HB657 • 2026

Income Taxes; to provide a one-time refundable income tax credit to qualified taxpayers

Taxes

Passed Legislature

This bill passed both chambers and reached final enrollment, even if later executive action is not shown here.

Sponsor: Datcher
Last action: 2026-03-31
Official status: Pending Committee Action in House of Origin
Effective date: Not listed

Plain English Breakdown

The bill status in metadata is conflicting: it lists 'Passed Legislature' but also shows a last action date of March 31, 2026, with 'Pending Committee Action.' The effective date field is empty.

One-Time Tax Credit for Qualified Alabama Income Taxpayers

This bill provides a one-time refundable tax credit to certain individual taxpayers who filed Alabama income taxes in both 2024 and 2025.

What This Bill Does

Adds Section 40-18-513 to the Code of Alabama to create a one-time tax credit for the 2025 tax year.
Sets the credit amount based on filing status: $250 for single or married filing separately, $375 for head of household, and $500 for married filing jointly.
Limits the credit to the lesser of the taxpayer's actual 2024 income tax liability (Line 17) or their specific filing status amount.
Further limits the refund so it cannot exceed the taxpayer's total 2025 individual income tax liability reported on Line 17.
Requires refunds to be sent by check or electronic transfer based on the taxpayer's instructions, after paying off any outstanding state debts first.
States that these credits and refunds are not counted as taxable income for Alabama purposes.

Who It Names or Affects

Individual taxpayers who filed an Alabama individual income tax return for both the 2024 and 2025 tax years, including those with extensions.
Nonresidents or part-year residents whose credit amount is reduced based on their ratio of taxable income in Alabama.
Taxpayers with outstanding debts to the state, as refunds will first be used to pay off these balances.

Terms To Know

Qualified taxpayer: An individual who filed an Alabama income tax return for both 2024 and 2025. This excludes nonresidents, estates, trusts, and dependents claimed in 2024 unless they had earned income.
Refundable tax credit: A payment from the state that is automatically credited after filing a 2025 return. The amount cannot exceed specific limits based on past or current tax liability.

Limits and Unknowns

The refund amount is capped by the taxpayer's reported income tax liability for either 2024 or 2025.
Any outstanding state debts will be deducted from this refund before money is sent to the taxpayer.
This credit does not earn interest for the person receiving it.

Bill History

2026-03-31 House
Pending Committee Action in House of Origin
2026-03-31 House
Read for the first time and referred to the House Committee on Ways and Means Education

Official Summary Text

Income Taxes; to provide a one-time refundable income tax credit to qualified taxpayers

Current Bill Text

Read the full stored bill text

HB657 INTRODUCED
Page 0
HB657
9J8S9BP-1
By Representatives Datcher, Lawrence
RFD: Ways and Means Education
First Read: 31-Mar-26
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9J8S9BP-1 03/26/2026 RA (F)RA 2026-1460
Page 1
First Read: 31-Mar-26
SYNOPSIS:
This bill would provide a one-time tax credit to
certain individual income taxpayers for the 2025 tax
year.
A BILL
TO BE ENTITLED
AN ACT
Relating to income taxes; to add Section 40-18-513 to
the Code of Alabama 1975, to provide a one-time tax credit to
certain individual income taxpayers for the 2025 tax year.
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. Section 40-18-513 is added to the Code of
Alabama 1975, to read as follows:
§40-18-513
(a) As used in this section, the term "qualified
taxpayer" means an individual taxpayer who filed an Alabama
individual income tax return pursuant to the tax levied in
Section 40-18-5, for both the 2024 and 2025 tax years,
including any extensions that have been granted.
(1) The term shall not include:
a. A nonresident;
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HB657 INTRODUCED
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a. A nonresident;
b. An estate or trust; or
c. An individual who was claimed as a dependent by
another taxpayer for federal or Alabama income tax purposes
for the 2024 tax year.
(2) The term shall include any individual taxpayer
excluded solely due to paragraph (1)c. of this section,
provided that such individual had earned income for the 2024
tax year.
(b)(1) Once a qualified taxpayer files an individual
income tax return for the 2025 tax year, the department shall
automatically credit such qualified taxpayer with a one-time
refund amount equal to the lesser of:
a. The qualified taxpayer's 2024 individual income tax
liability as properly reported on Line 17 of the 2024 Alabama
Form 40 or Line 17 of the 2024 Alabama Form 40A; or
b. An amount, which is based on such taxpayer's filing
status for the 2025 tax year, equal to:
1. In the case of a single taxpayer or married taxpayer
filing a separate return, two hundred fifty dollars ($250);
2. In the case of a head of household, three hundred
seventy-five dollars ($375); or
3. In the case of a married couple filing a joint
return, five hundred dollars ($500).
(2) Notwithstanding the provisions of subdivision (1),
in the case of any taxable nonresident or part-year resident
whose tax was prorated as provided by this chapter, the amount
of the refund credit determined pursuant to subdivision (1)
shall be prorated based on the ratio of income taxable in
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HB657 INTRODUCED
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shall be prorated based on the ratio of income taxable in
Alabama as properly reported on Line 10 of the 2024 Alabama
Form 40NR.
(3) In no event shall the department credit, pursuant
to this section, any taxpayer with a refund greater than the
taxpayer's individual income tax liability as properly
reported on Line 17 of the 2025 Alabama Form 40 or Line 17 of
the 2025 Alabama Form 40A.
(c) The refunds and credits provided for in this
section shall not constitute taxable income for Alabama
individual income tax purposes.
(d) Any refunds due under this section to a taxpayer
shall be either electronically transmitted or sent by check to
such taxpayer, based on the taxpayer's refund instructions, if
any, as indicated on the taxpayer's income tax return for the
2025 tax year, provided that such refund shall first be
credited against any outstanding liability existing at the
time the refund provided for in this section is to be issued.
(e) The amount of a refund or credit provided for in
this section may not accrue interest for the benefit of the
taxpayer or be paid or credited to the taxpayer with interest.
(f) Any amount due to be refunded or credited to a
taxpayer pursuant to this section shall be subject to the
setoff debt collection provisions of Article 3 of Chapter 40.
(g) The department may adopt rules necessary to
implement and administer this section.
Section 2. This act shall become effective immediately.
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