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Understanding Personal Income Tax in Alabama

Filed under State Taxes. Fact checked on February 12, 2013.

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Your choice of entity can affect your personal tax liability.

If you are a resident or non-resident of Alabama and receive taxable income individually from property owned or business transacted in Alabama, you are subject to tax on net income. Therefore, if you are operating your business as an S corporation, partnership or limited liability company, or sole proprietorship, you will be subject to a personal income tax on the business income that passes through to you. In addition, local income taxes apply in certain areas of Alabama, so be sure to check with your local government.

Marginal Tax Rates Effective for 2012
Single, Head of Family, or Married Filing Separately
Amount of Taxable Income Marginal Tax Bracket
$0 but not over $500 2.0% minus $ 0
$501 but not over $3,000 4.0% minus $10
$3,000 or more 5.0% minus $40

Marginal Tax Rates Effective for 2012
Married Filing Jointly
Amount of Taxable Income Marginal Tax Bracket
$0 but not over $1000 2.0% minus $ 0
$1,001 but not over $6,000 4.0% minus $20
$6,000 or more 5.0% minus $80

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