Alabama state income tax
Alabama has a state income tax. It is graduated, with a top marginal rate of 5%. Graduated rates from 2% to 5%. Single/HOF/MFS: 2% on first $500, 4% on next $2,500, 5% over $3,000. MFJ: 2% on first $1,000, 4% on next $5,000, 5% over $6,000. Capital gains are taxed as ordinary income (no special lower rate).
Does Alabama have a state income tax?
Yes. Alabama taxes individual income on a graduated schedule topping out at 5%. Graduated rates from 2% to 5%. Single/HOF/MFS: 2% on first $500, 4% on next $2,500, 5% over $3,000. MFJ: 2% on first $1,000, 4% on next $5,000, 5% over $6,000.
| Item | Alabama |
|---|---|
| State income tax | Yes, graduated |
| Top marginal rate | 5% |
| Capital gains | Taxed as ordinary income, up to 5% |
| State sales tax | 4% (plus local) |
| Avg. property tax rate | 0.37% of home value |
| Estate / inheritance tax | None |
How does Alabama tax capital gains?
Alabama has no separate, lower rate for capital gains. They are taxed as ordinary income at the same rates as your wages, up to 5%, on top of federal capital gains tax. See how capital gains tax works in 2026.
What about retirement income in Alabama?
Retirement income is taxed differently from wages in many states. For how Alabama treats Social Security, pensions, and 401(k)/IRA withdrawals, see Alabama retirement taxes.
Sources
- Alabama income tax rates and brackets: Alabama Department of Revenue / Taxation.
- Alabama capital gains treatment: Alabama tax authority.
- Alabama sales tax: Alabama Department of Revenue.