Datcher Bill Would Create One-Time Alabama Income Tax Credit for 2025
Written by Brent Wilson on
April 1, 2026
Rep. Kelvin Datcher, D-Birmingham, has introduced a bill that would create a one-time Alabama income tax credit for some individual taxpayers filing for the 2025 tax year.
The proposal, HB657, was read for the first time Tuesday and sent to the House Ways and Means Education Committee. Under the bill, eligible taxpayers could receive up to $250 for single filers or married people filing separately, up to $375 for heads of household, and up to $500 for married couples filing jointly.
The bill would apply to people who filed Alabama income tax returns for both 2024 and 2025. It would exclude nonresidents, estates and trusts, and taxpayers who were claimed as a dependent in 2024, although a dependent who earned income in 2024 could still qualify in some cases.
The credit would be calculated as the lesser of two amounts: a taxpayer’s 2024 Alabama income tax liability or the fixed dollar amount tied to that person’s 2025 filing status. In practice, that means a filer whose 2024 state income tax bill was lower than the maximum amount for that filing category would receive the lower figure.
HB657 also sets special rules for people who were not full-year Alabama residents. Nonresidents and part-year residents would have their credit reduced based on the share of their income earned in Alabama.
The bill says the credit could not be larger than a taxpayer’s 2025 tax liability. Any payment issued under the law would not count as taxable income, and the state could send the money by direct deposit or check. The state also could apply the payment to certain outstanding debts before sending any remaining amount to the taxpayer.
Datcher’s bill would add a new section to Alabama’s income tax law and give the state Department of Revenue authority to adopt rules to carry it out. If lawmakers pass the bill and it becomes law, it would take effect immediately.
Sending the bill to the House Ways and Means Education Committee is the first step in the legislative process. That committee handles many tax and revenue proposals before they can move to the full House for debate and a vote.
If the committee approves HB657, the bill would still need to pass the House and Senate in identical form before going to the governor. Lawmakers introduced it near the end of March, and its next movement will depend on whether the committee places it on its agenda in the weeks ahead.
