The dependent exemption depends on the adjusted gross income of the taxpayer. Before 2018, taxpayers could only take the standard deduction if they made $20,000 or less but with new tax law changes in the state, a married couple filing jointly can make a combined adjusted gross income of up to $23,000 to take the maximum standard deduction of $7,500. Note: State laws are constantly changing, particularly those affecting tax rates and exemptions. For single people, heads of families and married people filing separate returns: 1. This is something you likely know about in relation to your federal filings, where it’s called “Head of Household,” but it is slightly different for Alabama’s income tax purposes. The rule relies on you having domiciled in the state by doing things like buying a home or getting a driver’s license. Starting in 2018, the amount you’ll need to make to qualify for the state standard deduction is higher. The bill says that credit given for taxes paid in another state can only apply to the portion of a taxpayer’s income that is truly attributable to those other states. For those who don’t live in Alabama but received income for services performed in the state, you’ll need to report and pay taxes on the income you made while in the state, but only if it meets the minimum required to file. First $500: 2%; $501-$3,000: 4%; Over $3,000: 5% (for a single person); double the amounts for married persons filing jointly. Notably, Alabama has the highest maximum marginal tax bracket in the United States. These returns cover a period from 1986-2011 and were examined and attested by Baker Tilly, an independent accounting firm. States lacking an income tax generally make up for it through other types of consumer taxes, such as retail sales tax. 2% on the first $1,000 of taxable income. Because the value of state and federal exemptions differ, the federal Form W-4 cannot be substituted for the state Form A-4. Another big break for those unwrapping the complexities of the Alabama income tax is the personal exemption, which offers $1,500 for single taxpayers and $3,000 for married couples filing jointly. This is true even if you never intend to apply to become a U.S. citizen. Other benefits include income tax exemptions for Social Security and income from public or private pensions. One deduction you shouldn’t miss, though, is your federal self-employment taxes. If you’re married but file separately, you can only claim $2,000 if you earn $15,000 each year or more. If a dependent dies at some point during the tax year, you can still claim that person as a dependent on your taxes. The state does not collect taxes on personal property such as boats and computers. Alabama taxpayers may file their returns electronically or by traditional mail. Alabama gives you credit for taxes you paid to another state on Schedule CR. Microsoft Edge. Sixteen states have a partial exemption for military pay or retirement income (some of those exemptions are available only to retirees age 65 and older or below certain income levels or based on the years when they served in the military). of Revenue: Credit For Taxes Paid To Other States, Bradley.com: Alabama Legislature Passes Bill to Address Calculation of Credit for Taxes Paid to Other States. For the many Alabama taxpayers working in multiple states throughout the year, taxes can become complicated. See additional details of Alabama's personal income tax laws in the following chart: Note: State laws are constantly changing, particularly those affecting tax rates and exemptions. Parents who provide more than 50 percent of a dependent’s total support can claim the dependent exemption on them, as well. Revenue generated from personal income taxes helps pay for public services such as police and emergency personnel, as well as roads and schools. We recommend using Homestead Exemption 1 is equal to $4,000 of the assessed value in state taxes as well as $2,000 of the assessed value for county taxes. It’s important to note that in 2018, Alabama passed legislation meant to better manage the income taxes that multistate residents pay. You don’t have to pay taxes to more than one state on the same income, so states have a way to give you credit for the amounts you pay to other states during tax season. Below, we review all of these benefits and other tax rules retirees in Alabama including. Legally divorced on Dec. 31 of the property qualify for the self-employment taxes during that year will have a exemption!, an independent accounting firm should know Family will have a personal exemption amount of the exemption is $ in. 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