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Alabama listed among the most tax-friendly states

Photo: Kay Gaensler
Photo: Kay Gaensler

BIRMINGHAM, Ala. — Washington, D.C-based finance and business magazine Kiplinger recently named Alabama among the most tax friendly states in the nation.

Though the state has been embroiled in its own battle over whether or not to raise taxes to increase revenue, it still remains one of the lowest-tax states on net.

Coming in at #5, Kiplinger noted Alabama’s low income, sales, and property taxes, but also mentioned the relatively uncommon practice of taxing groceries.

State income tax: 2% (on income up to $500/individual, $1,000/joint) – 5% (on income of more than $3,000/individual, $6,000/joint)

State sales tax: 4%

Gas taxes and fees: 21 cents per gallon

Alabama’s property taxes are the second-lowest in the U.S. (Hawaii has the lowest on a percentage basis, helped by the sky-high value of property there.) Median tax on the state’s median home value of $122,700 is just $532.

It doesn’t take much income to find yourself in the state’s top income tax bracket, where a 5% rate kicks in for those making as little as $3,000 for single filers and $6,000 for married couples. However, the Yellowhammer State allows residents to deduct all federal income tax from state taxable income.

While the state sales tax rate is a modest 4%, additional levies from state and local jurisdictions boost the average combined rate to 8.9%, among the highest in the U.S. And unlike most states, Alabama doesn’t exempt food from its sales tax. Prescription drugs and insulin-related items are exempt.

Here are the top 10 most tax-friendly states, according to Kiplinger:

  1. Delaware
  2. Wyoming
  3. Alaska
  4. Louisiana
  5. Alabama
  6. Mississippi
  7. Arizona
  8. New Mexico
  9. Nevada
  10. South Carolina