Tax Lawyers in Alabama

The Alabama Department of Revenue (ADOR) oversees tax collection, enforcing a progressive income tax that peaks at 5%. Property taxes remain the second-lowest in the U.S., but sales tax rates can reach a maximum of 11% with local surcharges. Unlike many states, Alabama taxes groceries, impacting low-income households. Pensions are tax-free, but 401(k) and IRA withdrawals are taxable. Business owners contend with a 6.5% corporate tax alongside the Business Privilege Tax (BPT), an annual tax imposed on all businesses operating in Alabama as a fee for the privilege of conducting business. The minimum tax is $100, with the total amount based on a company’s net worth apportioned to Alabama. The state’s reliance on high sales taxes raises affordability concerns.

All income is subject to Alabama income tax unless specifically exempted by state law. Its state tax rates depend on two factors: your adjusted gross income (AGI) and filing status. Alabama has a progressive income tax, ranging from 2% to 5%. The top rate kicks in at just $3,000 for single filers and $6,000 for married couples, making it one of the least progressive tax structures in the US. Here is a breakdown of Alabama income tax rates, by filing status:

For single persons, heads of families, and married persons filing separate returns:

• 2% First $500 of taxable income
• 4% Next $2,500 of taxable income
• 5% All taxable income over $3,000

For married persons filing a joint return:

• 2%    First $1,000 of taxable income
• 4%    Next $5,000 of taxable income
• 5%    All taxable income over $6,000

Alabama also has a 4.00% state sales tax rate and an average combined state and local sales tax rate of 9.29%. Corporate income tax rate is 6.5%, pension income is tax-free, but 401(k) and IRA withdrawals are taxed. Standard deductions and exemptions vary by income level. The Alabama Department of Revenue (ADOR) administers income taxes, and state withholding applies to wages. Municipalities may also impose additional local income taxes.

Alabama provides key exemptions, particularly for retirees:

• Public and private pension income
• Military retirement payments
• Unemployment compensation
• State income tax refunds
• Federal civil service pensions
• Dividends on veteran’s life insurance.

• Certain agricultural income and disaster relief payments
• Employer-provided health insurance (if qualified)
• Welfare benefits

Alabama provides several tax exemptions, including:

• State income tax exemption for Social Security benefits and some retirement income.
• Property tax exemptions for seniors, disabled individuals, and veterans.
• Sales tax exemptions on groceries for qualifying low-income individuals starting in 2024.
• Business exemptions on certain machinery and raw materials used in manufacturing.
• Death benefits received by a designated beneficiary of a peace officer or fireman killed in the line of duty.
• Subsistence allowance received by law enforcement and correction officers of the State of Alabama.
• Gifts, money, or other property you inherit or that was willed to you
• Life insurance proceeds received because of a person’s death.

• Child support
• Alabama 529 Savings Plan: aka CollegeCounts 529, provides flexible investment options designed to help build college savings.

The cost of hiring an Alabama tax lawyer varies based on the complexity of the case and required services.

At TaxLawyer.com, we connect clients with our experienced Alabama tax attorneys who provide effective legal tax solutions while considering your financial situation, ensuring you receive the representation you need without unnecessary financial strain.

Before hiring an Alabama tax attorney, consider these steps:

• Identify your tax issue (IRS audit, back taxes, business tax, etc.).
• Research and verify experienced tax attorneys in Alabama.
• Schedule an initial consultation to discuss your case.
• Review legal fees and service agreements upfront.

At TaxLawyer.com, we simplify your search by connecting you with trusted Alabama tax lawyers who specialize in various tax matters, ensuring you get the right legal support.

Alabamans are subject to federal tax laws and also to its state tax laws. Here are some key points about its tax laws:

• Income Tax: Progressive rates from 2% to 5%, with deductions for dependents and federal tax payments.
• Capital Gains Tax: Capital gains are taxed as normal income in Alabama, and thus they are subject to the top income tax rate of 5%.
• Sales Tax: State sales tax rate of 4%, with an average combined state and local sales tax rate of 9.29%. Groceries are taxed unless you qualify for a low-income exemption.
• Property Tax: Alabama has a 0.36% effective property tax rate on owner-occupied housing value.
• Municipal Occupational Tax: Alabamans in certain cities must also pay municipal occupational taxes which applies to gross wages (as opposed to taxable income), and are typically withheld from workers’ paychecks. The occupational tax rates vary between 1% – 2% depending on your municipality.
• Corporate Tax: 6.5% on net income, plus a business privilege tax.
• Estate or Inheritance Tax: Alabama does not have an estate tax or inheritance tax.
• Tobacco & Fuel tax: Alabama has a 30.2 cents per gallon gas tax rate and a $0.675 cigarette excise tax rate.