Alabama State Income Tax for 2011, 2012

Depending on the filing status and amount earned, the personal income tax you have to pay in Alabama is either 2, 4 or 5%. Though they are not allowed to deduct their Federal Income Tax from their Alabama State Income Tax, Alabama Tax payers are allowed to deduct Federal Social Security and Medicare.

The general sales tax rate is 4%, though, depending on additional city or county sales taxes, the rate could be quite a lot higher than that. The total sales tax rate in Mobile, for example, is 10%, and there is an additional 1% restaurant sales tax, so if you eat at a diner in Mobile you would end up paying 11% in sales tax instead of the general 4%.

In fact, sales and excise tax accounts for 51% of all local and state revenue in Alabama. On average, those same taxes only account for 36% nationwide, making Alabama one of the more expensive states to call home. Another distinguishing trait is that Alabama is one of the few states that still taxes food and medicine.

Another thing that sets Alabama apart from most states is it’s tax on lower income families, which is among the highest in the country. This is illustrated by the fact that an income tax is levied on families of four that have $4,600 incomes; barely a quarter of the federal poverty line.

Currently, the Alabama income tax rate for corporations is at 6.5%. Interestingly, Alabama is the second least tax burdened state in the country, most likely because it’s property taxes are the lowest in the country. To increase the Alabama Property Tax, a voter referendum is needed.

There are of course many ways to file your income tax return in Alabama, and by far the easiest one is online tax filing. Alabama has some very pretty nifty tax credits available, including credits for taxes paid to another state, the capital credit and the basic skills deduction credit. Filing online is one of the best ways to make sure you receive all the credits you qualify for on your Alabama State Tax Return.