Taxes are a fact; therefore, it is advantageous for everyone to have a general idea of the basic tax structure and other related aspects. We give below a synopsis of the tax laws applicable to Alabama State:

1. Personal Income Tax:

The following rates of taxes apply for single persons, married persons filing separate returns and heads of families:

-2% on the first $500 of taxable income

-4% on taxable income between $501 and $3000

-5% on all taxable income above $3000

For married persons filing joint returns, the following tax rates are applicable:

-2% on the first $1,000 of taxable income

-4% on taxable income between $1,001 and $6,000

-5% on all taxable income above $6,000

Taxpayers are required to file Form 40 by 15 April every year. However, if the 15th falls on a holiday or weekend, the filing can be done on the next business day. The Alabama Department of Revenue thus gives the taxpayers an extra day to file their returns. The income tax return forms can be downloaded from the websites. Taxpayers have the option of filing the returns online. Once all the data is entered in the form, the tax due for payment is computed by the system. The completed form can then be printed out and mailed to the Department of Revenue.

2. Sales Tax:

The Alabama State’s Sales and Use Tax Section collects, administers and enforces the sales tax in 16 categories. The general tax rate on purchase of tangible assets is 4% in Alabama State. However, the overall tax rate in some jurisdictions may be higher than 4% because there are additional levies of 200 county and city sales taxes.

3. Personal and Real Property Taxes:

Ad valorem taxes of all properties are managed by the Property Tax Division of the Department of Revenue of Alabama State. This includes supervision, control, valuation, equalization and assessment of property taxes. The Department also provides guidance to the county officials in discharging their official duties.

The Alabama state grants homestead exemption to older or disabled taxpayers. This enables them to get a larger exemption on real property taxes. Any person seeking homestead exemption can contact the revenue commissioner of the county or the tax assessor. More information on this feature is available on the website of the Property Tax Division.

4. Inheritance and Estate Taxes:

September 30, 2005 was the final date for reporting in respect of any estate tax liabilities pertaining to the year 2004. Estate tax returns, estate tax waivers and affidavits of estate tax are no longer needed for properties that belonged to persons who have died after December 31, 2004.

In Alabama, taxpayers are allowed to file their returns online, free of charge. The Taxpayer Service Centers provide additional information to the taxpayers if required. There is also a provision for an annual tax holiday beginning from 12.01 a.m. on the 1st Friday of August and ending the following Sunday at midnight. The cities and counties may or may not opt to participate in this scheme.

By: Abhishek Agarwal

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