Retiring in Alabama: how your income is taxed
Alabama is fairly tax-friendly for retirees. On a typical retirement income it ranks #25 of 51 for the lowest state income tax.
The rules in Alabama
- Social Security: Social Security benefits are fully exempt from Alabama income tax.
- Pensions: Payments from defined benefit pension plans (IRC 414(j)), private or public, are fully exempt at any age (Ala. Admin. Code 810-3-19-.04). Government pensions (state TRS/ERS, federal civil service) are also exempt. Pensions that are defined contribution plans do not qualify and fall under the $6,000 age-65 exclusion.
- 401(k), 403(b) and IRA withdrawals: 401(k), IRA and other defined-contribution withdrawals are taxable, but at 65 and older each person can exclude the first $6,000 a year of this retirement income (in effect since 2023). A 2025 bill (HB 388) to raise this to $12,000 for 2026 died in committee, so $6,000 still applies.
Calculate your Alabama retirement taxes
State income tax in Alabama: $218 a year
In Alabama, the 401(k)/IRA amount counts as IRA withdrawals, which don't qualify for the pension exclusion. Enter withdrawals from employer plans such as a 401(k) or 403(b) as pension.
In Alabama you'd pay about $218 in state income tax and $4,336 in federal income tax on $70,000 of retirement income, keeping $65,446 (6.5% total).
Alabama ranks #25 of 51 for the lowest state tax on this income. 19 states charge no state income tax on this income.
What retirees pay in Alabama
| Retirement income | State tax (single) | State tax (married) | Federal tax (single) |
|---|---|---|---|
| $24,000 Social Security, $12,000 401(k)/IRA | $50 | $0 | $0 |
| $30,000 Social Security, $20,000 pension, $20,000 401(k)/IRA | $218 | $0 | $4,336 |
| $40,000 Social Security, $40,000 pension, $50,000 401(k)/IRA, $10,000 other income | $1,469 | $1,426 | $19,812 |
Age 67 or older, 2026 rules including the federal senior deduction. For married couples, income is the household total and both spouses are 67 or older. State estimates apply Alabama's main exclusions and may differ for income-tested credits.
States with lower retirement taxes
Moving to Alabama in retirement?
Compare the tax on your Social Security, pension and 401(k)/IRA income, and typical living costs, with the state you'd leave. These are the states most households moving to Alabama come from (IRS migration data, 2022–2023).
- Georgia to Alabama
- Florida to Alabama
- Tennessee to Alabama
- Texas to Alabama
- Mississippi to Alabama
- California to Alabama
Frequently asked questions
Does Alabama tax Social Security?
Not taxed. Social Security benefits are fully exempt from Alabama income tax.
Does Alabama tax pensions?
Not taxed. Payments from defined benefit pension plans (IRC 414(j)), private or public, are fully exempt at any age (Ala. Admin. Code 810-3-19-.04). Government pensions (state TRS/ERS, federal civil service) are also exempt. Pensions that are defined contribution plans do not qualify and fall under the $6,000 age-65 exclusion.
Does Alabama tax 401(k) and IRA withdrawals?
Partly taxed. 401(k), IRA and other defined-contribution withdrawals are taxable, but at 65 and older each person can exclude the first $6,000 a year of this retirement income (in effect since 2023). A 2025 bill (HB 388) to raise this to $12,000 for 2026 died in committee, so $6,000 still applies.
Is Alabama a good state to retire for taxes?
For a single retiree with $30,000 Social Security, $20,000 pension, $20,000 401(k)/IRA, Alabama charges about $218 in state income tax, ranking #25 of 51 (lowest tax first).
Related
Sources: admincode.legislature.state.al.us, aarp.org. Rules reviewed .