HB296 Alabama 2021 Session

Summary

Primary Sponsor

Lynn Greer

Republican

Session

Regular Session 2021

Title

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

Summary

Alabama would provide a phased-in state income tax exemption of 70% on distributions from defined contribution deferred compensation plans for residents 65 and older, up to a cap rising from 3,000 to 30,000 by 2031.

What This Bill Does

It adds a new exemption to Alabama income tax: 70% of distributions from defined contribution deferred compensation plans would be exempt for individuals aged 65 or older, up to a cap that starts at $3,000 in 2022 and increases by $3,000 each year until it reaches $30,000 in 2031. The exemption applies only to those 65+, and it cannot exceed 70% of the distributions. The Department of Revenue would issue rules to implement the exemption, and the act becomes effective three months after passage and governor approval.

Who It Affects

• Residents of Alabama who are 65 years of age or older and receive distributions from defined contribution deferred compensation plans (they would receive a state income tax exemption on a portion of those distributions).
• The Alabama Department of Revenue and retirement/plan administrators responsible for implementing and administering the new exemption.

Key Provisions

• Adds a new exemption: 70% of distributions from a defined contribution deferred compensation plan up to $30,000 exempt from state income tax for individuals 65 or older.
• Phased-in schedule starting January 1, 2022: exemption begins with 70% up to $3,000 and increases by $3,000 each year until reaching $30,000 in 2031.
• Eligibility limited to individual taxpayers who are 65+; exemption cannot exceed 70% of the distributions.
• Department of Revenue may enact rules to implement and administer the exemption.
• Effective date: three months after passage and governor approval.

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