HB389INTRODUCED
Page 0
HB389
1BAC3LL-1
By Representatives Garrett, Stadthagen, Colvin, Brinyark,
Kirkland, Marques, Rehm, Sorrells, Whorton, Paschal, Smith,
Butler, Moore (P), Shaw, Estes, Robertson, Wilcox, Lipscomb,
Harrison, Hammett, Pettus, Easterbrook, Stubbs, Starnes,
Standridge, Carns, Holk-Jones, Givens, Underwood, Mooney,
Ingram, Ross, Baker, Sells, Treadaway, Rigsby, Yarbrough,
Woods, DuBose, Lovvorn, Fidler, Lamb, Shirey, Gidley, Hulsey,
Lomax, Ledbetter, Hurst, Kiel
RFD: Ways and Means Education
First Read: 05-Mar-25
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12 1BAC3LL-1 02/25/2025 KHF (F)KHF 2025-81
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First Read: 05-Mar-25
SYNOPSIS:
Under current law, the state levies an income
tax upon all residents of the state and upon all
nonresidents who receive income from Alabama sources.
Taxpayers are allowed an optional standard deduction,
as well as dependent exemptions in computing income
subject to the tax.
This bill would increase the optional standard
deduction and expand the adjusted gross income range
allowable for the maximum optional standard deduction
and the dependent exemption to increase the threshold
at which the state imposes individual income
taxes.
A BILL
TO BE ENTITLED
AN ACT
Relating to income taxes; to amend Sections 40-18-15
and 40-18-19, Code of Alabama 1975, to increase the optional
standard deduction and expand the adjusted gross income range
allowable for the maximum optional standard deduction; and to
expand the adjusted gross income range allowable for the
maximum dependent exemption.
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maximum dependent exemption.
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. Sections 40-18-15 and 40-18-19, Code of
Alabama 1975, are hereby amended as follows:
"§40-18-15
(a) No deduction shall be allowed for any losses,
expenses, or interest deferred or disallowed pursuant to 26
U.S.C. § 267 or for any cost required to be capitalized in
accordance with 26 U.S.C. § 263A; otherwise, there shall be
allowed as deductions:
(1) All ordinary and necessary expenses paid or
incurred during the taxable year in carrying on any trade or
business, as determined in accordance with 26 U.S.C. § 162.
(2) Interest paid or accrued within the taxable year on
indebtedness, limited to the amount allowable as an interest
deduction for federal income tax purposes in the corresponding
tax year or period pursuant to the provisions of 26 U.S.C. §§
163, 264, and 265.
(3) The following taxes paid or accrued within the
taxable year:
a. Income taxes, Federal Insurance Contribution Act
taxes, taxes on self-employment income , and estate and gift
taxes imposed by authority of the United States or any
possession of the United States.
b. State and local, and foreign, occupational license
taxes, and contributions to state unemployment funds.
c. State and local, and foreign, real property taxes.
d. State and local personal property taxes.
e. The generation-skipping transfer (GST) tax imposed
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e. The generation-skipping transfer (GST) tax imposed
on income distributions by 26 U.S.C. § 2601.
f. The taxes described in paragraphs c., d., and e.
shall be deductible only to the extent that the taxes are
deductible for federal income tax purposes under 26 U.S.C. §
164 (relating to taxes).
g. In addition, there shall be allowed as a deduction,
state and local, and foreign taxes, except income taxes, and
taxes imposed by authority of the United States or any
possession of the United States, which are paid or accrued
within the taxable year in carrying on a trade or business or
an activity described in 26 U.S.C. § 212 (relating to expenses
for the production of income).
h. Notwithstanding paragraph g., any tax described in
any paragraph preceding paragraph g. that is paid or accrued
in connection with an acquisition or disposition of property
shall be treated as part of the cost of the acquired property
or, in the case of a disposition, as a reduction in the amount
realized on the disposition of that property.
(4) Losses sustained during the taxable year and not
compensated for by insurance or otherwise if incurred in a
trade or business, in accordance with 26 U.S.C. § 165(c)(1).
(5) Losses sustained during the taxable year and not
compensated for by insurance or otherwise, if incurred in any
transaction entered into for profit, though not connected with
the trade or business in accordance with 26 U.S.C. §
165(c)(2); but, in the case of a taxpayer other than a
resident of the state, only as to those transactions within
the state.
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the state.
(6) Casualty and theft losses sustained during the
taxable year of property not connected with the conduct of a
trade or business or a transaction entered into for profit as
determined in accordance with subsections (c)(3) and (h) of 26
U.S.C. § 165. In the case of a nonresident, the deduction
shall be allowed only for the losses arising from property
located within the State of Alabama and the limitations in 26
U.S.C. § 165 shall be applied with regard only to the
taxpayer's Alabama adjusted gross income. No loss shall be
allowed if at the time of filing the return, the loss has been
claimed on a federal estate tax return.
(7) Losses from debts ascertained to be worthless and
charged off during the taxable year of ascertainment, if
sustained in the conduct of the regular trade or business of
the taxpayer.
(8) A reasonable allowance for the exhaustion, wear and
tear of property from which any income is derived, including a
reasonable allowance for obsolescence, in accordance with 26
U.S.C. §§ 167 and 168, and an allowance for the amortization
of intangibles determined in accordance with 26 U.S.C. § 197.
(9) In the case of mines, oil, and gas wells, other
natural deposits and timber, a reasonable allowance for
depletion and for depreciation of improvements, according to
the peculiar condition in each case based upon the cost,
including the cost of development not otherwise deducted, such
reasonable allowance in all cases to be made under rules and
regulations to be prescribed by the Department of Revenue;
and, in the case of leasehold interests, the deduction allowed
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and, in the case of leasehold interests, the deduction allowed
by this section shall be equitably apportioned between the
lessor and the lessee.
(10) Charitable contributions to the extent allowed for
federal income tax purposes under 26 U.S.C. § 170 (relating to
charitable contributions and gifts).
(11) The deduction allowed to the individual for
federal income tax purposes by 26 U.S.C. § 219 (relating to
retirement savings).
(12) The deduction allowed for federal income tax
purposes by 26 U.S.C. § 404 (relating to qualified pension,
profit sharing, stock bonus, and annuity plans).
(13) For each individual income taxpayer, medical and
dental expenses, including amounts paid for medicine and drugs
and amounts paid for accident and health insurance, as
determined in accordance with 26 U.S.C. § 213; provided,
however, that the limitation of the deduction to the excess of
those expenses over 7.5 percent of adjusted gross income as
provided in 26 U.S.C. § 213 shall instead be limited to the
excess of those expenses over 4.0four percent of adjusted
gross income.
(14) For each individual income taxpayer, the deduction
determined in accordance with 26 U.S.C. § 212 for all the
ordinary and necessary expenses paid or incurred during the
taxable year for the production or collection of income, or
for the management, conservation, or maintenance of property
held for the production of income, or in connection with the
determination, collection, or refund of any tax.
(15) Any expense not exceeding $1,000 actually incurred
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(15) Any expense not exceeding $1,000 actually incurred
during the taxable year in constructing on his or her property
a family radioactive fallout shelter, as approved and
certified by the State Department of Emergency Management, and
any amount not exceeding $1,000 which he or she contributed
during the taxable year toward the construction of a community
radioactive fallout shelter.
(16) A deduction from the taxpayer's adjusted gross
income for state income tax purposes of the total cost of
installation for conversion from gas or electricity to wood as
the primary energy source for heating their individual
domestic homes for the taxable year during which a conversion
was completed.
(17) Alimony and separate maintenance payments, the
amount deductible to be the same as the amount deductible for
federal income tax purposes under 26 U.S.C. § 215 (relating to
alimony payments).
(18) Moving expenses paid or incurred during the
taxable year as allowed under 26 U.S.C. § 217 (relating to
moving expenses). However, in applying 26 U.S.C. § 217, the
term "new principal place of work" means only places of work
located within the State of Alabama.
(19) Any expense not exceeding $35,000 actually
incurred during the taxable year in removing from his or her
property any architectural or transportation barriers to
handicapped persons with nonambulatory and semiambulatory
disabilities; provided, however, that any improvements
resulting from that expense shall not be eligible to be
capitalized for depreciation.
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capitalized for depreciation.
(20) Notwithstanding subdivision (1), the deduction for
expenses of travel, entertainment, and meals shall be
determined in accordance with 26 U.S.C. § 274.
(21) The deduction allowed by 26 U.S.C. § 179 (relating
to expensing certain depreciable property), provided that no
deduction shall be allowed under subdivision (8) for any
amount allowed as a deduction under this subdivision.
(22) The deduction allowed by 26 U.S.C. § 195 (relating
to amortization of start-up expenditures), but in the case of
a nonresident, only if the principal place of business of the
business investigated, created, or acquired is located in the
State of Alabama.
(23) The deduction allowed by subdivision (1), to the
extent that it consists of unreimbursed employee business
expenses, and the deduction allowed by subdivision (14) shall
be allowed only to the extent that the aggregate of the
deductions exceeds 2two percent of adjusted gross income.
(24) The reasonable medical and legal expenses paid or
incurred by the taxpayer in connection with the adoption of a
minor. For purposes of this subdivision, medical expenses
shall include any medical and hospital expenses of the adoptee
and the adoptee's biological mother which are incident to the
adoptee's birth and subsequent medical care and which, in the
case of the adoptee, are paid or incurred before the petition
is granted.
(25) The amount of any aid or assistance, whether in
the form of property, services, or monies, provided to the
State Industrial Development Authority pursuant to Section
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State Industrial Development Authority pursuant to Section
41-10-44.8(d) in order to induce an approved company to
undertake a major project within the state.
(26) The amount of premiums paid pursuant to a
qualifying insurance contract for qualified long-term care
coverage.
(27) The amount deductible by the taxpayer in
accordance with 26 U.S.C. § 162(h).
(28) The amount, up to five thousand dollars ($5,000)
per annum, contributed subsequent to December 31, 2007, to the
Alabama Prepaid Affordable College Tuition Program or the
Alabama College Education Savings Program as defined in
Chapter 33C of Title 16. If the taxpayer makes a nonqualified
withdrawal as defined by Section 529 of the Internal Revenue
Code (26 U.S.C. 529), the amount of the nonqualified
withdrawal, plus 10 percent of the amount withdrawn, shall be
added back to the income of the contributing taxpayer in the
year the nonqualified withdrawal was distributed.
(b)(1) In lieu of the deductions allowable to
individual taxpayers, as provided in subdivision (a)(1) of
subsection (a) to the extent of unreimbursed employee business
expenses, and as provided in subdivisions (2), (3), (5), (6),
(10), (13), (14), (15), (16), (19), (22), and (26) of
subsection (a), the taxpayer may elect to take the optional
standard deduction of 20 percent of the adjusted gross income
or $2,000, whichever is the lesser. Taxpayers filing jointly
as defined in Section 40-18-27 may elect to take the optional
standard deduction of 20 percent of the adjusted gross income
or $4,000, whichever is the lesser.
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or $4,000, whichever is the lesser.
(2) For tax years beginning after December 31, 2006,
the optional standard deduction shall be determined as
follows:
a. The standard deduction for married taxpayers filing
jointly with adjusted gross income of $20,000 or less shall be
$7,500. For married taxpayers filing jointly with adjusted
gross income of greater than $20,000, the standard deduction
shall be reduced by $175 for each $500 of adjusted gross
income in excess of $20,000. Notwithstanding the preceding
sentence, the standard deduction shall not be less than $4,000
for married taxpayers filing jointly.
b. The standard deduction for married taxpayers filing
separate returns with adjusted gross income of $10,000 or less
shall be $3,750. For married taxpayers filing separate returns
with adjusted gross income of greater than $10,000, the
standard deduction shall be reduced by $88 for each $250 of
adjusted gross income in excess of $10,000. Notwithstanding
the preceding sentence, the standard deduction shall not be
less than $2,000 for married taxpayers filing separate
returns.
c. The standard deduction for head of family taxpayers
with adjusted gross income of $20,000 or less shall be $4,700.
For head of family taxpayers with adjusted gross income of
greater than $20,000, the standard deduction shall be reduced
by $135 for each $500 of adjusted gross income in excess of
$20,000. Notwithstanding the preceding sentence, the standard
deduction shall not be less than $2,000 for head of family
taxpayers.
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taxpayers.
d. The standard deduction for single taxpayers with
adjusted gross income of $20,000 or less shall be $2,500. For
single taxpayers with adjusted gross income of greater than
$20,000, the standard deduction shall be reduced by $25 for
each $500 of adjusted gross income in excess of $20,000.
Notwithstanding the preceding sentence, the standard deduction
shall not be less than $2,000 for single taxpayers.
(3) For tax years beginning after December 31, 2018,
the optional standard deduction shall be determined as
follows:
a. The standard deduction for married taxpayers filing
jointly with adjusted gross income of less than $23,000 shall
be $7,500. For married taxpayers filing jointly, the standard
deduction shall be reduced further by $175 for each $500 of
adjusted gross income in excess of $23,000. Notwithstanding
the preceding sentence, the standard deduction shall not be
less than $4,000 for married taxpayers filing jointly.
b. The standard deduction for married taxpayers filing
separate returns with adjusted gross income of less than
$10,500 shall be $3,750. For married taxpayers filing separate
returns, the standard deduction shall be reduced further by
$88 for each $250 of adjusted gross income in excess of
$10,500. Notwithstanding the preceding sentence, the standard
deduction shall not be less than $2,000 for married taxpayers
filing separate returns.
c. The standard deduction for head of family taxpayers
with adjusted gross income of less than $23,000 shall be
$4,700. For head of family taxpayers, the standard deduction
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$4,700. For head of family taxpayers, the standard deduction
shall be reduced further by $135 for each $500 of adjusted
gross income in excess of $23,000. Notwithstanding the
preceding sentence, the standard deduction shall not be less
than $2,000 for head of family taxpayers.
d. The standard deduction for single taxpayers with
adjusted gross income of less than $23,000 shall be $2,500.
For single taxpayers, the standard deduction shall be reduced
further by $25 for each $500 of adjusted gross income in
excess of $23,000. Notwithstanding the preceding sentence, the
standard deduction shall not be less than $2,000 for single
taxpayers.
(4) For tax years beginning after December 31, 2021,
the optional standard deduction shall be determined as
follows:
a. The standard deduction for married taxpayers filing
jointly with adjusted gross income of less than twenty-five
thousand five hundred dollars ($25,500) shall be eight
thousand five hundred dollars ($8,500). For married taxpayers
filing jointly, the standard deduction shall be reduced
further by one hundred seventy-five dollars ($175) for each
five hundred dollars ($500) of adjusted gross income in excess
of twenty-five thousand five hundred dollars ($25,500).
Notwithstanding the preceding sentence, the standard deduction
shall not be less than five thousand dollars ($5,000) for
married taxpayers filing jointly.
b. The standard deduction for married taxpayers filing
separate returns with adjusted gross income of less than
twelve thousand seven hundred fifty dollars ($12,750) shall be
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twelve thousand seven hundred fifty dollars ($12,750) shall be
four thousand two hundred fifty dollars ($4,250). For married
taxpayers filing separate returns, the standard deduction
shall be reduced further by eighty-eight dollars ($88) for
each two hundred fifty dollars ($250) of adjusted gross income
in excess of twelve thousand seven hundred fifty dollars
($12,750). Notwithstanding the preceding sentence, the
standard deduction shall not be less than two thousand five
hundred dollars ($2,500) for married taxpayers filing separate
returns.
c. The standard deduction for head of family taxpayers
with adjusted gross income of less than twenty-five thousand
five hundred dollars ($25,500) shall be five thousand two
hundred dollars ($5,200). For head of family taxpayers, the
standard deduction shall be reduced further by one hundred
thirty-five dollars ($135) for each five hundred dollars
($500) of adjusted gross income in excess of twenty-five
thousand five hundred dollars ($25,500). Notwithstanding the
preceding sentence, the standard deduction shall not be less
than two thousand five hundred dollars ($2,500) for head of
family taxpayers.
d. The standard deduction for single taxpayers with
adjusted gross income of less than twenty-five thousand five
hundred dollars ($25,500) shall be three thousand dollars
($3,000). For single taxpayers, the standard deduction shall
be reduced further by twenty-five dollars ($25) for each five
hundred dollars ($500) of adjusted gross income in excess of
twenty-five thousand five hundred dollars ($25,500).
Notwithstanding the preceding sentence, the standard deduction
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Notwithstanding the preceding sentence, the standard deduction
shall not be less than two thousand five hundred dollars
($2,500) for single taxpayers.
(5) For tax years beginning after December 31, 2025,
the optional standard deduction shall be determined as
follows:
a. The standard deduction for married taxpayers filing
jointly with adjusted gross income of less than twenty-eight
thousand dollars ($28,000) shall be nine thousand five hundred
dollars ($9,500). For married taxpayers filing jointly, the
standard deduction shall be reduced further by one hundred
seventy-five dollars ($175) for each five hundred dollars
($500) of adjusted gross income in excess of twenty-eight
thousand dollars ($28,000). Notwithstanding the preceding
sentence, the standard deduction shall not be less than six
thousand dollars ($6,000) for married taxpayers filing
jointly.
b. The standard deduction for married taxpayers filing
separate returns with adjusted gross income of less than
fourteen thousand dollars ($14,000) shall be four thousand
seven hundred fifty dollars ($4,750). For married taxpayers
filing separate returns, the standard deduction shall be
reduced further by eighty-eight dollars ($88) for each two
hundred fifty dollars ($250) of adjusted gross income in
excess of fourteen thousand dollars ($14,000). Notwithstanding
the preceding sentence, the standard deduction shall not be
less than three thousand dollars ($3,000) for married
taxpayers filing separate returns.
c. The standard deduction for head of family taxpayers
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c. The standard deduction for head of family taxpayers
with adjusted gross income of less than twenty-eight thousand
dollars ($28,000) shall be five thousand seven hundred dollars
($5,700). For head of family taxpayers, the standard deduction
shall be reduced further by one hundred thirty-five dollars
($135) for each five hundred dollars ($500) of adjusted gross
income in excess of twenty-eight thousand dollars ($28,000).
Notwithstanding the preceding sentence, the standard deduction
shall not be less than three thousand dollars ($3,000) for
head of family taxpayers.
d. The standard deduction for single taxpayers with
adjusted gross income of less than twenty-eight thousand
hundred dollars ($28,000) shall be three thousand five hundred
dollars ($3,500). For single taxpayers, the standard deduction
shall be reduced further by twenty-five dollars ($25) for each
five hundred dollars ($500) of adjusted gross income in excess
of twenty-eight thousand dollars ($28,000). Notwithstanding
the preceding sentence, the standard deduction shall not be
less than three thousand dollars ($3,000) for single
taxpayers.
(c) A deduction is allowable for the amount of federal
income tax paid or accrued within the taxable year. In the
case of a nonresident taxpayer, the amount of federal income
tax deductible to Alabama shall be determined by the ratio
that the amount of adjusted gross income received from sources
within the State of Alabama bears to the amount of adjusted
gross income received from sources within and outside the
State of Alabama.
(d) If separate returns are filed by husband and wife
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(d) If separate returns are filed by husband and wife
and one spouse elects to claim the optional standard
deduction, the other spouse must also claim the optional
standard deduction, unless, for the tax returns filed for the
2014 and subsequent tax years, the spouses have lived apart
for the entire year. In this case, each spouse may claim
either the optional standard deduction or itemized deductions.
Neither spouse may claim a deduction for expenses paid by the
other spouse.
(e) In the case of a nonresident individual:
(1) The deductions allowed in subdivisions (1), (2),
(3), (4), (5), (7), (8), (9), (11), (12), (19), (21), (23),
and (25) of subsection (a) shall be allowed only to the extent
that they are paid or incurred in carrying on a trade or
business within the State of Alabama and the deduction allowed
by Section 40-18-15.2 shall be allowed only to the extent it
arose from a trade or business carried on in Alabama.
(2) The deductions allowed by subdivisions (2), (3),
(5), (8), (9), (14), and (19) of subsection (a) shall be
allowed only to the extent arising from property located in
Alabama or transactions producing income that is subject to
tax in the State of Alabama.
(3) The amount of the deductions allowed by
subdivisions (2), (3), (6), (10), (13), (15), (16), (17),
(19), (24), and (26) of subsection (a) ,(and not allowed by
subdivisions (1) or (2) of this subsection ), or by subsection
(b) if the taxpayer elects the standard deduction, shall be
limited to the amount determined by multiplying the total of
such deductions by a fraction, the numerator of which is the
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such deductions by a fraction, the numerator of which is the
taxpayer's adjusted gross income determined using the rules
provided in subdivisions (1) and (2) of this subsection and
the denominator of which is the taxpayer's adjusted gross
income determined under Section 40-18-14.2. The deduction
allowed in subdivision (a)(17) of subsection (a) shall not be
subtracted in calculating either the numerator or denominator
in the previous sentence.
(f) Nothing in this section shall allow any item to be
deducted more than once."
"§40-18-19
(a) The following exemptions from income taxation shall
be allowed to every individual resident taxpayer:
(1) Retirement allowances, pensions and annuities, or
optional allowances, approved by the Board of Control of the
Teachers' Retirement System of Alabama, which exempt status is
set out in Section 16-25-23.
(2) Retirement allowances, pensions and annuities, or
optional allowances, approved by the Board of Control of the
Employees' Retirement System of Alabama, which exempt status
is set out in Section 36-27-28.
(3) The first eight thousand dollars ($8,000) of any
retirement compensation, retirement allowances, pensions and
annuities, or optional allowances, received by any eligible
firefighter, as defined in Sections 36-32-1 and 36-32-2, or
his or her designated beneficiary, from any firefighting
agency established in the State of Alabama, but only if such
retirement compensation, retirement allowances, pensions and
annuities, or optional allowances as are awarded as a result
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annuities, or optional allowances as are awarded as a result
of fire protection services rendered. This subdivision shall
become effective for the taxable years beginning January 1,
1987, and thereafter following its passage and approval by the
Governor, or upon its otherwise becoming a law; provided, that
for the taxable years beginning on or after January 1, 1991,
all of the pension and retirement payments shall be exempt
from taxation.
(4) The first eight thousand dollars ($8,000) of any
retirement compensation, retirement allowances, pensions and
annuities, or optional allowances received by any eligible
peace officer, as defined in subdivision (11) of Section
36-21-60 (11), or his or her designated beneficiary, from any
police retirement system established in the State of Alabama,
but only if the retirement compensation, retirement
allowances, pensions and annuities, or optional allowances are
awarded as a result of police services rendered. This
subdivision shall become effective for taxable years beginning
January 1, 1984, and thereafter; provided, that for the
taxable years beginning on or after January 1, 1991, all of
the pension and retirement payments shall be exempt from
taxation.
(5) Income received as annuities under the United
States Retirement System from the United States Government
Civil Service Retirement and Disability Fund, including income
received from the Tennessee Valley Authority's pension system,
income received as annuities under the United States Foreign
Service Retirement and Disability Fund, or income received
from any other United States government retirement and
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from any other United States government retirement and
disability fund.
(6) Beginning January 1, 1991, all payments made on or
after such date to a retiree or his designated beneficiary
under a "defined benefit plan," as defined under 26 U.S.C. §
414(j), to the extent such payment would be taxable for
federal income tax purposes.
(7) Net income realized by individuals and partnerships
from time to time in the business of conducting a financial
business employing monied capital coming into competition with
the business of national banks, but only if such individuals
and partnerships are subject to an excise tax imposed by this
state on or with respect to such income.
(8) In the case of a single person or a married person
not living with husband or wife, a personal exemption of one
thousand five hundred dollars ($1,500) or, in the case of a
head of a family or a married person living with husband or
wife, a personal exemption of three thousand dollars ($3,000),
but a husband and wife living together shall receive only one
personal exemption of three thousand dollars ($3,000) against
their aggregate income, and in case they make separate returns
each must claim a personal exemption of one thousand five
hundred dollars ($1,500).
(9) a. Three hundred dollars ($300) for each person,
other than husband or wife, dependent upon the taxpayer, and
over half of whose support, for the calendar year in which the
taxable year for the taxpayer begins, was received from the
taxpayer.
b. For tax years beginning after December 31, 2006, for
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b. For tax years beginning after December 31, 2006, for
taxpayers with adjusted gross income equal to or less than
twenty thousand dollars ($20,000), one thousand dollars
($1,000) for each person other than husband or wife, dependent
upon the taxpayer, and over half of whose support, for the
calendar year in which the taxable year for the taxpayer
begins, was received from the taxpayer.
c. For tax years beginning after December 31, 2006, for
taxpayers with adjusted gross income in excess of twenty
thousand dollars ($20,000) and equal to or less than one
hundred thousand dollars ($100,000), five hundred dollars
($500) for each person other than husband and wife, dependent
upon the taxpayer, and over half of whose support, for the
calendar year in which the taxable year for the taxpayer
begins, was received from the taxpayer.
d. For tax years beginning after December 31, 2021, for
taxpayers with adjusted gross income equal to or less than
fifty thousand dollars ($50,000), one thousand dollars
($1,000) for each person other than husband or wife, dependent
upon the taxpayer, and over half of whose support, for the
calendar year in which the taxable year for the taxpayer
begins, was received from the taxpayer.
e. For tax years beginning after December 31, 2021, for
taxpayers with adjusted gross income in excess of fifty
thousand dollars ($50,000) and equal to or less than one
hundred thousand dollars ($100,000), five hundred dollars
($500) for each person other than husband and wife, dependent
upon the taxpayer, and over half of whose support, for the
calendar year in which the taxable year for the taxpayer
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calendar year in which the taxable year for the taxpayer
begins, was received from the taxpayer.
f. For tax years beginning after December 31, 2025, for
taxpayers with adjusted gross income equal to or less than
sixty thousand dollars ($60,000), one thousand dollars
($1,000) for each person other than husband or wife, dependent
upon the taxpayer, and over half of whose support, for the
calendar year in which the taxable year for the taxpayer
begins, was received from the taxpayer.
g. For tax years beginning after December 31, 2025, for
taxpayers with adjusted gross income in excess of sixty
thousand dollars ($60,000) and equal to or less than one
hundred twenty thousand dollars ($120,000), five hundred
dollars ($500) for each person other than husband and wife,
dependent upon the taxpayer, and over half of whose support,
for the calendar year in which the taxable year for the
taxpayer begins, was received from the taxpayer.
For the purposes of this section, "dependent" shall
mean: A son or daughter of the taxpayer or a descendant of
either; a stepson or stepdaughter of the taxpayer; a brother,
sister, stepbrother, or stepsister of the taxpayer; the father
or mother of the taxpayer or an ancestor of either; a
stepfather or stepmother of the taxpayer; a son or daughter of
a brother or sister of the taxpayer; a brother or sister of
the father or mother of the taxpayer; a son-in-law,
daughter-in-law, father-in-law, mother-in-law, brother-in-law,
or sister-in-law of the taxpayer. As used in this paragraph
the terms "brother" and "sister" include a brother or sister
by the half blood. For the purpose of determining whether any
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by the half blood. For the purpose of determining whether any
of the foregoing relationships exist, a legally adopted child
of a person shall be considered a child of such a person by
blood.
(10) Beginning January 1, 1998, all income, interest,
dividends, gains, or benefits of any kind received from
savings accounts or prepaid tuition contracts administered
under Title 16, Chapter 33C, are exempt from all income
taxation by the state and by all of its political subdivisions
to the extent that the amounts remain on deposit in the PACT
Trust Fund or the ACES Trust Fund, or are used to pay the
designated beneficiary's qualified higher education expenses
as defined in 26 U.S.C. § 529, or are refunded under such
terms as would not carry a penalty under 26 U.S.C. § 529.
(11) Beginning January 1, 2016, all income, interest,
dividends, gains, or benefits of any kind received from ABLE
savings accounts administered under Title 16, Chapter 33C, are
exempt from all income taxation by the state and by all of its
political subdivisions to the extent that the amounts remain
on deposit in the ABLE Trust Fund, or are used to pay the
designated beneficiary's qualified disability expenses as
defined in 26 U.S.C. § 529A, or are refunded under such terms
as would not carry a penalty under 26 U.S.C. § 529A, or other
applicable federal law.
(12) Beginning January 1, 2018, amounts received by an
individual from sources within a foreign country or countries
which constitute a housing allowance, and earned income
attributable to services performed by such individual received
during the tax period are exempt from all income taxation by
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during the tax period are exempt from all income taxation by
the state and by all of its political subdivisions to the
extent such income is exempt from federal income tax pursuant
to 26 U.S.C. § 911.
(13) a. Beginning January 1, 2023, the first six
thousand dollars ($6,000) of taxable retirement income.
b. This exemption may only be claimed by individual
taxpayers who are 65 years of age or older.
(b) Of the following personal exemptions allowed
resident taxpayers, each nonresident individual taxpayer shall
be allowed that proportion thereof that the adjusted gross
income received by said nonresident individual taxpayer from
sources within the State of Alabama bears to his or her
adjusted gross income received from sources within and without
the State of Alabama: In the case of a single person or a
married person not living with husband or wife, a personal
exemption of one thousand five hundred dollars ($1,500) or, in
the case of a head of a family or a married person living with
husband or wife, a personal exemption of three thousand
dollars ($3,000), a husband and wife living together shall
receive but one personal exemption of three thousand dollars
($3,000) against their aggregate income; and, in case they
make separate returns, each must claim a personal exemption of
one thousand five hundred dollars ($1,500); and the amount in
subdivision (a)(9) of subsection (a) for each person, other
than husband or wife, dependent upon and receiving his or her
chief support from the taxpayer.
(c) The Department of Revenue may enact rules as
necessary to implement and administer the provisions of this
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necessary to implement and administer the provisions of this
act."
Section 2. This act shall become effective on October
1, 2025.
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