Alabama's income tax brackets were last changed twelve years ago for tax year 2008, and the tax rates have not been changed since at least 2001.. Alabama has three marginal tax brackets, ranging from 2% (the lowest Alabama tax bracket) to 5% (the highest Alabama tax bracket). Here's an excerpt taken directly from the State of Alabama web site: I AM OVER 65. MAT is an online filing system developed to allow taxpayers to file and pay their withholding tax electronically. File Schedules 3 & 4 to itemize your tax exemptions, and additional taxes paid. The Alabama Department of Revenue offers a FREE electronic service, My Alabama Taxes (MAT), for filing and remitting withholding tax. Generally, the Alabama state tax rate on income is 2 percent on the first $500 of income, 4 percent on the next $3,000 and 5 percent of all income … Gov. The top rate can’t go above 5% because of the limit imposed by the state Constitution. The Alabama dependent exemption amount increased significantly for some taxpayers beginning in 2007, as a result of a tax reform measure passed by the Legislature in 2006. FORM ALABAMA DEPARTMENT OF REVENUE A-4 Employee's Withholding Exemption Certificate REV. The theory is that the individual earned the benefits (tax-free) while he or she was working in Alabama, and thus the benefits should be taxable by Alabama, regardless of where the taxpayer resides when the payments are received. 1/99 FULL NAME SOCIAL SECURITY NO. They were already exempt … Learn how filing status affects your tax bill Alabama income tax rates. For lower-income residents, that tax hit can be painful, since the state … Form 40 is the Alabama income tax return form for all full-time and part-time state residents (non-residents must file a Form 40NR). The good news is that if you are age sixty-five or older you are exempt from paying state property taxes. In addition to a state sales tax, counties and cities are allowed to collect taxes on purchases made in their jurisdictions. Also, the amount of the exempt severance payments should not be included in Alabama taxable wages (box 16) of the employee W-2 form, but should be disclosed in box 14 (Other) of the W-2 as exempt severance payments. Military income: Up to $15,000 of military basic pay received during the taxable year may be exempted from Virginia income tax. Kay Ivey signed an emergency proclamation today making the payments of up to $1,200 for individuals and $2,400 for married couples exempt from state income tax. But there is an often-overlooked federal law and a couple of Alabama exemption statutes we should keep in mind. Alabama collects a state income tax, with rates of 2%, 4% and 5%. Alabama income tax must not be withheld when exempt severance payments are made. The rates are 2%, 4% and 5%, and your marginal tax rate will depend on your income and filing status. 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