Adopted R 1060
Alabama2026Enacted
HB527
Alabama Tax Deduction for Overtime Pay and Temporary Food Sales Tax Pause
Last scannedAug 24, 2026, 9:06 AM
In one sentence
This law creates a new tax deduction of up to $1,000 for qualified overtime pay earned in Alabama between 2026 and 2028 and pauses the state sales tax on food from May through June 2026.
What it does
- Establishes an income tax deduction equal to qualified overtime compensation received during the year, capped at $1,000 per taxpayer for years starting in 2026 through 2028.
- Allows taxpayers to claim this overtime deduction whether they choose itemized deductions or take the standard deduction on their state return.
- Suspends the collection of the state portion of sales and use taxes specifically on food items from May 1, 2026, through June 30, 2026.
Who it affects
- Individual income taxpayers in Alabama who receive qualified overtime compensation during taxable years beginning January 1, 2026.
- Consumers purchasing food items within the state between May 1 and June 30, 2026.
Limits and unknowns
- The overtime deduction is limited to $1,000 per taxpayer and only applies to tax years beginning between January 1, 2026, and December 31, 2028.
- The food sales tax suspension lasts for exactly two months in the spring of 2026; it does not apply before May or after June.
Plain language
Terms to know
- Qualified overtime compensation
- Extra pay earned by a worker for hours worked beyond their regular schedule that meets specific criteria set by the law to be eligible for this deduction.
- Sales and use tax suspension
- A temporary pause where the state does not collect its portion of taxes on certain items, in this case food, during a defined two-month period.
Official record
Sources
Official summary
This act amends Section 40-18-15, Code of Alabama 1975, to: (1) for tax years beginning January 1, 2026, and ending December 31, 2028, establish an individual income tax deduction for qualified overtime compensation equal to the amount of qualified overtime compensation received during the taxable year, not exceeding $1,000 per taxpayer and regardless of whether deductions are itemized; and (2) beginning May 1, 2026, through June 30, 2026, suspend the state portion of the sales and use tax on food.
Official activity
Bill history
- EnactedHouse
- Motion to Read a Third Time and Pass - Adopted Roll Call 1244 (Yeas 32, Nays 0)Senate
- Third Reading in Second House (Yeas 31, Nays 0)Senate
- Delivered to GovernorHouse
- Signature RequestedSenate
- EnrolledHouse
- Ready to EnrollHouse
- Read for the Second Time and placed on the CalendarSenate
- Reported Out of Committee Second HouseSenate
- Motion to Read a Third Time and Pass as Amended - Adopted Roll Call 1064 (Yeas 103, Nays 0)House
- Motion to Adopt - Adopted Roll Call 1063 (Yeas 103, Nays 0)House
- Lomax motion to Table - Adopted Roll Call 1062 (Yeas 103, Nays 0)House
- Lomax motion to Table - Adopted Roll Call 1061 (Yeas 101, Nays 0)House
- Motion to Adopt - Adopted Roll Call 1060 (Yeas 96, Nays 3)House
- Third Reading in House of Origin (Yeas 97, Nays 2)House
- Pending Committee Action in Second HouseSenate
- Read for the first time and referred to the Senate Committee on Finance and Taxation EducationSenate
- EngrossedHouse
- Shaw 1st Amendment OfferedHouse
- Lands 2nd Amendment OfferedHouse
Changes
Amendments
4 stored
Adopted R 1061 by Lomax
Adopted R 1062 by Lomax
Adopted R 1063