Alabama retirement income tax (2026)

By the Deorbit Plan editorial team, a Berrydyne program · Last reviewed November 2026 · Topic: Taxes in retirement

Income tax: Flat 5%
Social Security: Exempt
Retirement exclusion: $6,000 per person, age 65+
Standard deduction: $8,500 joint · $4,250 single
Personal exemption: $3,000 joint · $1,500 single
Capital gains: Taxed as ordinary income

How Alabama taxes retirement income

Alabama taxes income at one flat rate, 5%, whatever the amount and filing status^[1].

Before the rate applies, the simulator subtracts a standard deduction of $8,500 on a joint return ($4,250 single) and personal exemptions of $3,000 ($1,500 single).

Social Security benefits are exempt from Alabama income tax: none of the benefit enters the state base, as in 22 of the 24 states covered here that tax income.

From age 65, each person can exclude up to $6,000 a year of IRA, 401(k) and pension distributions, so a couple can exclude up to $12,000 when each spouse has that much. In the worked examples the couple’s distributions are split evenly between the spouses, so each spouse’s cap applies to half.

Long-term capital gains and qualified dividends are taxed as ordinary income, at the same rates.

Put together, the example couple below owes $1,825 in Alabama, the 18th lowest of the 24 states covered here that tax income.

2026 rate

One rate, 5%, applies to all taxable income for every filing status; there are no brackets.

Worked example

A retired couple, both 67, filing jointly, with $48,000 of Social Security, $40,000 of IRA withdrawals and a $20,000 pension. The figures are computed when the page is built, by the same state-tax function the simulator runs.

Married couple, both 67, in Alabama
IRA / 401(k) withdrawals + pension	$60,000
Social Security in the state base ($48,000 received, $40,000 federally taxable)	$0
Less retirement exclusion	−$12,000
Less standard deduction	−$8,500
Less personal exemptions	−$3,000
Taxable in Alabama	$36,500
Alabama income tax	$1,825
Share of $108,000 gross income	1.69%

The couple’s next $1,000 of IRA withdrawals would add $50 of Alabama tax.

A single retiree, 67, with half those amounts ($24,000 of Social Security, $20,000 of IRA withdrawals, a $10,000 pension) owes $913, 1.69% of gross income, against the couple’s 1.69%.

Single filer, 67, in Alabama
IRA / 401(k) withdrawals + pension	$30,000
Social Security in the state base ($24,000 received, $11,300 federally taxable)	$0
Less retirement exclusion	−$6,000
Less standard deduction	−$4,250
Less personal exemptions	−$1,500
Taxable in Alabama	$18,250
Alabama income tax	$913
Share of $54,000 gross income	1.69%

Age matters here: if both spouses were 63, below the exclusion age of 65, the same income would owe $2,425, which is $600 more than at 67.

Alabama state tax calculator

Filing statusAge (both spouses)Social Security benefits for the yearIRA / 401(k) withdrawalsPension or annuity incomeWages

Alabama income tax: $1,825 (1.69% of $108,000 gross income).
Taxable in Alabama: $36,500 (after $12,000 of retirement exclusion and $11,500 of deductions and exemptions).
The next $1,000 of IRA withdrawals would add $50.

Runs the same state-tax function as the Deorbit Plan simulator, with withdrawals and pension split evenly between spouses on a joint return. State tax only; federal tax and any local income tax are not included.

As IRA withdrawals rise

The same couple, with Social Security and the pension unchanged, taking more from their IRAs (a larger withdrawal, a required minimum distribution or a Roth conversion all count as distributions here):

Alabama tax for the example couple at higher IRA withdrawals
IRA withdrawals	Alabama tax	Share of gross income	Next $1,000 adds
$0	$0	0.00%	$0
$20,000	$825	0.94%	$50
$40,000	$1,825	1.69%	$50
$80,000	$3,825	2.58%	$50
$120,000	$5,825	3.10%	$50
$200,000	$9,825	3.67%	$50

Neighbouring states

The example couple’s state tax in Alabama and in the neighbouring states covered here, same income and ages:

Example couple’s state income tax, 2026
State	Income tax	Social Security	Couple’s tax	Difference
Alabama	Flat 5%	Exempt	$1,825	n/a
Florida	None	Not taxed	$0	−$1,825
Georgia	Flat 4.99%	Exempt	$0	−$1,825
Tennessee	None	Not taxed	$0	−$1,825

Against Alabama, the couple would pay less in Florida (−$1,825), Georgia (−$1,825), Tennessee (−$1,825). With $200,000 of IRA withdrawals instead of $40,000, they would owe $9,825 in Alabama, against Florida ($0), Georgia ($2,994), Tennessee ($0).

What this page leaves out

What the simulator does and does not handle for Alabama, item by item^[1]:

Flat 5% approximation of the 2/4/5% graduated brackets.
Max-tier standard deduction $8,500 married filing jointly (real deduction phases with AGI).
$1,500/spouse exemption.
Social Security exempt.
$6,000/person IRA/401(k) distribution exclusion at 65+ (Act 2022-297).
Federal-tax deductibility ignored.

In every state the simulator also leaves out credits, itemized deductions, deductions that phase out with income, local income taxes, surtaxes and any deduction for federal tax paid. It holds state amounts fixed and does not index them for inflation.

See it over a full plan

Load the demo plan with Alabama as the state of residence and see the state tax line year by year, alongside federal tax, RMDs and Roth conversions. Open it in the simulator →

If you already have a saved plan, the link only takes you to the Household panel, where the state is set; your plan is not changed.

This page shows how the rules work. It is not financial, tax or investment advice. State law has details these pages leave out, so check the state’s own instructions or ask a tax professional before you act. See the disclaimer.

Sources

Verified July 12, 2026. The full verification record for this entry is in the sources ledger, with every other figure the simulator uses on the sources page.