Does Alabama have a state income tax?

Yes. Alabama imposes a progressive state income tax with three brackets ranging from 2% on the first $500 of taxable income to 5% on income above $3,000. The bracket thresholds are very low, so most full-time workers reach the top 5% rate quickly. Alabama is unusual among states because it allows residents to deduct their federal income tax payments on their state return, which can meaningfully reduce state tax liability for high earners. This federal deduction is a distinctive feature shared by only a handful of states, including Iowa, Louisiana, Missouri, Montana, and Oregon.

How much does a $20/hour worker take home in Alabama?

At $20/hour working 40 hours per week, your gross annual pay is $41,600. After federal income tax of approximately $2,940, Alabama state income tax of roughly $1,800, Social Security of $2,579, and Medicare of $603, your annual take-home pay is approximately $33,678. That works out to about $1,295 per biweekly paycheck. By comparison, the same worker in Tennessee (no income tax) would take home roughly $1,800 more annually, while a worker in Georgia (flat 5.39%) would take home about $200 less.

What is the Alabama minimum wage in 2026?

Alabama does not have a state minimum wage and follows the federal minimum wage of $7.25 per hour. This has been the case since the federal rate last increased in July 2009. Alabama also has a state preemption law that prohibits cities and counties from setting their own higher local minimum wages, which was tested when Birmingham attempted to raise its local minimum to $10.10 per hour in 2016. Many Alabama employers in metropolitan areas like Birmingham, Huntsville, Mobile, and Montgomery offer starting wages well above $7.25 due to competitive labor markets, especially in the growing aerospace, automotive, and healthcare sectors.

Can I deduct my federal taxes on my Alabama state return?

Yes. Alabama is one of only six states that allows residents to deduct federal income tax paid from their state taxable income. This deduction is taken as an itemized adjustment and can substantially lower your Alabama state tax liability, particularly if you are in a high federal bracket. For example, a single filer paying $10,000 in federal income tax effectively reduces their Alabama taxable income by that same amount, saving $500 in state tax at the top 5% rate. This calculator estimates state tax without applying the federal tax deduction, so your actual liability may be slightly lower than shown.

What are Alabama state income tax brackets in 2026?

Alabama uses three brackets for single filers: 2% on the first $500 of taxable income, 4% on income from $500 to $3,000, and 5% on income above $3,000. For married filing jointly, the bracket thresholds double to $1,000 and $6,000. These thresholds have not been adjusted for inflation in decades, which means virtually every full-time worker pays the top 5% rate on the majority of their income. The state standard deduction is $3,000 for single filers, $8,500 for married filing jointly, and $5,200 for head of household, but it phases down for higher income earners.

Do Alabama cities charge local income taxes?

Some Alabama cities impose an occupational license tax, sometimes called an occupational tax or city wage tax, that functions like a local income tax on wages earned within city limits. Birmingham levies a 1% occupational tax on gross wages of workers employed in the city, and Bessemer, Gadsden, and several other municipalities have similar taxes ranging from 1% to 2%. These local taxes apply to all workers earning wages inside city limits regardless of residency, so a Birmingham suburb resident who commutes to a downtown Birmingham office still pays the 1% city tax. This calculator does not include local occupational taxes, so your actual take-home may be slightly lower if you work in one of these cities.

Does Alabama tax Social Security or retirement income?

No. Alabama does not tax Social Security benefits at the state level, and it also exempts most traditional pensions, including federal, state, and military retirement pay. Additionally, Alabama exempts the first $6,000 of distributions from defined contribution plans like 401(k)s and IRAs for taxpayers age 65 and older. This combination of exemptions makes Alabama relatively tax-friendly for retirees, despite the state having an income tax on wages. Combined with low property taxes (median effective rate around 0.40%, among the lowest in the nation) and a moderate cost of living, Alabama is an appealing retirement destination for residents whose primary income comes from Social Security and pensions.

Alabama Paycheck Calculator (Hourly) — Free Take-Home Pay Estimator

How the Alabama Paycheck Calculator Works

This Alabama paycheck calculator hourly tool computes your take-home pay by subtracting federal income tax, Alabama state income tax, and FICA (Social Security + Medicare) from your gross earnings. Alabama uses a three-bracket progressive state income tax topping out at 5%, with very low bracket thresholds that push most workers to the top rate quickly.

The core formula:

Take-Home = Gross Pay - Federal Tax - State Tax - Social Security - Medicare

P_{net} = P_{gross} - T_{fed} - T_{AL} - T_{SS} - T_{Med}

Annual gross is hourly wage multiplied by hours per week multiplied by 52 weeks. To convert between hourly and annual figures, see our salary calculator. Per-period pay divides the annual figure by 52, 26, 24, or 12 depending on your pay frequency.

Federal income tax follows progressive brackets from 10% on the first $11,925 of taxable income (single) up to 37% on income above $626,350. The standard deduction is $15,000 for single filers, $30,000 for married filing jointly, and $22,500 for head of household. Alabama state income tax applies separately: 2% on the first $500 of taxable income, 4% from $500 to $3,000, and 5% above $3,000 for single filers. Alabama uses its own modest standard deduction of $3,000 single, $8,500 married, and $5,200 head of household. Social Security tax is 6.2% on wages up to $176,100, and Medicare is 1.45% on all wages plus a 0.9% surtax above $200,000 single or $250,000 married.

Alabama Hourly Paycheck Tax Breakdown

Alabama state income tax is a defining feature of the paycheck calculation for residents. The brackets are 2% on the first $500, 4% from $500 to $3,000, and 5% above $3,000. Because the top bracket starts at just $3,000 of taxable income, a worker earning $40,000 per year has nearly all of their income subject to the 5% top rate after the standard deduction. This effectively makes Alabama's tax behave like a near-flat 5% rate for the vast majority of full-time workers, even though it is technically progressive.

Compared to its neighbors, Alabama sits in the middle of the pack. Georgia transitioned to a flat 5.39% in 2024, slightly higher than Alabama's top 5% rate. Mississippi runs a graduated system from 0% to 5%, similar to Alabama in practice. Tennessee and Florida charge no state income tax at all, making them noticeably more favorable for wage earners. A worker earning $50,000 in Alabama pays roughly $2,200 to $2,400 in state income tax, while the same worker in Tennessee or Florida keeps all of that, and a Georgia worker pays slightly more at about $2,400 to $2,500.

Alabama's distinctive feature is the federal income tax deduction on the state return, which can meaningfully reduce state liability for higher earners. Workers paying $10,000 or more in federal income tax can subtract that amount from Alabama taxable income, saving up to $500 at the 5% rate. This is rare nationally and partially offsets Alabama's otherwise modest standard deductions. Lower-income workers benefit less from this provision because they pay little federal tax to deduct.

Your Alabama paycheck deductions come from four sources:

Federal income tax: Progressive brackets based on filing status and taxable income. See our income tax calculator for full-year estimates.
Alabama state income tax: Progressive brackets of 2%, 4%, and 5% with thresholds at $500 and $3,000 for single filers.
Social Security: 6.2% on wages up to $176,100 annually.
Medicare: 1.45% on all wages, plus 0.9% surtax above $200,000 single or $250,000 married.

Variable Definitions

Hourly Wage: Your gross pay per hour before deductions. Alabama follows the federal minimum of $7.25/hour. A poultry processing worker in Cullman or Albertville earning $16/hour grosses $33,280 annually, while a Mercedes-Benz auto assembly worker in Tuscaloosa County earning $32/hour grosses $66,560. The aerospace engineering corridor around Huntsville pays significantly higher, with NASA Marshall and defense contractor positions commonly starting at $40-50/hour.

Hours per Week: Total regular hours. Full-time is 40. Steel mill workers in Birmingham doing rotating 12-hour shifts might log 36 hours one week and 48 hours the next, averaging 42. Enter your typical weekly figure. Overtime above 40 hours is paid at 1.5x under federal law.

Pay Frequency: Weekly (52 periods), biweekly (26), semi-monthly (24), or monthly (12). Most large Alabama employers like Honda Manufacturing in Lincoln, Hyundai in Montgomery, and the University of Alabama system pay biweekly. State government and school district employees are commonly paid semi-monthly.

Filing Status: Determines your federal and Alabama standard deductions and bracket thresholds. A single filer at the University of Alabama Birmingham hospital earning $55,000 has a federal standard deduction of $15,000 and Alabama deduction of $3,000. Married filing jointly doubles the federal standard deduction to $30,000 and increases the Alabama deduction to $8,500. Head of household, often used by single parents in Mobile or Birmingham, provides $22,500 federally and $5,200 in Alabama.

Pre-Tax Deduction: Percentage of gross pay contributed to 401(k), 403(b), or HSA. An assembly worker at the Hyundai Motor Manufacturing plant in Montgomery earning $58,000 who contributes 8% ($4,640) reduces both federal and Alabama taxable income, saving roughly $1,015 federally (at 22%) and $232 in Alabama (at 5%), for a combined tax savings of about $1,247 per year.

Worked Example 1: Alabama Hourly Paycheck at $18/Hour

A single filer earning $18/hour, working 40 hours/week, biweekly pay, with a 5% pre-tax 401(k) contribution:

Annual gross: $18 x 40 x 52 = $37,440
Pre-tax deduction: $37,440 x 5% = $1,872
Taxable gross: $37,440 - $1,872 = $35,568
Federal taxable income: $35,568 - $15,000 (standard deduction) = $20,568
Federal tax: ($11,925 x 10%) + ($8,643 x 12%) = $1,192.50 + $1,037.16 = $2,229.66
Alabama taxable income: $35,568 - $3,000 (AL standard deduction) = $32,568
Alabama state tax: ($500 x 2%) + ($2,500 x 4%) + ($29,568 x 5%) = $10 + $100 + $1,478.40 = $1,588.40
Social Security: $35,568 x 6.2% = $2,205.22
Medicare: $35,568 x 1.45% = $515.74
Total deductions: $1,872 + $2,229.66 + $1,588.40 + $2,205.22 + $515.74 = $8,411.02
Annual take-home: $37,440 - $8,411.02 = $29,028.98
Biweekly take-home: $29,028.98 / 26 = $1,116.50

Worked Example 2: Alabama Hourly Paycheck at $48/Hour

A married filing jointly filer earning $48/hour, working 40 hours/week, biweekly pay, with a 10% pre-tax 401(k) contribution:

Annual gross: $48 x 40 x 52 = $99,840
Pre-tax deduction: $99,840 x 10% = $9,984
Taxable gross: $99,840 - $9,984 = $89,856
Federal taxable income: $89,856 - $30,000 (married standard deduction) = $59,856
Federal tax: ($23,850 x 10%) + ($36,006 x 12%) = $2,385 + $4,320.72 = $6,705.72
Alabama taxable income: $89,856 - $8,500 (AL married standard deduction) = $81,356
Alabama state tax: ($1,000 x 2%) + ($5,000 x 4%) + ($75,356 x 5%) = $20 + $200 + $3,767.80 = $3,987.80
Social Security: $89,856 x 6.2% = $5,571.07
Medicare: $89,856 x 1.45% = $1,302.91
Total deductions: $9,984 + $6,705.72 + $3,987.80 + $5,571.07 + $1,302.91 = $27,551.50
Annual take-home: $99,840 - $27,551.50 = $72,288.50
Biweekly take-home: $72,288.50 / 26 = $2,780.33

This Huntsville aerospace engineer takes home roughly 72.4% of gross. Alabama's federal-tax deduction provision could reduce state tax by an additional $335 at this income level if elected.

Edge Cases and Advanced Scenarios

Social Security wage base cap ($176,100 in 2026): If you earn above $176,100 annually, Social Security tax stops at that threshold. An Alabama orthopedic surgeon earning $400,000 pays SS tax capped at $176,100 x 6.2% = $10,918.20 rather than 6.2% of the full $400,000. The cap resets January 1.

Additional Medicare tax for high earners: Wages above $200,000 (single) or $250,000 (married) incur an extra 0.9% Medicare surtax. A Birmingham law firm partner earning $300,000 filing single owes an additional ($300,000 - $200,000) x 0.9% = $900 in Medicare tax beyond the standard 1.45%.

Birmingham occupational license tax: Workers earning wages within Birmingham city limits owe a 1% occupational license tax on gross wages, regardless of residency. A software developer living in Hoover but commuting to a downtown Birmingham employer pays an additional 1% on top of state and federal taxes. On a $75,000 salary, that is $750 per year not reflected in this calculator. Bessemer, Gadsden, and several other Alabama municipalities impose similar 1-2% occupational taxes.

What to Do with Your Alabama Paycheck Result

Compare your calculated take-home pay to your actual pay stub. Differences often come from local occupational taxes (especially in Birmingham), health insurance premiums, or court-ordered garnishments not included here.
Increase pre-tax 401(k) contributions to reduce both federal and Alabama state tax. Every dollar contributed saves both your federal marginal rate and Alabama's 5% top rate.
Consider itemizing federal taxes on your Alabama return to claim the federal income tax deduction. This is most valuable for workers in the federal 22% bracket or higher.
Review your Alabama Form A-4 withholding alongside your federal W-4. Both can be adjusted independently when your circumstances change.
Use our federal income tax percentage calculator to see your effective federal rate and understand what share of your gross income goes to federal versus state taxes.

Related Calculators

Arkansas Paycheck Calculator (Hourly) — compare Alabama's 5% top rate to Arkansas's 3.9% top rate.
Georgia Paycheck Calculator (Hourly) — Georgia's flat 5.39% vs Alabama's progressive 5%.
Florida Paycheck Calculator (Hourly) — Florida has no income tax; see the take-home difference.
Salary Calculator — convert between hourly and annual pay.
Income Tax Calculator — estimate your total federal income tax liability.
Federal Income Tax Percentage Calculator — find your effective federal tax rate.
Paycheck Calculator by State — compare take-home pay across all 50 states and DC.

Alabama Paycheck Calculator (Hourly)