HB163 Alabama 2022 Session

Summary

Primary Sponsor

Lynn Greer

Republican

Session

Regular Session 2022

Title

Income tax, optional standard deduction amount and adjusted gross income range allowable for maximum optional standard deduction and dependent exemption, increased, Secs. 40-18-15, 40-18-19 am'd.

Summary

HB163 increases Alabama's optional standard deduction and broadens the income ranges for the maximum optional standard deduction and the maximum dependent exemption.

What This Bill Does

Allows taxpayers to take an optional standard deduction equal to 20% of adjusted gross income (AGI) or a fixed amount, whichever is smaller, with higher fixed amounts for married couples filing jointly. Implements updated tables for the optional standard deduction for tax years 2021 and later, setting specific base amounts and phaseouts by filing status as AGI increases. Expands the dependent exemption by adjusting the per-dependent exemption amounts based on AGI, increasing or maintaining exemptions at lower incomes and reducing them at higher incomes through defined AGI tiers. Keeps other deduction and exemption provisions in place but aligns them with the new optional standard deduction and dependent-exemption rules; the act takes effect immediately upon passage.

Who It Affects

• Resident individual taxpayers filing Alabama state returns (single, head of household, married filing jointly, and married filing separately) who choose between itemizing deductions and the optional standard deduction, with amounts varying by filing status and AGI.
• Dependents claimed on Alabama returns, whose per-dependent exemption amounts now depend on AGI thresholds; nonresident taxpayers are also affected through how Alabama-source income interacts with the deduction and exemption limits.

Key Provisions

• 40-18-15: Optional standard deduction changes. In general, taxpayers may deduct 20% of AGI or $2,000 (or $4,000 for joint filers), whichever is lesser. The 2021+ tables set higher base deductions by filing status with phased reductions as AGI increases: for tax years after 2021, the following examples apply—married filing jointly with AGI under $25,500 gets $8,500 (reduced by $175 per $500 of AGI above $25,500, minimum $5,000); married filing separately under $12,750 gets $4,250 (reduced by $88 per $250 above threshold, minimum $2,500); head of family under $25,500 gets $5,200 (reduced by $135 per $500 above threshold, minimum $2,500); single under $25,500 gets $3,000 (reduced by $25 per $500 above threshold, minimum $2,500).
• 40-18-19: Dependent exemption changes. The per-dependent exemption amounts are adjusted by AGI thresholds, increasing from prior years (2006 thresholds to $20,000 AGI for $1,000 per dependent; $20,000–$100,000 AGI for $500 per dependent) to the 2021 thresholds of up to $50,000 AGI for $1,000 per dependent and $50,000–$100,000 AGI for $500 per dependent, with the dependent definitions expanded to include a broad list of family relationships.
• Effective date: The act becomes effective immediately upon passage and approval by the Governor.

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