Alabama Payroll · Graduated 2%-5% + Federal Tax Deduction · IRS Publication 15-T
Alabama Paycheck Calculator 2025
Estimate your Alabama take-home pay for hourly or salaried work. Alabama withholds a graduated 2% to 5% state income tax using the Form A-4 formula, which uniquely subtracts your own federal income tax first, plus optional city occupational taxes on gross wages. Uses 2025 IRS Publication 15-T rates.
Pay Details
Used for the federal Publication 15-T withholding tables. Your Alabama A-4 status is set separately below.
Check this on Form W-4 if you hold two jobs or your spouse also works. It switches to the higher federal Step 2 withholding schedule.
Pre-Tax Deductions (Optional)
Traditional elective deferral. Lowers federal and Alabama state tax, but not the city occupational tax.
Cafeteria-plan medical premiums. Lowers federal, FICA, and occupational-tax wages.
Federal W-4 Adjustments (Optional)
Annual federal dependent credit total (e.g. $2,000 per child under 17)
Federal Step 4c additional withholding per paycheck
Alabama Withholding (Form A-4)
The A-4 status sets your Alabama standard deduction, personal exemption, and rate schedule. No A-4 on file means the employer withholds at "0".
Number of dependents other than yourself and spouse. Each is worth $1,000 (income $50,000 or less), $500 ($50,000 to $100,000), or $300 (over $100,000).
Optional additional Alabama amount requested on Form A-4.
City Occupational Tax (Optional)
About two dozen Alabama cities levy an occupational (license) tax on wages earned in the city, withheld on gross pay. It follows where you work, not where you live. Confirm the current rate with your city.
Alabama tax is graduated (2%, 4%, 5%) applied after the standard deduction, personal exemption, dependents, and your own federal income tax withheld. Alabama has no employee-paid unemployment tax and no state disability deduction.
Enter your pay details and click Calculate to see your take-home pay breakdown.
Want the full Alabama payroll picture, including the Form A-4 formula, the federal income tax deduction, city occupational taxes, employer unemployment tax, and filing frequencies? Read the Alabama Payroll Taxes guide.
Alabama Payroll Taxes Guide →Short Answer
This Alabama paycheck calculator estimates net take-home pay after federal income tax withholding, Social Security (6.2%), Medicare (1.45%), Alabama income tax withheld on the graduated 2%/4%/5% A-4 formula, and any city occupational tax. Alabama's formula is distinctive: it subtracts your own federal income tax, the income-phased standard deduction, your A-4 personal exemption, and per-dependent allowances before applying the rate. For a single filer earning $65,000 per year paid biweekly, with the "S" A-4 status and no dependents, gross pay is $2,500.00 per period, the Alabama state line is about $104.40, and net take-home is approximately $1,976.89. Add a Birmingham 1% occupational tax and the same worker keeps $1,951.89 after the $25.00 city line. Because Alabama deducts your federal tax, the state line is roughly $296 a year lower than it would be without that deduction. Alabama has no employee unemployment contribution.
Key Takeaways
- Alabama withholds a graduated state income tax at 2%, 4%, and 5% using the Form A-4 formula method. Single, head-of-family, and separate filers pay 2% on the first $500 of Alabama taxable income, 4% on the next $2,500, and 5% over $3,000; married filers claiming both exemptions get doubled brackets ($1,000 / $6,000).
- Alabama subtracts your own federal income tax before applying the state rate. This is the unusual part of the formula: more federal withholding means less Alabama tax, and it lowers the state line by roughly $296 a year for a single $65,000 earner.
- The standard deduction phases down as income rises, from a maximum of $2,500 to $8,500 depending on A-4 status, plus a personal exemption of $1,500 (single) or $3,000 (married), and a dependent allowance of $1,000, $500, or $300 each by income.
- No A-4 on file means withholding at "0", which removes the personal exemption and over-withholds by about $75 a year for a single filer. File the A-4 to claim your exemptions.
- About two dozen Alabama cities levy a city occupational (license) tax on gross wages earned in the city, most commonly Birmingham (1%), Bessemer (1%), Auburn (1%), Opelika (1.5%), and Gadsden (2%). It follows where you work and is not reduced by a 401(k) deferral.
- Alabama has no employee-paid unemployment tax, no state disability deduction, and no reciprocity with any other state. Unemployment insurance is funded entirely by employers on the first $8,000 of wages.
2025 Alabama Paycheck Tax Quick Reference
| Tax | Rate | Wage Base / Threshold | Notes |
|---|---|---|---|
| Federal Income Tax | 10%–37% | No cap | Graduated brackets. Based on W-4 filing status and Publication 15-T percentage method tables. |
| Social Security (OASDI) | 6.2% employee | $176,100 (2025) | Withholding stops at wage base. Employer matches 6.2%. |
| Medicare (HI) | 1.45% employee | No limit | Employer matches 1.45%. |
| Additional Medicare Tax | 0.9% | $200,000 single/HOH; $250,000 MFJ; $125,000 MFS | Employee only. Employer withholds once individual wages exceed $200,000. |
| Alabama Income Tax | 2% / 4% / 5% | No cap | Graduated. Applied after the standard deduction, personal exemption, dependents, and the federal income tax deduction. |
| City Occupational Tax | 1% to 2% | Gross wages, no cap | Birmingham, Bessemer, Auburn 1%; Opelika 1.5%; Gadsden 2%; ~two dozen cities total. Where you work. |
| AL Personal Exemption | $1,500 / $3,000 | Reduces taxable wages | $1,500 single/MFS; $3,000 married/head of family; $0 at the "0" status. |
| AL Unemployment (employee) | None | — | Alabama UI is employer-funded only ($8,000 base). No employee deduction. |
How This Calculator Works
Hourly Mode: Gross Pay Per Period
Gross pay per period equals the hourly rate multiplied by hours worked per week, then scaled to the pay period. For biweekly pay: hourly rate × hours per week × 2. For weekly: hourly rate × hours per week. For semi-monthly and monthly: hourly rate × hours per week × (52 ÷ periods per year).
Salary Mode: Gross Pay Per Period
Gross pay per period equals annual salary divided by the number of pay periods per year. Weekly: ÷ 52. Biweekly: ÷ 26. Semi-monthly: ÷ 24. Monthly: ÷ 12.
Which Wages Alabama Taxes
Alabama's withholding formula starts from annual gross wages, then subtracts a stack of deductions before the graduated rate is applied. Pre-tax retirement and cafeteria-plan amounts reduce the base, and the city occupational tax rides on gross wages, so the two Alabama lines do not share a base:
- Federal taxable wages = gross − Section 125 medical − 401(k) elective deferral.
- Alabama state base = the same wages, then reduced by the standard deduction, the A-4 personal exemption, dependents, and the annual federal income tax withheld. The graduated 2%/4%/5% schedule applies to what remains.
- City occupational-tax base = gross wages (Medicare wages). A 401(k) deferral does not reduce it, though a Section 125 medical premium does.
- FICA wages (Social Security, Medicare) = gross − Section 125 medical. The 401(k) deferral does not reduce FICA.
Alabama's own treatment of some cafeteria-plan premiums can differ from the federal rules; this calculator uses the federal taxable-wage base for the Alabama line, which matches the common case. Confirm your exact Alabama wage base with your employer if you have unusual pre-tax benefits.
Social Security Tax
Social Security is 6.2% of annualized FICA wages up to the $176,100 wage base for 2025. The per-period amount is the annualized Social Security tax divided by pay periods. This calculator does not track year-to-date cumulative wages, so for workers approaching the wage base, actual withholding will stop mid-year once the limit is reached.
Medicare Tax
Standard Medicare is 1.45% on all FICA wages. The calculator adds the 0.9% Additional Medicare Tax on annualized FICA wages above $200,000, matching the employer withholding rule in IRS Topic 560: withholding starts once wages exceed $200,000 in a calendar year regardless of filing status. Final liability on Form 8959 uses filing-status thresholds ($200,000 single/HOH, $250,000 MFJ, $125,000 MFS).
Federal Income Tax Withholding
The calculator follows IRS Publication 15-T Worksheet 1A (Percentage Method for Automated Payroll Systems) for 2025:
- Annualize the per-period gross pay (multiply by pay periods per year).
- Subtract annualized Section 125 medical premiums and 401(k) elective deferrals to get federal taxable wages.
- Add Step 4a other income; subtract Step 4b additional deductions.
- Subtract the line 1g allowance: $12,900 for married filing jointly or $8,600 otherwise. If the W-4 Step 2 box is checked, subtract $0 instead. The result is the Adjusted Annual Wage Amount.
- Apply the Annual Percentage Method table for the W-4 filing status - the STANDARD schedule, or the Step 2 Checkbox schedule when the Step 2 box is checked - then divide the tentative annual withholding by pay periods.
- Subtract Step 3 dependent credits divided by pay periods, then add Step 4c extra withholding.
Alabama State Income Tax (Form A-4 Formula Method)
Alabama follows the formula method in the Alabama Department of Revenue's Withholding Tax Tables and Instructions for Employers. The employer annualizes wages, then subtracts four deductions before applying the graduated rate:
GI = annual gross wages
taxable = GI − standard deduction(A-4 status, GI) − annual federal income tax withheld − personal exemption(A-4 status) − dependents × per-dependent(GI)
annual AL tax = graduated 2%/4%/5% schedule(A-4 status, taxable)
per period = annual AL tax ÷ pay periods
The federal income tax deduction (Line 2B of the Alabama formula) is what sets Alabama apart. Alabama is one of a small number of states that let employees deduct their own federal income tax, so a worker with more federal withholding has a smaller Alabama base. The standard deduction phases down as income rises: for a single or "0" filer it starts at $3,000, falls by $25 per $500 of gross income above $25,999, and floors at $2,500 once gross income reaches $35,500; the married ("M") amount starts at $8,500 and floors at $5,000. The personal exemption is $1,500 for single or married-filing-separately and $3,000 for married or head of family, and each dependent is worth $1,000 (gross income $50,000 or less), $500 ($50,000 to $100,000), or $300 (over $100,000). The graduated rate is 2% on the first $500 of taxable income, 4% on the next $2,500, and 5% above $3,000 for the "0"/S/H/MS schedules, with those brackets doubled for the "M" schedule.
City Occupational (License) Tax
About two dozen Alabama municipalities levy an occupational or license tax on wages earned within the city, withheld by the employer on gross pay. The most common are Birmingham (1%), Bessemer (1%), Auburn (1%), Opelika (1.5%), and Gadsden (2%). The tax follows where the work is physically performed, not where the employee lives, so a commuter into Birmingham pays it and a Birmingham resident working elsewhere does not. Because it rides on gross wages rather than the state-reduced base, a 401(k) deferral does not lower it, though a Section 125 medical premium does because it reduces Medicare wages. Select your work city above and the calculator adds the line; leave it on "no city occupational tax" and none applies. Municipal rates can change, so confirm your city's current rate.
No Alabama Employee Unemployment Tax
Alabama collects no employee unemployment contribution; the entire cost of Alabama unemployment insurance falls on employers through the Alabama Department of Labor on the first $8,000 of each worker's wages. Alabama also has no state disability insurance deduction and no paid-family-leave payroll deduction, and no reciprocity agreements with other states. That leaves an Alabama paycheck with federal taxes, the graduated state tax, the optional city occupational tax, and FICA.
Alabama Withholding Formula Deductions (Form A-4)
Alabama Department of Revenue Withholding Tax Tables and Instructions for Employers. The amounts below are annual figures subtracted from gross income before the graduated rate is applied.
| Deduction | Amount |
|---|---|
| Standard deduction — "0" or "S" | $3,000 max, phasing to $2,500 by $35,500 GI |
| Standard deduction — "MS" | $4,250 max, phasing to $2,500 by $17,750 GI |
| Standard deduction — "M" | $8,500 max, phasing to $5,000 by $35,500 GI |
| Standard deduction — "H" | $5,200 max, phasing to $2,500 by $35,500 GI |
| Federal income tax deduction | Your annual federal income tax withheld |
| Personal exemption — "S" or "MS" | $1,500 |
| Personal exemption — "M" or "H" | $3,000 |
| Personal exemption — "0" | $0 |
| Per dependent (GI ≤ $50,000) | $1,000 |
| Per dependent (GI $50,000 to $100,000) | $500 |
| Per dependent (GI over $100,000) | $300 |
Graduated Rate Schedule
| Taxable Income (annual) | "0" / S / H / MS | "M" (married) |
|---|---|---|
| First bracket — 2% | First $500 | First $1,000 |
| Second bracket — 4% | Next $2,500 ($500–$3,000) | Next $5,000 ($1,000–$6,000) |
| Top bracket — 5% | Over $3,000 | Over $6,000 |
Real-World Paycheck Scenarios
Scenario 1: Salaried Single Filer, No City Tax
Alex earns $65,000 per year in Huntsville, paid biweekly, files single on the federal W-4 and the "S" status on Form A-4, with no dependents and no pre-tax contributions. Huntsville has no city occupational tax. The biweekly gross is $65,000 ÷ 26 = $2,500.00.
Alabama detail: Alex's $65,000 of wages is reduced by the $2,500 standard deduction (phased to the floor at this income), the $1,500 single personal exemption, and the annual federal income tax withheld of $5,913.96, leaving Alabama taxable income of $55,086.04. The graduated rate gives $500 × 2% + $2,500 × 4% + ($55,086.04 − $3,000) × 5% = $2,714.30 a year, or about $104.40 per period. Without Alabama's federal income tax deduction the taxable base would be $61,000 and the tax about $115.77 per period, so the federal deduction saves Alex roughly $296 a year. If Alex took the same job in Birmingham, a 1% occupational tax of $25.00 per period would drop net pay to $1,951.89.
Scenario 2: Married Filer with Two Dependents
Jordan earns $85,000 per year in Montgomery, paid biweekly, files married filing jointly on the federal W-4 and claims the "M" status with two dependents on Form A-4. Montgomery has no city occupational tax. The biweekly gross is $85,000 ÷ 26 = $3,269.23.
Jordan's Alabama base is $85,000 minus the $5,000 married standard deduction (phased to the floor), the $3,000 married personal exemption, two dependents at $1,000 each ($2,000), and $6,123.00 of annual federal income tax withheld, leaving $69,877.00. The married schedule taxes that at $1,000 × 2% + $5,000 × 4% + ($69,877 − $6,000) × 5% = $3,413.85 a year, about $131.30 per period. Because the married brackets are doubled and the federal tax and dependent allowances come out first, the effective Alabama rate is well under 5%. See the W-4 withholding guide for how the federal Step 2 checkbox changes the federal figure that feeds the Alabama deduction.
Practitioner Insight
The Alabama feature that surprises clients most is the federal income tax deduction. Alabama is one of only a handful of states that let you subtract your own federal income tax before figuring the state tax, and it produces a counter-intuitive result: bumping your federal withholding actually lowers your Alabama tax. We see it most often when a client fixes an under-withholding problem on the federal side and then notices the state line drifted down a few dollars. It is not an error; it is Line 2B of the A-4 formula doing exactly what it is written to do.
The second recurring item is the "0" default. Alabama requires employers to withhold at zero exemptions when there is no Form A-4 on file, and the federal W-4 does not substitute for it. New hires who fill out the federal paperwork but skip the A-4 quietly lose their $1,500 or $3,000 personal exemption and over-withhold all year. The fix is a two-minute A-4, and it is worth about $75 a year for a single filer and more for a married filer with dependents.
Third is the city occupational tax. A worker who commutes into Birmingham, Bessemer, Auburn, Opelika, or Gadsden pays 1% to 2% of gross wages to that city, withheld right on the stub, even if they live in a no-tax town. Remote and hybrid workers sometimes keep paying it after they stop commuting; the tax follows the days actually worked in the city, so a work-from-home shift can mean a refund claim with the city.
When This Calculator Gives a Less Accurate Estimate
- Federal withholding differs from the estimate: Because Alabama deducts your actual federal income tax, any difference between the calculator's federal figure and your real federal withholding also shifts the Alabama line. A very high Step 4c extra federal amount, for example, lowers the Alabama tax more than shown here.
- No A-4 on file: If you have not filed Form A-4, your employer withholds at "0" (no personal exemption), so your real Alabama withholding will be a little higher than an "S" estimate. Select "0" in the status list to match a no-A-4 paycheck.
- City occupational rate or coverage: The calculator applies the selected city's rate to all gross wages. If you work in the city only part of the time, or your city is not in the list, or the local rate has changed, your real occupational line will differ. Roughly two dozen Alabama cities levy this tax at rates from about 0.5% to 2%.
- Section 125 cafeteria plans: Alabama's treatment of some pre-tax benefits can differ from the federal rules. The calculator uses the federal taxable-wage base for the Alabama line, which matches the common case but may not match every plan.
- Roth contributions: A Roth 401(k) deferral is post-tax and reduces neither federal nor Alabama taxable wages. Do not enter it in the 401(k) field, which models traditional pre-tax deferrals only.
- Year-to-date tracking and variable hours: The calculator annualizes a single consistent pay period. Social Security stops mid-year at the wage base, overtime and seasonal hours vary, and bonuses use supplemental withholding at a flat 5% for Alabama.
Frequently Asked Questions
How is Alabama state income tax withheld for 2025?
Alabama withholds state income tax using the Form A-4 formula method in the Alabama Department of Revenue withholding booklet. The employer annualizes gross wages, then subtracts four things: the standard deduction (which phases down as income rises), the employee's own annual federal income tax withheld, the A-4 personal exemption, and a per-dependent allowance. The graduated rate is then applied to what remains: 2% on the first bracket, 4% on the next, and 5% above it, and the annual tax is divided across pay periods. The federal-tax deduction is the unusual part: Alabama is one of the few states that lets employees subtract their federal income tax, so more federal withholding lowers the Alabama tax. Source: Alabama Department of Revenue, Withholding Tax Tables and Instructions for Employers.
Does Alabama really subtract my federal income tax before calculating state tax?
Yes. Line 2B of the Alabama withholding formula deducts the employee's annual federal income tax withheld from the wage base before the state rate is applied. Alabama is one of a small number of states that allow a deduction for federal income taxes. In practice this means the more federal income tax you have withheld, the less Alabama tax you owe, and a single filer earning $65,000 pays roughly $296 a year less in Alabama tax than they would if the federal deduction did not exist. Source: Alabama Department of Revenue withholding formula, Line 2B.
What are the Alabama income tax brackets for 2025?
Alabama has three graduated brackets. For single, head of family, and married-filing-separately filers, the first $500 of Alabama taxable income is taxed at 2%, the next $2,500 at 4%, and everything over $3,000 at 5%. For married filers claiming both exemptions, the brackets double: 2% on the first $1,000, 4% on the next $5,000, and 5% over $6,000. Because the standard deduction, personal exemption, dependent allowances, and federal income tax are all subtracted first, most of a normal paycheck is taxed at the 5% top rate but the effective rate is well below 5%. Source: Alabama Department of Revenue.
What happens if I do not file a Form A-4 with my Alabama employer?
If you do not give your employer a completed Form A-4, Alabama requires the employer to withhold using zero exemptions, the "0" status. That removes the $1,500 single personal exemption (or the $3,000 married exemption), so more of your pay is taxed and you are over-withheld by about $75 a year for a single filer. Filing the A-4 and claiming the exemptions you are entitled to fixes it. The federal Form W-4 is not an acceptable substitute for the Alabama A-4. Source: Alabama Department of Revenue, Withholding Tax Tables and Instructions for Employers.
Which Alabama cities have an occupational or license tax on wages?
About two dozen Alabama municipalities levy an occupational or license tax on wages earned within the city, withheld by the employer on gross pay. The most common are Birmingham (1%), Bessemer (1%), Auburn (1%), Opelika (1.5%), and Gadsden (2%); others include Attalla, Rainbow City, Glencoe, Midfield, Fairfield, and Leeds. The tax follows where the work is physically performed, not where the employee lives, and it rides on gross wages, so a 401(k) deferral does not reduce it. Select your work city in the calculator to add the line. Confirm the current rate with your city, since municipal rates can change. Source: Alabama municipal ordinances; City of Birmingham and City of Auburn revenue departments.
Does a 401(k) contribution reduce Alabama state tax?
A traditional 401(k) or 403(b) elective deferral reduces the wages Alabama taxes, because it is already excluded from the federal taxable wages the Alabama formula starts from, so it lowers the Alabama state line. It does not reduce the city occupational tax, which is charged on gross wages, and it does not reduce Social Security and Medicare, which are also on gross. A Roth 401(k) contribution is post-tax and reduces none of these. Alabama's own treatment of some pre-tax benefits can differ from the federal rules, so confirm your exact state wage base with your employer.
Do Alabama employees pay state unemployment or disability tax?
No. Alabama unemployment insurance is funded entirely by employer contributions to the Alabama Department of Labor, on the first $8,000 of each worker's wages. Employees pay nothing toward Alabama unemployment, so there is no employee unemployment line on an Alabama paycheck. Alabama also has no state disability insurance deduction and no paid-family-leave payroll deduction. Source: Alabama Department of Labor.
Does Alabama have income tax reciprocity with other states?
No. Alabama has no reciprocity agreements with any other state. An Alabama resident who works in another state that has an income tax generally has that state's tax withheld and claims a credit on the Alabama return, and a nonresident who works in Alabama has Alabama tax withheld on the Alabama-earned wages. A 30-day safe harbor (Act 2025-334) exempts an out-of-state worker's Alabama earnings until they exceed 30 days of work in Alabama in a calendar year. Source: Alabama Department of Revenue.
Why does my actual Alabama paycheck differ from this estimate?
This calculator estimates standard federal withholding, FICA, Alabama state withholding using the A-4 formula method (including the federal income tax deduction), and the optional city occupational tax. Actual paychecks also reflect post-tax deductions such as Roth contributions and garnishments, year-to-date cumulative Social Security tracking, your exact work city and its current rate, Alabama's specific treatment of any cafeteria-plan premiums, employer-specific payroll adjustments, mid-year A-4 changes, and any additional Alabama withholding you requested. The calculator assumes consistent pay each period and does not track cumulative wages across the year.
What To Do Next
Start by confirming three Alabama-specific lines on your most recent pay stub. First, check the state line: it should reflect the graduated 2%/4%/5% schedule applied after the standard deduction, personal exemption, dependents, and your federal income tax. Second, if you work in Birmingham, Bessemer, Auburn, Opelika, Gadsden, or another occupational-tax city, check for a 1% to 2% occupational-tax line on your gross wages. Third, confirm a Form A-4 is on file so you are not being withheld at the "0" zero-exemption default.
If the A-4 status is wrong or missing, the fix is a new Form A-4 submitted to your employer. If you commute into an occupational-tax city only part of the time, keep a record of your in-city days so you can reclaim the tax on the days you worked elsewhere.
For the full Alabama employer picture, including the federal income tax deduction, city occupational taxes, the state unemployment wage base, and filing frequencies, read the Alabama Payroll Taxes guide. To understand how withholding connects to your year-end liability, see How Payroll Taxes Work and W-4 Withholding Explained. To decode every line on the stub itself, use How to Read a Pay Stub. If you also have self-employment income, the 1099 Tax Calculator estimates the federal side including self-employment tax.
Sources & Editorial Disclosure
- Alabama Department of Revenue, Withholding Tax Tables and Instructions for Employers and Withholding Agents (Form A-4 formula method; standard deduction phase-out; federal income tax deduction, Line 2B; personal exemptions; per-dependent allowances; graduated 2%/4%/5% schedule; zero-exemption default; 5% supplemental rate)
- Alabama Department of Revenue, Form A-4 (Employee's Withholding Tax Exemption Certificate) (exemption codes 0, S, MS, M, H and dependent claims)
- Alabama Department of Revenue, Withholding Tax overview (employer requirements, filing, 30-day safe harbor)
- Alabama Department of Revenue, Standard Deduction FAQ (maximum standard deduction $3,000 single / $8,500 married / $4,250 MFS / $5,200 head of family)
- Alabama Department of Labor (employer-funded unemployment insurance, $8,000 wage base; no employee contribution)
- City of Birmingham (1% occupational tax on wages earned in the city)
- IRS Publication 15-T (2025), Employer's Tax Guide to Federal Income Tax Withholding
- IRS Topic 751, Social Security and Medicare Withholding Rates
- IRS Topic 560, Additional Medicare Tax
- Social Security Administration, 2025 Wage Base ($176,100)
- Authored by Munib Ur Rehman · Reviewed by Nausheen Shahid, LMN Tax Inc. Not affiliated with the IRS or the State of Alabama. For informational purposes only.