Read the full stored bill text
HB341 ENROLLED
Page 0
HB341
JPURUYF-2
By Representatives Starnes, Rehm, Shaw, Bolton, Stubbs,
Fincher, Mooney, Oliver, Ingram, Paschal, Lipscomb, Smith,
Brown, Sorrells, Marques, Robertson, Hammett, Treadaway,
Kirkland, Colvin, Stadthagen, DuBose, Shaver, Hulsey
RFD: Ways and Means Education
First Read: 29-Jan-26
1
2
3
4
5
6
7
8
HB341 Enrolled
Page 1
First Read: 29-Jan-26
Enrolled, An Act,
Relating to exemptions from state income taxation; to
amend Section 40-18-19, Code of Alabama 1975; to exempt the
first $5,000 of taxable income earned from inactive duty
training from state income tax for individuals that serve in
the Alabama National Guard; and to make nonsubstantive,
technical revisions to update the existing code language to
current style.
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. Section 40-18-19, Code of Alabama 1975, is
amended to read as follows:
"§40-18-19
(a) The following exemptions from income taxation shall
be allowed to every individual resident taxpayer:
(1) Retirement allowances, pensions and annuities, or
optional allowances, approved by the Board of Control of the
Teachers' Retirement System of Alabama, which exempt status is
set out in Section 16-25-23.
(2) Retirement allowances, pensions and annuities, or
optional allowances, approved by the Board of Control of the
Employees' Retirement System of Alabama, which exempt status
is set out in Section 36-27-28.
(3) The first eight thousand dollars ($8,000) of any
retirement compensation, retirement allowances, pensions and
annuities, or optional allowances, received by any eligible
firefighter, as defined in Sections 36-32-1 and 36-32-2, or
his or her designated beneficiary, from any firefighting
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
HB341 Enrolled
Page 2
his or her designated beneficiary, from any firefighting
agency established in the State of Alabama, but only if such
retirement compensation, retirement allowances, pensions and
annuities, or optional allowances as are awarded as a result
of fire protection services rendered. This subdivision shall
become effective for the taxable years beginning January 1,
1987, and thereafter following its passage and approval by the
Governor, or upon its otherwise becoming a law ; provided, that
for the taxable years beginning on or after January 1, 1991,
all of the pension and retirement payments shall be exempt
from taxation.
(4) The first eight thousand dollars ($8,000) of any
retirement compensation, retirement allowances, pensions and
annuities, or optional allowances received by any eligible
peace officer, as defined in subdivision (11) of Section
36-21-60 (11), or his or her designated beneficiary, from any
police retirement system established in the State of Alabama,
but only if the retirement compensation, retirement
allowances, pensions and annuities, or optional allowances are
awarded as a result of police services rendered. This
subdivision shall become effective for taxable years beginning
January 1, 1984, and thereafter; provided, that for the
taxable years beginning on or after January 1, 1991, all of
the pension and retirement payments shall be exempt from
taxation.
(5) Income received as annuities under the United
States Retirement System from the United States Government
Civil Service Retirement and Disability Fund, including income
received from the Tennessee Valley Authority's pension system,
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
HB341 Enrolled
Page 3
received from the Tennessee Valley Authority's pension system,
income received as annuities under the United States Foreign
Service Retirement and Disability Fund, or income received
from any other United States government retirement and
disability fund.
(6) Beginning January 1, 1991, all payments made on or
after such date to a retiree or his designated beneficiary
under a "defined benefit plan," as defined under 26 U.S.C. §
414(j), to the extent such payment would be taxable for
federal income tax purposes.
(7) Net income realized by individuals and partnerships
from time to time in the business of conducting a financial
business employing monied capital coming into competition with
the business of national banks, but only if such individuals
and partnerships are subject to an excise tax imposed by this
state on or with respect to such income.
(8) In the case of a single person or a married person
not living with husband or wife, a personal exemption of one
thousand five hundred dollars ($1,500) or, in the case of a
head of a family or a married person living with husband or
wife, a personal exemption of three thousand dollars ($3,000),
but a husband and wife living together shall receive only one
personal exemption of three thousand dollars ($3,000) against
their aggregate income, and in case they make separate returns
each must claim a personal exemption of one thousand five
hundred dollars ($1,500).
(9) a. Three hundred dollars ($300) for each person,
other than husband or wife, dependent upon the taxpayer, and
over half of whose support, for the calendar year in which the
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
HB341 Enrolled
Page 4
over half of whose support, for the calendar year in which the
taxable year for the taxpayer begins, was received from the
taxpayer.
b. For tax years beginning after December 31, 2006, for
taxpayers with adjusted gross income equal to or less than
twenty thousand dollars ($20,000), one thousand dollars
($1,000) for each person other than husband or wife, dependent
upon the taxpayer, and over half of whose support, for the
calendar year in which the taxable year for the taxpayer
begins, was received from the taxpayer.
c. For tax years beginning after December 31, 2006, for
taxpayers with adjusted gross income in excess of twenty
thousand dollars ($20,000) and equal to or less than one
hundred thousand dollars ($100,000), five hundred dollars
($500) for each person other than husband and wife, dependent
upon the taxpayer, and over half of whose support, for the
calendar year in which the taxable year for the taxpayer
begins, was received from the taxpayer.
d. For tax years beginning after December 31, 2021, for
taxpayers with adjusted gross income equal to or less than
fifty thousand dollars ($50,000), one thousand dollars
($1,000) for each person other than husband or wife, dependent
upon the taxpayer, and over half of whose support, for the
calendar year in which the taxable year for the taxpayer
begins, was received from the taxpayer.
e. For tax years beginning after December 31, 2021, for
taxpayers with adjusted gross income in excess of fifty
thousand dollars ($50,000) and equal to or less than one
hundred thousand dollars ($100,000), five hundred dollars
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
HB341 Enrolled
Page 5
hundred thousand dollars ($100,000), five hundred dollars
($500) for each person other than husband and wife, dependent
upon the taxpayer, and over half of whose support, for the
calendar year in which the taxable year for the taxpayer
begins, was received from the taxpayer.
For the purposes of this section, "dependent" shall
mean: A son or daughter of the taxpayer or a descendant of
either; a stepson or stepdaughter of the taxpayer; a brother,
sister, stepbrother, or stepsister of the taxpayer; the father
or mother of the taxpayer or an ancestor of either; a
stepfather or stepmother of the taxpayer; a son or daughter of
a brother or sister of the taxpayer; a brother or sister of
the father or mother of the taxpayer; or a son-in-law,
daughter-in-law, father-in-law, mother-in-law, brother-in-law,
or sister-in-law of the taxpayer. As used in this paragraph
the terms "brother" and "sister" include a brother or sister
by the half blood. For the purpose of determining whether any
of the foregoing relationships exist, a legally adopted child
of a person shall be considered a child of such a person by
blood.
(10) Beginning January 1, 1998, all income, interest,
dividends, gains, or benefits of any kind received from
savings accounts or prepaid tuition contracts administered
under Title 16, Chapter 33C, are exempt from all income
taxation by the state and by all of its political subdivisions
to the extent that the amounts remain on deposit in the PACT
Trust Fund or the ACES Trust Fund, or are used to pay the
designated beneficiary's qualified higher education expenses
as defined in 26 U.S.C. § 529, or are refunded under such
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
HB341 Enrolled
Page 6
as defined in 26 U.S.C. § 529, or are refunded under such
terms as would not carry a penalty under 26 U.S.C. § 529.
(11) Beginning January 1, 2016, all income, interest,
dividends, gains, or benefits of any kind received from ABLE
savings accounts administered under Title 16, Chapter 33C, are
exempt from all income taxation by the state and by all of its
political subdivisions to the extent that the amounts remain
on deposit in the ABLE Trust Fund, or are used to pay the
designated beneficiary's qualified disability expenses as
defined in 26 U.S.C. § 529A, or are refunded under such terms
as would not carry a penalty under 26 U.S.C. § 529A, or other
applicable federal law.
(12) Beginning January 1, 2018, amounts received by an
individual from sources within a foreign country or countries
which constitute a housing allowance, and earned income
attributable to services performed by such individual received
during the tax period are exempt from all income taxation by
the state and by all of its political subdivisions to the
extent such income is exempt from federal income tax pursuant
to 26 U.S.C. § 911.
(13) a. Beginning January 1, 2023, the first six
thousand dollars ($6,000) of taxable retirement income.
b. This exemption may only be claimed by individual
taxpayers who are 65 years of age or older.
(14) Beginning January 1, 2027 through December 31,
2029, the first five thousand dollars ($5,000) of income
received by a member of the Alabama National Guard as payment
for inactive duty training (IDT) as described in 37 U.S.C. §
206.
141
142
143
144
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164
165
166
167
168
HB341 Enrolled
Page 7
206.
(b) Of the following personal exemptions allowed
resident taxpayers, each nonresident individual taxpayer shall
be allowed that proportion thereof that the adjusted gross
income received by saidthe nonresident individual taxpayer
from sources within the State of Alabama bears to his or her
adjusted gross income received from sources within and without
the State of Alabama: In the case of a single person or a
married person not living with husband or wife, a personal
exemption of one thousand five hundred dollars ($1,500) or, in
the case of a head of a family or a married person living with
husband or wife, a personal exemption of three thousand
dollars ($3,000), a husband and wife living together shall
receive but one personal exemption of three thousand dollars
($3,000) against their aggregate income; and, in case they
make separate returns, each must claim a personal exemption of
one thousand five hundred dollars ($1,500); and the amount in
subdivision (a)(9) of subsection (a) for each person, other
than husband or wife, dependent upon and receiving his or her
chief support from the taxpayer.
(c) The Department of Revenue may enact rules as
necessary to implement and administer the provisions of this
actsection ."
Section 2. This act shall become effective on October
1, 2026.
169
170
171
172
173
174
175
176
177
178
179
180
181
182
183
184
185
186
187
188
189
190
191
192
HB341 Enrolled
Page 8
1, 2026.
________________________________________________
Speaker of the House of Representatives
________________________________________________
President and Presiding Officer of the Senate
House of Representatives
I hereby certify that the within Act originated in and
was passed by the House 10-Feb-26, as amended.
John Treadwell
Clerk
Senate 07-Apr-26 Amended and Passed
House 07-Apr-26 Concurred in Senate
Amendment
193
194
195
196
197
198
199
200
201
202
203
204
205
206
207
208
209
210
211
212
213
214
215
216
217
218
219
220
221
222
223
224
225