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  • What interest income is exempt from Alabama taxation?

What interest income is exempt from Alabama taxation?

Interest on obligations of the State of Alabama or any county, city, or municipality of Alabama, and interest on obligations of the United States, or any of its possessions.

Interest on obligations of the State of Alabama or any county, city, or municipality of Alabama, and interest on obligations of the United States, or any of its possessions.

Related FAQs in Income Tax Questions, Individual Income Tax

There are four different filing statuses available under Alabama law:

Single
Married Filing a Joint Return
Married Filing a Separate Return
Head of Family
Explanation of the filing statuses

For a list of income exempt from Alabama Income Tax, go to: Listing of exempt income items

All income is subject to Alabama income tax unless specifically exempted by state law. For examples of taxable income go to: Listing of taxable income

Interest on obligations of the State of Alabama or any county, city, or municipality of Alabama, and interest on obligations of the United States, or any of its possessions.

For single persons, heads of families, and married persons filing separate returns:

2% First $500 of taxable income

4% Next $2,500 of taxable income

5% All taxable income over $3,000

For married persons filing a joint return:

2% First $1,000 of taxable income

4% Next $5,000 of taxable income

5% All taxable income over $6,000

Certain taxpayers are eligible to contribute funds to a special savings account to save funds for a down payment and closing costs on the purchase of a first home in Alabama. Contributions up to $5,000 for a single taxpayer or $10,000 for married couples filing a joint return to this account may be deductible and earnings are tax free if all the requirements are met. The deduction is available for the 5 years in which deposits were made into a first time and second chance home buyer savings account.

Information about the Alabama First-Time and Second Chance Home Buyer Savings Account