State retirement taxes · 2026
Does Alabama tax retirement income?
Short answer: Partly. Alabama does not tax Social Security benefits. Defined-benefit pensions are fully exempt, and each person 65+ can exclude another $6,000 of IRA or 401(k) income.
What’s taxed in Alabama
2026 rules.
- Social SecurityNot taxed
- Alabama does not tax Social Security benefits.
- PensionsNot taxed
- Public pensions and private defined-benefit pensions are fully exempt at any age.
- IRA & 401(k) withdrawalsPartly taxed
- IRA and 401(k) withdrawals are taxable, but each person 65 or older can exclude up to $6,000 a year.
- Military retirement payNot taxed
- Military retirement pay is fully exempt.
- Income tax rate5% top
- 2% on the first $500 of taxable income, 4% on the next $2,500 and 5% above $3,000 (married filing jointly: $1,000, $5,000 and $6,000).
Does Alabama tax Social Security?
Alabama does not tax Social Security benefits.
Social Security is on Alabama’s list of income you do not report at all — there is no age test and no income test.
Your federal return is a separate question — see how much of your benefit the IRS taxes with the taxable Social Security calculator.
Are pensions taxed in Alabama?
Public pensions and private defined-benefit pensions are fully exempt at any age.
Alabama’s do-not-report list includes the state Teachers’, Employees’ and Judicial retirement systems, federal civil service retirement, TVA pensions, Railroad Retirement and any private defined-benefit plan under IRC 414(j). Other pensions and annuities are taxable, but at 65 or older each person can exclude up to $6,000 of them — the same exclusion that covers IRAs.
Public vs. private pensions: Public pensions and private defined-benefit pensions are treated alike: both are exempt. Annuities and private plans that are not defined-benefit are taxable, minus the $6,000 exclusion at 65+.
Are IRA and 401(k) withdrawals taxed in Alabama?
IRA and 401(k) withdrawals are taxable, but each person 65 or older can exclude up to $6,000 a year.
IRA, 401(k), 403(b), SEP and Keogh distributions are reported on Schedule RS. A taxpayer 65 or older can exclude up to $6,000, and a spouse 65 or older gets a separate $6,000, limited to the retirement income Alabama would otherwise tax. There is no income limit.
Required minimum distributions (RMDs) are IRA and 401(k) withdrawals, so the same rules apply. Estimate your RMD.
Is military retirement pay taxed in Alabama?
Military retirement pay is fully exempt.
What is Alabama’s income tax rate?
3 brackets, topping out at 5%.
2% on the first $500 of taxable income, 4% on the next $2,500 and 5% above $3,000 (married filing jointly: $1,000, $5,000 and $6,000). The brackets are set in law and don’t change with inflation. Alabama also lets you deduct the federal income tax you paid.
2026 brackets. Each rate applies to taxable income above the amount shown.
| Single | Married, joint | Rate |
|---|---|---|
| $0 | $0 | 2% |
| $500 | $1,000 | 4% |
| $3,000 | $6,000 | 5% |
Standard deduction and exemptions
The standard deduction shrinks as income rises: $3,000 for single filers, falling to $2,500; $8,500 for married couples filing jointly at Alabama AGI up to $25,999, falling to $5,000 at $35,500 and above (head of family $5,200 to $2,500; married filing separately $4,250 to $2,500). Personal exemption: $1,500 single, $3,000 joint. These amounts are set in law and carry into 2026.
What tax breaks do seniors get in Alabama?
The $6,000-per-person retirement income exclusion at 65 is the main senior break. Alabama has no extra standard deduction for age and has not adopted the federal $6,000 senior deduction for 2025–2028.
What changed for 2026?
HB 527, signed April 16, 2026, adds a deduction of up to $1,000 of qualified overtime pay for tax years 2026 through 2028. We found no enacted 2026 change to how Alabama taxes retirement income.
Alabama’s 2025 Form 40 rules carry into 2026 for retirement income; its brackets are set in law and are not indexed.
What we couldn’t confirm
- Our verifier could not sweep every 2026 bill, so we say only that we found no enacted change to retirement taxation.
How Alabama compares with its neighbors
Thinking of moving across the line? Here’s how each bordering state treats retirement income in 2026.
- AlabamaThis pageVery friendlySocial Security Not taxedTop rate: 5% top
- FloridaTax-free retirement incomeSocial Security Not taxedTop rate: None
- GeorgiaVery friendlySocial Security Not taxedTop rate: 4.99% flat
- MississippiVery friendlySocial Security Not taxedTop rate: 4% flat
- TennesseeTax-free retirement incomeSocial Security Not taxedTop rate: None
State tax is half the picture — check the federal side
Alabama retirement tax questions
Is Alabama tax-friendly for retirees?
We rate Alabama “Very friendly” for 2026. Alabama does not tax Social Security benefits. Defined-benefit pensions are fully exempt, and each person 65+ can exclude another $6,000 of IRA or 401(k) income. The top income tax rate is 5%.
Are required minimum distributions (RMDs) taxed in Alabama?
RMDs are withdrawals from IRAs and 401(k)-type plans, so they follow Alabama’s rules for those accounts. IRA and 401(k) withdrawals are taxable, but each person 65 or older can exclude up to $6,000 a year.
Is military retirement pay taxed in Alabama?
No. Military retirement pay is fully exempt.
What is Alabama’s income tax rate for 2026?
2% on the first $500 of taxable income, 4% on the next $2,500 and 5% above $3,000 (married filing jointly: $1,000, $5,000 and $6,000). The brackets are set in law and don’t change with inflation. Alabama also lets you deduct the federal income tax you paid.
Sources for Alabama
Primary sources only. We re-check them whenever an agency publishes new figures.
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