Alabama 2025 Regular Session

Alabama House Bill HB388 Compare Versions

Only one version of the bill is available at this time.

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1	1	HB388INTRODUCED
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3	3	HB388
4	4	DBWQNHN-1
5	5	By Representatives Garrett, Stadthagen, Colvin, Brinyark,
6	6	Kirkland, Marques, Sorrells, Rehm, Whorton, Paschal, Smith,
7	7	Shaw, Butler, Moore (P), Estes, Robertson, Lipscomb, Wilcox,
8	8	Harrison, Hammett, Pettus, Easterbrook, Starnes, Stubbs,
9	9	Standridge, Carns, Holk-Jones, Givens, Underwood, Ross,
10	10	Mooney, Ingram, Baker, Sells, Treadaway, Rigsby, Yarbrough,
11	11	Woods, DuBose, Lovvorn, Fidler, Lamb, Gidley, Shirey, Hulsey,
12	12	Lomax, Ledbetter, Hurst, Kiel
13	13	RFD: Ways and Means Education
14	14	First Read: 05-Mar-25
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26	26	12 DBWQNHN-1 02/25/2025 KHF (F)KHF 2025-77
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28	28	First Read: 05-Mar-25
29	29	SYNOPSIS:
30	30	Under current law, the first $6,000 of taxable
31	31	retirement income for individuals who are 65 years of
32	32	age or older is exempt from Alabama income taxes.
33	33	This bill would increase the exemption amount to
34	34	$12,000 of taxable income for individuals who are 65
35	35	years of age or older.
36	36	A BILL
37	37	TO BE ENTITLED
38	38	AN ACT
39	39	Relating to income taxes; to amend Section 40-18-19,
40	40	Code of Alabama 1975, regarding exemptions from income
41	41	taxation; to increase the exemption amount for taxable
42	42	retirement income of individuals who are 65 years of age or
43	43	older to $12,000.
44	44	BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
45	45	Section 1. Section 40-18-19, Code of Alabama 1975, is
46	46	hereby amended as follows:
47	47	"§40-18-19
48	48	(a) The following exemptions from income taxation shall
49	49	be allowed to every individual resident taxpayer:
50	50	(1) Retirement allowances, pensions and annuities, or
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80	80	(1) Retirement allowances, pensions and annuities, or
81	81	optional allowances, approved by the Board of Control of the
82	82	Teachers' Retirement System of Alabama, which exempt status is
83	83	set out in Section 16-25-23.
84	84	(2) Retirement allowances, pensions and annuities, or
85	85	optional allowances, approved by the Board of Control of the
86	86	Employees' Retirement System of Alabama, which exempt status
87	87	is set out in Section 36-27-28.
88	88	(3) The first eight thousand dollars ($8,000) of any
89	89	retirement compensation, retirement allowances, pensions and
90	90	annuities, or optional allowances, received by any eligible
91	91	firefighter, as defined in Sections 36-32-1 and 36-32-2, or
92	92	his or her designated beneficiary, from any firefighting
93	93	agency established in the State of Alabama, but only if such
94	94	retirement compensation, retirement allowances, pensions and
95	95	annuities, or optional allowances as are awarded as a result
96	96	of fire protection services rendered. This subdivision shall
97	97	become effective for the taxable years beginning January 1,
98	98	1987, and thereafter following its passage and approval by the
99	99	Governor, or upon its otherwise becoming a law; provided, that
100	100	for the taxable years beginning on or after January 1, 1991,
101	101	all of the pension and retirement payments shall be exempt
102	102	from taxation.
103	103	(4) The first eight thousand dollars ($8,000) of any
104	104	retirement compensation, retirement allowances, pensions and
105	105	annuities, or optional allowances received by any eligible
106	106	peace officer, as defined in subdivision (11) of Section
107	107	36-21-60, or his or her designated beneficiary, from any
108	108	police retirement system established in the State of Alabama,
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138	138	police retirement system established in the State of Alabama,
139	139	but only if the retirement compensation, retirement
140	140	allowances, pensions and annuities, or optional allowances are
141	141	awarded as a result of police services rendered. This
142	142	subdivision shall become effective for taxable years beginning
143	143	January 1, 1984, and thereafter; provided, that for the
144	144	taxable years beginning on or after January 1, 1991, all of
145	145	the pension and retirement payments shall be exempt from
146	146	taxation.
147	147	(5) Income received as annuities under the United
148	148	States Retirement System from the United States Government
149	149	Civil Service Retirement and Disability Fund, including income
150	150	received from the Tennessee Valley Authority's pension system,
151	151	income received as annuities under the United States Foreign
152	152	Service Retirement and Disability Fund, or income received
153	153	from any other United States government retirement and
154	154	disability fund.
155	155	(6) Beginning January 1, 1991, all payments made on or
156	156	after such date to a retiree or his designated beneficiary
157	157	under a "defined benefit plan," as defined under 26 U.S.C. §
158	158	414(j), to the extent such payment would be taxable for
159	159	federal income tax purposes.
160	160	(7) Net income realized by individuals and partnerships
161	161	from time to time in the business of conducting a financial
162	162	business employing monied capital coming into competition with
163	163	the business of national banks, but only if such individuals
164	164	and partnerships are subject to an excise tax imposed by this
165	165	state on or with respect to such income.
166	166	(8) In the case of a single person or a married person
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196	196	(8) In the case of a single person or a married person
197	197	not living with husband or wife, a personal exemption of one
198	198	thousand five hundred dollars ($1,500) or, in the case of a
199	199	head of a family or a married person living with husband or
200	200	wife, a personal exemption of three thousand dollars ($3,000),
201	201	but a husband and wife living together shall receive only one
202	202	personal exemption of three thousand dollars ($3,000) against
203	203	their aggregate income, and in case they make separate returns
204	204	each must claim a personal exemption of one thousand five
205	205	hundred dollars ($1,500).
206	206	(9) a. Three hundred dollars ($300) for each person,
207	207	other than husband or wife, dependent upon the taxpayer, and
208	208	over half of whose support, for the calendar year in which the
209	209	taxable year for the taxpayer begins, was received from the
210	210	taxpayer.
211	211	b. For tax years beginning after December 31, 2006, for
212	212	taxpayers with adjusted gross income equal to or less than
213	213	twenty thousand dollars ($20,000), one thousand dollars
214	214	($1,000) for each person other than husband or wife, dependent
215	215	upon the taxpayer, and over half of whose support, for the
216	216	calendar year in which the taxable year for the taxpayer
217	217	begins, was received from the taxpayer.
218	218	c. For tax years beginning after December 31, 2006, for
219	219	taxpayers with adjusted gross income in excess of twenty
220	220	thousand dollars ($20,000) and equal to or less than one
221	221	hundred thousand dollars ($100,000), five hundred dollars
222	222	($500) for each person other than husband and wife, dependent
223	223	upon the taxpayer, and over half of whose support, for the
224	224	calendar year in which the taxable year for the taxpayer
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254	254	calendar year in which the taxable year for the taxpayer
255	255	begins, was received from the taxpayer.
256	256	d. For tax years beginning after December 31, 2021, for
257	257	taxpayers with adjusted gross income equal to or less than
258	258	fifty thousand dollars ($50,000), one thousand dollars
259	259	($1,000) for each person other than husband or wife, dependent
260	260	upon the taxpayer, and over half of whose support, for the
261	261	calendar year in which the taxable year for the taxpayer
262	262	begins, was received from the taxpayer.
263	263	e. For tax years beginning after December 31, 2021, for
264	264	taxpayers with adjusted gross income in excess of fifty
265	265	thousand dollars ($50,000) and equal to or less than one
266	266	hundred thousand dollars ($100,000), five hundred dollars
267	267	($500) for each person other than husband and wife, dependent
268	268	upon the taxpayer, and over half of whose support, for the
269	269	calendar year in which the taxable year for the taxpayer
270	270	begins, was received from the taxpayer.
271	271	For the purposes of this section, "dependent" shall
272	272	mean: A son or daughter of the taxpayer or a descendant of
273	273	either; a stepson or stepdaughter of the taxpayer; a brother,
274	274	sister, stepbrother, or stepsister of the taxpayer; the father
275	275	or mother of the taxpayer or an ancestor of either; a
276	276	stepfather or stepmother of the taxpayer; a son or daughter of
277	277	a brother or sister of the taxpayer; a brother or sister of
278	278	the father or mother of the taxpayer; a son-in-law,
279	279	daughter-in-law, father-in-law, mother-in-law, brother-in-law,
280	280	or sister-in-law of the taxpayer. As used in this paragraph
281	281	the terms "brother" and "sister" include a brother or sister
282	282	by the half blood. For the purpose of determining whether any
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312	312	by the half blood. For the purpose of determining whether any
313	313	of the foregoing relationships exist, a legally adopted child
314	314	of a person shall be considered a child of such a person by
315	315	blood.
316	316	(10) Beginning January 1, 1998, all income, interest,
317	317	dividends, gains, or benefits of any kind received from
318	318	savings accounts or prepaid tuition contracts administered
319	319	under Title 16, Chapter 33C, are exempt from all income
320	320	taxation by the state and by all of its political subdivisions
321	321	to the extent that the amounts remain on deposit in the PACT
322	322	Trust Fund or the ACES Trust Fund, or are used to pay the
323	323	designated beneficiary's qualified higher education expenses
324	324	as defined in 26 U.S.C. § 529, or are refunded under such
325	325	terms as would not carry a penalty under 26 U.S.C. § 529.
326	326	(11) Beginning January 1, 2016, all income, interest,
327	327	dividends, gains, or benefits of any kind received from ABLE
328	328	savings accounts administered under Title 16, Chapter 33C, are
329	329	exempt from all income taxation by the state and by all of its
330	330	political subdivisions to the extent that the amounts remain
331	331	on deposit in the ABLE Trust Fund, or are used to pay the
332	332	designated beneficiary's qualified disability expenses as
333	333	defined in 26 U.S.C. § 529A, or are refunded under such terms
334	334	as would not carry a penalty under 26 U.S.C. § 529A, or other
335	335	applicable federal law.
336	336	(12) Beginning January 1, 2018, amounts received by an
337	337	individual from sources within a foreign country or countries
338	338	which constitute a housing allowance, and earned income
339	339	attributable to services performed by such individual received
340	340	during the tax period are exempt from all income taxation by
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370	370	during the tax period are exempt from all income taxation by
371	371	the state and by all of its political subdivisions to the
372	372	extent such income is exempt from federal income tax pursuant
373	373	to 26 U.S.C. § 911.
374	374	(13) a. Beginning January 1, 2023 through December 31,
375	375	2025, the first six thousand dollars ($6,000) of taxable
376	376	retirement income.
377	377	b. Beginning January 1, 2026, the first twelve thousand
378	378	dollars ($12,000) of taxable retirement income.
379	379	b. This exemption may only be claimed by individual
380	380	taxpayers who are 65 years of age or older.
381	381	(b) Of the following personal exemptions allowed
382	382	resident taxpayers, each nonresident individual taxpayer shall
383	383	be allowed that proportion thereof that the adjusted gross
384	384	income received by said nonresident individual taxpayer from
385	385	sources within the State of Alabama bears to his or her
386	386	adjusted gross income received from sources within and without
387	387	the State of Alabama: In the case of a single person or a
388	388	married person not living with husband or wife, a personal
389	389	exemption of one thousand five hundred dollars ($1,500) or, in
390	390	the case of a head of a family or a married person living with
391	391	husband or wife, a personal exemption of three thousand
392	392	dollars ($3,000), a husband and wife living together shall
393	393	receive but one personal exemption of three thousand dollars
394	394	($3,000) against their aggregate income; and, in case they
395	395	make separate returns, each must claim a personal exemption of
396	396	one thousand five hundred dollars ($1,500); and the amount in
397	397	subdivision (9) of subsection (a) for each person, other than
398	398	husband or wife, dependent upon and receiving his or her chief
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428	428	husband or wife, dependent upon and receiving his or her chief
429	429	support from the taxpayer.
430	430	(c) The Department of Revenue may enact rules as
431	431	necessary to implement and administer the provisions of this
432	432	act."
433	433	Section 2. This act shall become effective on October
434	434	1, 2025.
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