Alabama tax filing: file AL state taxes online, Form 40, top rate 5%

Do you have to file an Alabama tax return?

You generally must file an Alabama return for 2025 if your gross income is above the filing threshold for your status, or if Alabama tax was withheld and you want it refunded. Full-year and part-year residents file Form 40 (with Form 40A as a short form for simple returns), and nonresidents with Alabama-source income file Form 40NR.

The dependent exemption is up to $1,000 per dependent at lower incomes and steps down as Alabama adjusted gross income rises. The rules are published by the Alabama Department of Revenue, and the state tax filing pillar compares Alabama with the other states.

Alabama tax rates and the federal income tax deduction

Alabama uses three brackets, and while the top rate is a modest 5 percent, it applies at a very low income level, so most filers pay 5 percent on the bulk of their income.

For married couples filing jointly the brackets double: 2 percent on the first $1,000, 4 percent on the next $5,000, and 5 percent on income over $6,000. What sets Alabama apart is the deduction for federal income tax paid. You subtract the net federal income tax you paid for the year from your Alabama income, and you can take it whether you use the Alabama standard deduction or itemize. Alabama's standard deduction slides with income, reaching $8,500 for a married couple filing jointly and $3,000 for a single filer at lower incomes, phasing down toward $5,000 and $2,500 respectively as income rises.

Social Security, retirement, local and overtime rules

Alabama is generous with retirement income. Social Security is not taxed, and several pension types are fully exempt.

Some Alabama cities levy a local occupational tax on wages earned in the city, such as 1 percent in Birmingham and Bessemer and 2 percent in Gadsden. Employers withhold these, so they are not filed on Form 40. One time-limited note for 2025: Alabama exempted certain overtime pay from state income tax, but that exemption expired June 30, 2025, so overtime earned in the second half of the year is again taxable. Alabama does not have a state Earned Income Tax Credit. TaxFile applies the deductions and exemptions you qualify for automatically.

Alabama filing deadline, extension and filing online

Alabama's deadline is April 15, 2026 for tax year 2025 returns, matching the federal date. Alabama grants an automatic six-month extension to file, with no form to submit, moving the filing deadline to October 15, 2026. The extension is to file only, not to pay.

Any tax you owe is still due April 15, 2026. To send an extension payment by mail you use Form 40V, the individual income tax payment voucher. Filing electronically is the practical default, and the Alabama return builds on your federal figures. TaxFile prepares both from one pass:

• Upload or talk. Drop in your W-2s and 1099s and it reads them, or describe your year and it asks what it needs.
• Federal and Alabama together. One set of documents produces both returns, with the three brackets, the sliding standard deduction, and the federal income tax deduction applied.
• Credits checked. It applies the Social Security exemption and the retirement exclusions where they fit.
• Error check, then you approve. Nothing is e-filed until you review and approve every line, through an authorized IRS e-file provider.

Pricing is $39 for a simple return, $89 self-employed, $199 business, plus $19 for each state return. There is no free tier. If your Alabama income comes from contract or freelance work, self-employed tax filing covers Schedule C and Schedule SE in more detail. TaxFile does not prepare local occupational tax filings, does not e-file federal extensions or amended returns, and does not handle capital gains on Schedule D, rental income on Schedule E, or cryptocurrency. TaxFile is self-prepared tax software and does not provide personalized tax advice, and no refund amount is guaranteed.