How does Alabama tax retirement income (Social Security, pensions, 401(k)/IRA)?
Alabama does not tax Social Security income at the state level — no matter your income. Most traditional pensions — including government, military, and many private pensions — are fully exempt from Alabama state income tax.
Distributions from traditional 401(k)s and IRAs are generally subject to Alabama income tax as ordinary income. However, if you are age 65 or older, you can exclude up to $6,000 per person of taxable retirement income from state tax each year; for a couple filing jointly that can be $12,000 total.
Qualified Roth IRA or Roth 401(k) distributions are generally not taxed by Alabama, because they’re already tax-free federally when conditions are met. This tax structure makes Alabama relatively tax-friendly for many retirees. Learn more about retirement-friendly Alabama tax policies.