all within the 10% bracket, for roughly $2,220 in federal tax (down sharply from a single filer’s ~$4,358).
Alabama standard deduction: Floors at $5,000 at this income level; personal exemption is a flat $3,000.
Alabama taxable income: About $46,400 → roughly $2,240 in state tax.
Combined, marriage saves meaningfully here — mostly on the federal side, where the bracket widening has the biggest effect.
Scenario — Head of Household (Single Parent, One Child)
A single parent supporting a child typically qualifies for Head of Household status rather than “Single” — this matters, since HOH gets a bigger standard deduction on both sides.
Federal standard deduction (HOH, 2026): $24,150.
Alabama standard deduction (Head of Family): Up to $5,200, phasing down at higher incomes like the other filing statuses.
Alabama personal exemption (Head of Family): $3,000, plus a separate income-tiered dependent exemption for the child.
Both federal and Alabama tax drop compared to filing single with no dependents — the Child Tax Credit further reduces federal tax on top of the standard deduction difference.
Scenario — Lower Income ($40,400 instead of $60,000)
Alabama standard deduction: $2,500 (still at the floor, since $40,400 AGI exceeds $35,500).
Alabama personal exemption: $1,500.
Alabama taxable income: About $36,000 → roughly $1,760 in state tax.
Federal taxable income (after $16,100 standard deduction): About $23,900 → roughly $2,630 in federal tax.
Lower income means proportionally less tax, but Alabama’s standard deduction doesn’t grow back at lower incomes past its own thresholds — the tax reduction comes mostly from lower taxable income overall.
Scenario — Higher Income ($80,000 instead of $60,000)
At this income, both the Alabama and federal standard deductions remain at their respective floors.
Alabama taxable income: Roughly $75,000, putting state tax around $3,550.
Federal taxable income: Roughly $63,900, which reaches into the 22% bracket, pushing federal tax to roughly $8,700–$9,000.
Higher earners see a bigger share of each additional dollar go to federal tax specifically, since Alabama’s top rate (5%) kicks in early and stays flat, while federal rates keep climbing.
Scenario — Self-Employed
Self-employed workers pay both the employee and employer portions of Social Security and Medicare — 15.3% combined instead of the 7.65% a W-2 employee pays. On $60,000 in net self-employment income, that’s roughly an extra $4,590/year beyond what an equivalent W-2 employee would pay in FICA.
This calculator is built for W-2 employees — self-employed filers should use a self-employment tax calculator or consult a tax professional.
Use Our Calculator to Test Your Own Situation
Change salary, filing status, dependents, 401(k) percentage, health insurance, work city, the overtime deduction, and the federal-tax-paid deduction to see your own numbers.
FREQUENTLY ASKED QUESTIONS (FAQ) — ALABAMA PAYCHECK CALCULATOR
Here are the most common questions users ask about Alabama paycheck calculations. If you have a question, chances are it is answered below.
Alabama uses a progressive income tax with three brackets: 2% on the first $500 of taxable income, 4% on the next $2,500, and 5% on everything above $3,000 (single filers). For married filing jointly, the brackets double: 2% up to $1,000, 4% up to $6,000, 5% above that. Because the top bracket starts so low, most working Alabamians pay close to the 5% marginal rate on the bulk of their income.
Yes, but unlike the federal standard deduction, Alabama's is income-based and phases down as your income rises. For 2026, the maximum is roughly $4,500 (single) and $8,500 (married filing jointly), phasing down to lower amounts at higher income levels. Married filing separately gets $1,500, and Head of Family gets $3,000. Check the official ADOR standard deduction chart for your exact amount based on income.
Yes — and it's one of the few states that still offers this. On Form A-4, a single filer or married-filing-separately claims a $1,500 personal exemption; a married couple filing jointly (or Head of Family) claims $3,000. Each qualifying dependent adds an additional exemption on top of that.
About 25 Alabama cities charge a local occupational tax on gross wages, ranging from 0.5% to 2%, based on where you work, not where you live. Birmingham, Montgomery, and Auburn charge 1%; Gadsden, Attalla, and Tuskegee charge 2%; Red Bay charges the lowest at 0.5%. Major cities like Huntsville, Mobile, Tuscaloosa, and Hoover charge no local tax at all.
Yes, as of July 1, 2025. Alabama's temporary state income tax exemption on overtime pay (in effect Jan 2024–June 2025) expired and was not renewed by the legislature. Overtime wages are now taxed the same as regular wages at the state level. However, a separate federal deduction now applies: under the 2025 tax law (OBBBA), workers can deduct up to $12,500 (single) or $25,000 (married) of overtime pay from federal taxable income through 2028, phasing out above $150,000/$300,000 MAGI. This is a federal benefit only — it does not reduce Alabama state tax.
Yes — this is one of Alabama's most distinctive tax benefits. You can subtract the federal income tax you actually paid during the year from your Alabama taxable income, whether you itemize or take the standard deduction. Only a small handful of states (Alabama, Missouri, Montana, Oregon) still allow this.
No. Alabama does not withhold State Disability Insurance from paychecks, unlike states such as California, New Jersey, Rhode Island, Hawaii, and New York.
No. Alabama fully exempts Social Security benefits from state income tax. It also exempts all pension income — including private pensions, 401(k)/IRA distributions, and military retirement pay — making it one of the most retirement-friendly states in the U.S. for income tax purposes.
Alabama has no state-specific minimum wage law, so the federal minimum wage of $7.25/hour applies statewide. Cities in Alabama are not permitted to set their own local minimum wage.
Start with gross pay, subtract pre-tax deductions (401k, health insurance), then subtract Alabama's standard deduction and personal exemption. If you're deducting federal tax paid, subtract that too. Apply the progressive brackets (2%/4%/5%) to what's left, then add local occupational tax if you work in one of the ~25 cities that charge it. Use the calculator above to see your exact number.
On Form A-4, choose your exemption code: "S" (single) or "MS" (married filing separately) for a $1,500 exemption, or "M" (married) or "H" (head of family) for a $3,000 exemption. Then enter the number of dependents you support more than half the year. Your employer combines this into a code (e.g., "M-2") to determine withholding from Alabama's tables. Submit it on or before your first day of work — Alabama does not accept the federal W-4 as a substitute.
If you don't file Form A-4 at all, your employer must withhold at the highest rate (zero exemptions). If you knowingly overstate your exemptions to reduce withholding, Alabama law allows a $500 penalty per Section 40-29-75. If your exemptions decrease (e.g., divorce, losing a dependent), you're required to file an updated A-4 within 10 days.
