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Alabama State Tax Updates

Our Dash of SALT Blog provides the most recent developments and changes in state and local tax regulations. Here are the latest updates for Alabama.

July 1, 2025

Alabama Amends Research and Experimental Expense Treatment

Authored by: Bonnie Susmano, JD, MBA and Brandon Spinella

For tax years beginning on or after January 1, 2024, research and experimental expenditures for Alabama tax purposes will not follow the provisions of IRC § 174, as amended by the Tax Cuts and Jobs Act (TCJA), P.L. 115-97, effective 5/14/2025. Instead, taxpayers can choose to currently deduct research and experimental expenditures or treat the expenditures as deferred expenses in the same manner as provided in IRC § 174 prior to tax year 2022.

If you have any questions about the Alabama research and experimental expenditures for tax purposes, please reach out to a member of the Withum SALT Team.

June 3, 2025

Alabama Amends Research and Experimental Expense Treatment

Authored by: Brian Meier, MSA and Katie Nguyen, CPA

Effective May 14, 2025, Alabama has enacted legislation (Act 400, H163) that separates its tax treatment of research and experimental (R&E) expenditures from the federal approach introduced by the Tax Cuts and Jobs Act (TCJA). Starting with the 2024 tax year, Alabama taxpayers can either immediately deduct R&E costs or defer them, following the rules that were in place before 2022. This move rejects the TCJA’s requirement to amortize such expenses over five years (or 15 years for foreign research), allowing more flexibility for businesses conducting R&D within the state.

If you have questions about state treatment of R&D expenses, please reach out to a member of the Withum SALT Team.

June 3, 2025

Alabama Exempts Compensation for Nonresidents With 30 or Less Workdays in the State

Authored by: Bonnie Susmano, JD, MBA and Jessie Racioppi, MSA

For tax years beginning after December 31, 2025, nonresident individuals will be exempt from Alabama nonresident individual income tax under the following conditions:

  1. Compensation is for duties performed by the nonresident individual in Alabama in 30 or less days per calendar year;
  2. The nonresident individual performed employment duties in at least two states per calendar year;
  3. The compensation was not paid to the individual as a professional athlete, professional entertainer, or public figure;
  4. The nonresident individual’s home state either has a similar exclusion, does not impose individual income tax, or the individual’s income is exempt from Alabama state tax under federal laws.

If an individual meets these conditions, the employer is no longer obligated to withhold Alabama state tax.

If you have questions about nonresident personal income tax, please reach out to a member of the Withum SALT Team.

April 8, 2025

Alabama’s Senate to Consider Sales Tax Cut on Baby and Women’s Products

Authored by: Bonnie Susmano, JD, MBA and Emilia Jarrin

Alabama House Bill 152 proposes eliminating the state sales tax on baby care items, feminine hygiene products, and maternity clothing. If enacted, this bipartisan Bill will make essential products more affordable. Presently, the Alabama sales tax on the items covered by Bill 152 ranges from 4% to 11% depending on the County.

If you have questions about state sales tax exemptions, please reach out to a member of the Withum SALT Team.

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