They were already exempt … Alabama income tax must not be withheld when exempt severance payments are made. Also, the amount of the exempt severance payments should not be included in Alabama taxable wages (box 16) of the employee W-2 form, but should be disclosed in box 14 (Other) of the W-2 as exempt severance payments. The rates are 2%, 4% and 5%, and your marginal tax rate will depend on your income and filing status. Learn how filing status affects your tax bill Alabama income tax rates. HOME ADDRESS CITY STATE ZIP CODE If you had no Alabama income tax liability last year and you anticipate no Alabama income tax liability this year, you may claim ''exempt'' from Alabama withholding tax. Alabama collects a state income tax, with rates of 2%, 4% and 5%. In addition to a state sales tax, counties and cities are allowed to collect taxes on purchases made in their jurisdictions. Here's an excerpt taken directly from the State of Alabama web site: I AM OVER 65. Alabama's income tax brackets were last changed twelve years ago for tax year 2008, and the tax rates have not been changed since at least 2001.. Alabama has three marginal tax brackets, ranging from 2% (the lowest Alabama tax bracket) to 5% (the highest Alabama tax bracket). If you live in Alabama, you pay a state income tax in addition to filing your federal income taxes. 1/99 FULL NAME SOCIAL SECURITY NO. You won’t have to worry about rising income tax rates in Alabama. The Alabama dependent exemption amount increased significantly for some taxpayers beginning in 2007, as a result of a tax reform measure passed by the Legislature in 2006. MAT is an online filing system developed to allow taxpayers to file and pay their withholding tax electronically. The top rate can’t go above 5% because of the limit imposed by the state Constitution. The Alabama Department of Revenue offers a FREE electronic service, My Alabama Taxes (MAT), for filing and remitting withholding tax. Gov. File Schedules 3 & 4 to itemize your tax exemptions, and additional taxes paid. The good news is that if you are age sixty-five or older you are exempt from paying state property taxes. Kay Ivey signed an emergency proclamation today making the payments of up to $1,200 for individuals and $2,400 for married couples exempt from state income tax. Form 40 is the Alabama income tax return form for all full-time and part-time state residents (non-residents must file a Form 40NR). Military income: Up to $15,000 of military basic pay received during the taxable year may be exempted from Virginia income tax. For lower-income residents, that tax hit can be painful, since the state … Each marginal rate only applies to earnings within the applicable marginal tax bracket. FORM ALABAMA DEPARTMENT OF REVENUE A-4 Employee's Withholding Exemption Certificate REV. Fax the approval letter to (334) 242-0112. 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