Alabama Wage and Payroll Tax Facts
February 01, 2024
Having to comply with unique state taxes and wage laws can make processing payroll doubly daunting. Here’s everything you need to know about these rates and laws for the state of Alabama.
Alabama is one of the few states that doesn't have a minimum wage law or require rates. Instead, it applies the rates required by the federal government in the Fair Labor Standards Act (FLSA) when needed.
When it comes to processing payroll, Alabama-based organizations must handle the following taxes in addition to those required by the federal government:
- Personal Income (a.k.a. State Income Tax)
- State Unemployment Insurance (SUI)
- Local Taxes
The below information was last updated January 30, 2024. It is not intended as legal or tax advice.
Alabama Minimum Wage Rates
|
Wage Type |
Alabama Rates* |
Federal Rates |
|
Minimum Wage |
N/A |
$7.25 |
|
Tipped Minimum Wage |
$2.13 |
|
|
Actual Tip Credit |
$5.12 |
*The state doesn't have a minimum wage law, so the federal rates under the FLSA are used instead.
Alabama State Income Tax (SIT) Rates
Alabama's SIT is progressive, meaning it adjusts based on the income level of the employee paying the tax:
| Filing Status | Income Tax Bracket [Over X] - [But not over Y] |
2024 Income Tax Rate |
| Single / Head of Household / Married (filed separately) | $0 - $500 | 2.00% of excess over $0 |
| $500 - $3,000 | 4.00% of excess over $500 | |
| $3,000 or greater | 5.00% of excess over $3,000 | |
| Married (filed jointly) | $0 - $1,000 | 2.00% of excess over $0 |
| $1,000 - $6,000 | 4.00% of excess over $1,000 | |
| $6,000 or greater | 5.00% of excess over $6,000 |
|
Additional Alabama SIT Details |
|
|
Supplemental Withholding Computation |
5.00% |
|
Valid Filing Statuses |
|
|
Exemptions (rates)* |
Number of dependents |
|
Exemptions (individuals) |
|
|
Form W-4 |
Form A-4 |
|
Reconciliation Frequency |
Annual |
*From January 1, 2024 - June 30, 2025, overtime wages should be excluded after making any pretax deductions.
Alabama State Unemployment Insurance (SUI) Rates
SUI provides unemployment benefits to eligible workers who are unemployed through no fault of their own (as determined by state law) and meet the state’s eligibility requirements.
|
Alabama SUI Tax Details |
|
|
Taxable Wage Base |
$8,000 |
|
Employee Subject to Tax |
No |
|
Rates for Experienced Employers |
0.05% - 6.10% |
|
Rates for New Employers |
2.70% |
|
Effective Period |
Calendar Year |
|
Voluntary Contributions Allowed |
No |
Alabama State Disability Insurance (SDI) Rates
SDI benefits are funded by employees through mandatory payroll deductions from each paycheck. Alabama, however, doesn't require employers to collect an SDI tax.
Miscellaneous Alabama Tax Information
Reciprocal Agreement(s)
Reciprocal agreements are when workers who live and work in different states are only required to pay taxes to the state where they live. Alabama currently has no reciprocal agreements with any other states.
This doesn’t mean, however, that interstate workers living in Alabama pay double. It’s federally illegal for two states to tax the same income. In most cases, the employee’s work state will credit or refund them at tax time based on the taxes they owe their home state. If the tax rates differ, the employee must cover the difference.
Paid Sick Leave (PSL) Taxes
The state of Alabama doesn’t require employers to collect PSL taxes, nor does the state have a program providing such leave to employees.
Paid Family and Medical Leave (PFML) Taxes
The state of Alabama doesn't require employers to collect PFML taxes, nor does the state have a program providing such leave to employees.
Local Taxes
In addition to the state-wide taxes mentioned above, over two dozen cities and municipalities also impose an occupational tax that employers must withhold from each employee's wages.
Alabama Employer Registration
The agencies below can help with your state-based employer registration, including best practices, account numbers, and unemployment information. Contact the Department of Revenue for withholding tax topics and the Department of Labor for unemployment tax topics.
|
Registration Details |
Department of Revenue |
Department of Labor |
|
Phone |
(334) 242-1584 | (334) 954-4730 |
|
Online Registration |
MAT Homepage | eGov User Registration |
|
Registration Instructions |
Online registration is required. Account numbers will be issued in 2-10 days. | Online registration is required. Account numbers will be issued during the online process. |
|
Employer Self-Service Login |
MAT Homepage | eGov Login Page |
Additional Alabama Payroll Tax Resources
- Department of Labor Market Information
- Department of Revenue BEST Resources
- Department of Revenue Forms Library
This information is provided as a courtesy and may be updated at any time. It is not intended as legal or tax guidance. If you have questions or concerns, we encourage you to seek the advice of a qualified CPA, tax attorney, or advisor.
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