HB388 Alabama 2025 Session

Summary

Primary Sponsor

Danny GarrettRepresentative

Republican

Session

2025 Regular Session

Title

Income tax, exemption for taxable retirement income increased

Summary

HB388 would raise Alabama's 65+ retirement income exemption from $6,000 to $12,000, using a schedule that keeps $6,000 through 2025 and increases to $12,000 in 2026, with the act becoming effective October 1, 2025.

What This Bill Does

The bill increases the amount of retirement income that is exempt from Alabama income taxes for residents age 65 or older. It sets a phased schedule: $6,000 exemption for tax years 2023 through 2025, and $12,000 starting in 2026. The exemption applies to retirement income from listed sources such as pensions, annuities, and related allowances; other existing retiree exemptions remain in place, and the act takes effect on October 1, 2025.

Who It Affects

• Alabama resident taxpayers who are 65 years of age or older and have taxable retirement income from pensions, annuities, or other listed retirement sources (e.g., state employee pensions, federal government retirement funds, police/fire retirement systems, and related allowances). They would see a larger portion of their retirement income exempt from state income tax, especially starting in 2026.
• Nonresident individual taxpayers with Alabama-sourced retirement income; their exemptions would continue to be prorated under existing rules and are not directly changed by the 65+ exemption increase.

Key Provisions

• Amendment to Section 40-18-19 to increase the 65+ retirement income exemption from $6,000 to $12,000.
• Phased schedule: $6,000 exemption for tax years 2023-2025; $12,000 exemption beginning with tax year 2026.
• Exemption applies only to individuals who are 65 years of age or older and are resident taxpayers of Alabama.
• Effective date: October 1, 2025.

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 & Revenue