Alabama Taxes

Graduated 2%–5%. Single, head of family and married filing separately: 2% on the first $500 of taxable income, 4% on the next $2,500, 5% over $3,000. Married filing jointly: 2% on the first $1,000, 4% on the next $5,000, 5% over $6,000 — so most wage earners pay the 5% top rate on most of their income.

State gasoline excise tax is 30 cents a gallon and diesel 31 cents a gallon (effective July 1, 2025; Code of Ala. 40-17-325), not counting the 18.4-cent federal tax.

Owner-occupied homes (Class III) are assessed at only 10% of appraised value, then taxed at millage rates set by counties and local taxing agencies — e.g. a $100,000 home at a 32.5-mill county rate owes about $325/year, before homestead exemptions.

Alabama taxes groceries at a reduced state sales and use tax rate of 2%, down from 3% since September 1, 2025 (Act 2025-305; Ala. Code 40-23-2(6): the tax on the sale of food "shall be reduced to two percent" on that date). Under Act 2026-604 the state portion of the tax on food was suspended from May 1, 2026 through June 30, 2026, and the 2% state rate applies again from July 1, 2026. "Food" means SNAP-eligible food as defined in 7 U.S.C. 2011 — generally food for home consumption, but not alcoholic beverages, tobacco, hot foods or hot food ready to eat, which are taxed at the general rate. City and county sales taxes on food were not affected by either act and still apply on top of the state rate; local rates are listed by the Alabama Department of Revenue.