STATE RANKING #23

Quick facts: 

-Alabama does not tax your Social Security, making it a great place for retirees.

Alabama has one of the lowest property tax rates in the country

4.00%

State Income Tax

State
Income
Tax

6.50%

Cost of Setting Up A Business

state
business
tax

SUPER LOW

Property
Taxes

9.22%

Sales
Tax (average)

State Income Taxes in Alabama

The state of Alabama does have an individual income tax. Like most states with income tax, it is calculated on a marginal scale whose range is from 2.00% to 4.00% for 2020.

State Business Taxes in Alabama

The state of Alabama has a flat Corporate Tax rate of 6.50%. For other business entities that are flow-thru entities, such as S Corporations, Partnerships, LLCs, etc., they are taxed the individual income tax rates between 2.00% to 4.00% (max).

Capital Stock Tax in Alabama

The state of Alabama has a Capital Stock tax referred to as Privilege Tax. The Privilege tax is based on the net worth of your business at 0.175%. The Privilege tax has a minimum tax of $100, and maximum tax of $15,000 per year.

Sales Taxes in Alabama

Like many states, Alabama has multiple tax rates. One at the state level and another at the local level. The state rate is 4.00% the average local rate is 5.22% (total average tax rate for Alabama Sales Tax is 9.22%).

Property Taxes in Alabama

The average property tax rate for residential property in the state of Alabama is 0.40%, making it almost the lowest effective property tax rate in the country (just behind Hawaii which has the lowest).

Unemployment taxes in Alabama

Unemployment taxes usually consist of three factors. They are the wage base, range of rates, number of schedules. Below is an outline of the three:

  • Wage Base – Alabama has a low wage base of $8,000 for 2020
  • UI Rates – range from 0.65% to 6.80%
  • Schedules – Alabama has four rate schedules regarding Unemployment taxes.

Alabama Business Entities - LLCs

Alabama refers to its yearly LLC fee as a Privilege Tax. Here are some important facts:

  • Alabama annual LLC fee (a.k.a. Privilege Tax) is $100
  • The year you register with the State, you pay a one time fee of $150.00
  • Secretary of State of Alabama website – click here
  • If you would like help setting up your LLC, we recommend using IncFile.com. They are simple and easy to use.

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