Alabama taxes and cost of living (2026)
Alabama has a graduated income tax from 2.00% to 5.00%. A $100,000 salary is worth about $76,184 a year in national buying power after every tax and Alabama's prices, #10 of 51 (the state average is $70,397). Retiring on $50,000 a year takes about $1.17M, #11 lowest.
- State income tax
- 2.0%–5.00%
- Sales tax (avg. combined)
- 9.46%
- Property tax (effective)
- 0.38%
- Cost of living
- 88.8
- US = 100
- Social Security taxed?
- No
- Median home
- $233K
Take-home pay in Alabama
Single filer, 10% of salary to a pre-tax 401(k), standard deduction, renting. All taxes include estimated sales tax.
| Salary | Federal | FICA | State + local | All-in tax rate | Take-home | In US dollars |
|---|---|---|---|---|---|---|
| $50,000 | $3,220 | $3,825 | $1,849 | 19.3% | $36,106 | $40,649 |
| $75,000 | $6,020 | $5,738 | $2,834 | 20.9% | $52,909 | $59,566 |
| $100,000 | $10,970 | $7,650 | $3,712 | 23.8% | $67,669 | $76,184 |
| $150,000 | $21,134 | $11,475 | $5,453 | 26.9% | $96,938 | $109,136 |
| $250,000 | $43,304 | $15,514 | $8,845 | 28.6% | $157,337 | $177,136 |
What it takes to retire in Alabama
Married couple, age 60, withdrawals 60% from 401(k)/IRA, 20% Roth, 20% brokerage, no Social Security yet, renting. Spending at US-average prices.
| Spending | At AL prices | Income taxes | All taxes | FI number |
|---|---|---|---|---|
| $40,000 | $35,529 | $610 | $1,803 | $903.5K |
| $60,000 | $53,294 | $1,502 | $3,292 | $1.37M |
| $80,000 | $71,058 | $3,302 | $5,689 | $1.86M |
| $120,000 | $106,588 | $7,137 | $10,717 | $2.84M |
Alabama tax rules at a glance
- Income tax: Alabama has a graduated income tax from 2.00% to 5.00%. Rates unchanged for 2026. Std deduction is the maximum; it phases down with AGI starting ~$26k (to $2,500 single / $5,000 MFJ at ~$35.5k+ AGI). Dependent exemption $1,000 (AGI <= $50k), $500 ($50k-$100k), $300 (>$100k). Federal income tax paid is deductible on the state return, which materially lowers effective rates for higher earners.
- Local income tax: Occupational (wage) taxes in a limited number of cities, e.g. Birmingham 1%, Bessemer 1%, Gadsden 2%, plus a few others (roughly 0.5-2%). Tax Foundation puts the statewide average local effective rate at ~0.07% of AGI, so 0 statewide; apply city rate if the user picks one of these cities.
- Social Security: Not taxed. Social Security fully exempt.
- Retirement income: Defined-benefit pensions (state/local, federal civil service, military, private DB plans) are fully exempt at any age. Separately, up to $6,000 per taxpayer age 65+ of other taxable retirement income (IRA/401k/defined-contribution distributions) is excluded (Schedule RS).
- Capital gains: Taxed as ordinary income.
- Sales tax: 4.00% state rate, 9.46% average with local taxes; groceries taxed at a reduced rate.
Compare Alabama with
Frequently asked questions
Does Alabama have a state income tax?
Alabama has a graduated income tax from 2.00% to 5.00%. Rates unchanged for 2026. Std deduction is the maximum; it phases down with AGI starting ~$26k (to $2,500 single / $5,000 MFJ at ~$35.5k+ AGI). Dependent exemption $1,000 (AGI <= $50k), $500 ($50k-$100k), $300 (>$100k). Federal income tax paid is deductible on the state return, which materially lowers effective rates for higher earners.
How much is $100,000 after taxes in Alabama?
A single filer earning $100,000 who puts $10,000 in a 401(k) takes home about $67,669 after federal, state and local income taxes and payroll taxes, an all-in effective rate of 23.8% including estimated sales tax.
Does Alabama tax Social Security?
No. Alabama does not tax Social Security benefits. Social Security fully exempt.
How much do you need to retire in Alabama?
To spend $50,000 a year (at US-average prices) with withdrawals mostly from a 401(k)/IRA, you'd need about $1.17M in Alabama using the 4% rule, after its cost of living and taxes.
Is Alabama expensive to live in?
Alabama's cost of living index is 88.8, where the US average is 100 (BEA Regional Price Parities, 2024). The median home is worth about $233,300 and median rent is $1,077 a month.
How this is calculated
- Income taxes use 2026 federal and state brackets, standard deductions and personal exemptions or credits. No itemized deductions or other credits. Local income taxes use a typical statewide rate (for example, Maryland's county taxes or New York City's); many places have none.
- Payroll taxes include Social Security (6.2% up to the wage base), Medicare, and employee-paid state programs such as California SDI or Washington's paid leave premium. A married household salary is treated as two equal earners for payroll-tax caps.
- Cost of living uses the Bureau of Economic Analysis's Regional Price Parities (2024), where the US average is 100. Spending you enter at national prices is scaled by each state's index.
- Sales tax is estimated as the average combined state and local rate on about a third of spending (more where groceries are taxed). It is shown for context but not added to costs, because the price parities already include it. Property tax applies the state's effective rate to its median home value (Census ACS 2024) if you own.
- Retirement solves for the withdrawal that covers your spending plus the taxes it triggers, using each state's treatment of Social Security, retirement-account withdrawals and capital gains, then multiplies by 25 (a 4% withdrawal rate).
- Years to FI starts from zero, adds what you save each year in that state, and grows it at a 5% real return until it reaches that state's FI number.
Estimates for comparison, not tax advice. Your actual taxes depend on deductions, credits, where in the state you live and more. Sources: BEA Regional Price Parities, Census ACS, state sales tax rates, IRS, state revenue departments (per state).