HB108 Alabama 2020 Session

Summary

Primary Sponsor

Lynn Greer

Republican

Session

Regular Session 2020

Title

Deferred compensation plans, portion of income exempt from income tax, Sec. 40-18-19 am'd.

Summary

HB 108 would exempt 80% of distributions from defined contribution deferred compensation plans for Alabama residents age 65 or older, up to $20,000, with the exemption phased in from 2021 to 2030.

What This Bill Does

It amends the state income tax exemptions to allow 80% of distributions from defined contribution deferred compensation plans to be exempt from Alabama income tax, up to a rising cap beginning at $2,000 in 2021 and reaching $20,000 by 2030, for individuals 65 or older. The exemption cannot exceed 80% of the distribution. The Department of Revenue is authorized to implement the changes, and the act becomes effective three months after governor approval.

Who It Affects

• Alabama resident taxpayers who are 65 years old or older and receive distributions from defined contribution deferred compensation plans (such as 401(k) or 403(b) plans); they would benefit from a growing portion of those distributions not being taxed by the state.
• Plan administrators and financial institutions that distribute funds from defined contribution deferred compensation plans; they would need to apply the exemption and handle any related reporting and withholding under the new rules.

Key Provisions

• 80 percent of distributions from a defined contribution deferred compensation plan, up to $2,000 in 2021 and increasing by $2,000 each year until reaching $20,000 in 2030, are exempt from Alabama state income tax for taxpayers aged 65 or older.
• The Department of Revenue may enact rules to implement and administer the exemption, and the act becomes effective on the first day of the third month after it is signed into law.

AI-generated summary using openai/gpt-5-nano on Feb 22, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Taxation