How Alabama taxes retirement income
Alabama does not tax Social Security benefits. Pension income is also exempt. Alabama fully exempts Social Security benefits and qualified defined-benefit pension income (government/military/TVA/Teachers'-Employees' Retirement System, and qualified private defined-benefit plans under IRC 414(j)). However, distributions from defined-contribution plans, 401(k), 403(b), and traditional IRA withdrawals, ARE taxed as ordinary income at Alabama's 2%-5% rates, same as federal treatment upon distribution; there is only a modest age-65+ exemption ($6,000, rising to $12,000 in 2026) on top of that.
Retirement income tax in Alabama, at a glance
| Income type | Taxed by Alabama? |
|---|---|
| Social Security | No |
| Pensions | No |
| 401(k) / IRA withdrawals | Yes |
| Estate / inheritance tax | None |
| Avg. property tax rate | 0.37% of home value |
Does Alabama tax Social Security benefits?
No. Alabama does not tax Social Security benefits.
Does Alabama tax pensions and 401(k) or IRA withdrawals?
Alabama exempts pension income, though other retirement withdrawals may still be taxed. Alabama fully exempts Social Security benefits and qualified defined-benefit pension income (government/military/TVA/Teachers'-Employees' Retirement System, and qualified private defined-benefit plans under IRC 414(j)). However, distributions from defined-contribution plans, 401(k), 403(b), and traditional IRA withdrawals, ARE taxed as ordinary income at Alabama's 2%-5% rates, same as federal treatment upon distribution; there is only a modest age-65+ exemption ($6,000, rising to $12,000 in 2026) on top of that.
For the mechanics of required withdrawals in retirement, see what is an RMD.
Sources
- Alabama taxation of retirement income (Social Security, pensions, 401(k)/IRA): Alabama Department of Revenue / Taxation.