HB527 Alabama 2026 Session

Summary

Primary Sponsor

James LomaxRepresentative

Republican

Session

2026 Regular Session

Title

Individual income taxes; deduction for qualified overtime income established.

Summary

HB527 would create a new deduction for qualified overtime pay up to $1,000 per taxpayer for 2026–2028 and temporarily suspend the state sales tax on food for two months, with related code updates.

What This Bill Does

The bill establishes an individual income tax deduction equal to the amount of qualified overtime compensation received in a tax year, up to $1,000 per taxpayer, for tax years 2026 through 2028. Qualified overtime is defined and calculated under federal rules (26 U.S.C. § 225). Taxpayers can claim this overtime deduction whether or not they itemize their deductions, and they may elect the optional standard deduction instead of certain itemized deductions. It also suspends the state portion of the sales and use taxes on food for May 1 through June 30, 2026, and includes non-substantive technical revisions to update the code language to current style.

Who It Affects

• Alabama individual income taxpayers who earn qualified overtime income, who could reduce their taxable income by up to $1,000 per year.
• All Alabama residents who purchase food taxed by the state, who would benefit from the temporary suspension of the state sales tax on food during May 1 to June 30, 2026.

Key Provisions

• Establishes a deduction for qualified overtime income equal to the amount of qualified overtime compensation received during the tax year, up to $1,000 per taxpayer, for tax years 2026 through 2028, defined per 26 U.S.C. § 225.
• For tax years 2026–2028, taxpayers may claim the overtime deduction regardless of itemization and may elect the optional standard deduction (20% of AGI or fixed amounts by filing status) in lieu of certain itemized deductions.
• Suspends the state portion of the sales and use taxes on food for May 1, 2026 through June 30, 2026.
• Section 1 effective October 1, 2026; Section 2 effective immediately; includes non-substantive revisions to update existing code language to current style.

AI-generated summary using openai/gpt-5-nano-2025-08-07 on Mar 31, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Taxation & Revenue