Alabama has a graduated state individual income tax, with rates ranging from 2.00 percent to 5.00 percent. There are also jurisdictions that collect local income taxes. Alabama has a 6.50 percent corporate income tax rate, a 4.00 percent state sales tax rate, and an average combined state and local sales tax rate of 9.46 percent. Alabama has a 0.37 percent effective property tax rate on owner-occupied housing value. Alabama does not have an estate tax or inheritance tax. Alabama’s gas tax is 31 cents per gallon, and its cigarette excise tax is $0.675 per pack of 20 cigarettes.
Alabama raises tax revenue primarily through general sales taxes (32.6 percent of total state and local tax revenue), individual income taxes (24.0 percent), and other taxes (21.6 percent). Alabama collects $4,950 in state and local tax collections per capita, carries $5,470 in state and local debt per capita, and has a 78 percent funded ratio of public pension plans. Alabama’s tax system ranks 37th overall on the 2026 State Tax Competitiveness Index.
Each state’s tax code is a multifaceted system with many moving parts, and Alabama is no exception. Use the tabs below to compare Alabama taxes with other states and to see how Alabama raises tax revenue. You can also browse our tax maps, which are compiled from our annual publication, Facts & Figures 2026: How Does Your State Compare?
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The State Tax Competitiveness Index enables policymakers, taxpayers, and business leaders to gauge how their states’ tax systems compare. While there are many ways to show how much state governments collect in taxes, the Index evaluates how well states structure their tax systems and provides a road map for improvement.
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Facts & Figures serves as a one-stop state tax data resource that compares all 50 states on over 40 measures of tax rates, collections, burdens, and more.
2 min read
Individual income taxes are a major source of state government revenue, accounting for more than a third of state tax collections. How do income taxes compare in your state?
9 min read
Retail sales taxes are an essential part of most states’ revenue toolkits, responsible for nearly a quarter of combined state and local tax collections.
18 min read
Forty-four states levy a corporate income tax, with top rates ranging from a 2 percent flat rate in North Carolina to an 11.5 percent top marginal rate in New Jersey. Four states—Georgia, Nebraska, North Carolina, and Pennsylvania—reduced their corporate income tax rates effective January 1, 2026.
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Property taxes are the primary tool for financing local governments. While no taxpayers in high-tax jurisdictions will be celebrating their yearly payments, property taxes are largely rooted in the benefit principle of taxation: the people paying the property tax bills are most often the ones benefiting from the services.
9 min read
An ideal sales tax is imposed on all final consumption, both goods and services, but excludes intermediate transactions to avoid tax pyramiding.
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Retail sales taxes are an essential part of most states’ revenue toolkits, responsible for 32 percent of state tax collections and 13 percent of local tax collections (24 percent of combined collections).
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Summer has arrived and states are beginning to implement policy changes that were enacted during the legislative session (or are being phased in over time).
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The vaping industry has grown rapidly in recent decades, becoming a well-established product category and a viable alternative to cigarettes for those trying to quit smoking. US states levy a variety of tax structures on vaping products.
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To stay competitive in an increasingly mobile post-pandemic world, states and localities must learn from the tax policy successes and failures of their neighbors and communities across the nation.
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Different layers of taxation on production and distribution combine to make up about 40 percent of the retail price of beer.
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Newer products like spirits-based hard seltzers and ready-to-drink cocktails have fueled growth, while also blurring the lines of a categorical tax system. The result has been a spirited competition throughout the alcohol industry for market share, including calls to reform tax policy.
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Gross receipts taxes impose costs on consumers, workers, and shareholders alike. Shifting from these economically damaging taxes can thus be a part of states’ plans for improving their tax codes in an increasingly competitive tax landscape.
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Gas tax revenues have decoupled from road expenses and have been unable to support road funding in recent years. As such, states nationwide are exploring ways to supplement or replace gas tax revenues.
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At the end of 2025, the individual tax provisions in the Tax Cuts and Jobs Act (TCJA) expire all at once. Without congressional action, most taxpayers will see a notable tax increase relative to current policy in 2026.
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