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Category: Alabama

Alabama Adjustments to Income

Alabama Adjustments to Income:


 * Contributions to an Individual Retirement Arrangement (IRA), Keogh Retirement Plan Contributions (if self-employed) or SEP Contributions- may be taken as an adjustment to income.  These contributions represent a deferral of tax on a portion of your income. At the time funds are distributed from these accounts, the amount on which tax has been deferred cannot be claimed as a cost basis in the fund.  Use the worksheet in your Federal Form 1040 line-by-line instructions to calculate the amount allowable.  The amount deductible on your Alabama return is subject to the same limitations as allowable on your 2016 Federal return. 


* Penalty on Early Withdrawal of Savings -  Also deductible as an adjustment to income are penalties you incurred for the early withdrawal of a time savings deposit before its maturity.NOTE:  Penalties on early withdrawal from retirement plans are not deductible.


*  Alimony Payments - You can deduct payments of alimony or separate maintenance made under a court decree to the same extent allowed for federal income tax purposes. DO NOT deduct lump-sum cash or property settlements, voluntary payments not made under a court order or a written separation agreement, or amounts specified as child support. The name, social security number, and address of the person receiving the payments must be shown within your Alabama income tax return.


 * Qualified Adoption Expenses - The reasonable medical and legal expenses paid or incurred by the taxpayer in connection with the adoption of a minor may be deducted as an adjustment to income.  The expenses allowed on your 2016 return are limited to those expenses paid or incurred on or after January 1, 2016, even though adoption proceedings may have begun before this date.  A resident of Alabama for only a part of 2016 may deduct only those expenses paid or incurred while a resident of Alabama Adoption agency fees are not deductible.


* Self-Employed Health Insurance Deduction - You can deduct self-employed health insurance premiums to the same extent as allowed for federal purposes.


* Alabama College Counts 529 Fund or Alabama Prepaid Affordable College Tuition Program (PACT) -  you can deduct up to $5,000 or $10,000 if married Filing jointly per year for contributions made to the Alabama Prepaid Affordable College Tuition Program (PACT) or the Alabama College Counts 529 Fund.


*Contributions to IRA, KEOGH, SEP - If you made payments to a traditional Individual Retirement Arrangement (IRA) or to a Keogh plan, you may be entitled to claim these payments as an adjustment to income.


* Health Insurance Premium Deduction- Alabama resident taxpayers may deduct from their Alabama gross income 100% of the amounts that they pay as health insurance premiums as part of an employer provided health insurance plan who are employed by an employer that has less than 25 employees and earns no more than $50,000.00 of wages and reports no more than $75,000.00 of adjusted gross income on their Alabama individual income tax return ($150,000.00 if Married Filing Joint).


* Costs to RetroFit/Upgrade Home to Resist Wind/Flood Damage - Alabama residents may deduct from gross income the lesser of 50% of the cost or $3,000.00 to retrofit or upgrade their home to resist wind or flood damage. The taxpayer must have a certification as prescribed under Chapter 31D, Title 27, Code of Alabama 1975 or the Alabama Residential and Energy Codes Board.


* Deposits to a Catastrophe Savings Account - Alabama residents may deduct from gross income deposits made to a catastrophe savings account. The deduction is $2,000.00 if the insurance deductible is equal to or less than $1,000.00. If the deductible is greater than $1,000.00 the amount of the deduction is the lesser of $15,000.00 or twice the amount of the insurance deductible. If the taxpayer is self-insured and chooses not to obtain insurance then the deduction is the lesser of $250,000.00 or the value of the taxpayer’s legal residence.


*  Moving Expenses - Employees and self-employed persons (including partners) may deduct certain moving expenses as an adjustment to gross income to the same extent and subject to the same limitations as currently allowed under federal rules with the following exception:


         The new job location must be within the State of Alabama.


* This deduction may be taken if you moved in connection with your job or business and your new workplace in Alabama is at least fifty (50) miles farther from your old residence than your old workplace was from your former residence. If you had no former workplace, your new workplace must be at least fifty (50) miles from your old residence.


* Only expenses incurred in the moving of household goods and personal effects from the former residence to the new residence and traveling expenses, including lodging while en route to the new location are deductible.


** Expenses which are no longer deductible include the cost of meals while en route to the new location, pre-move house hunting trips, temporary living expenses, closing costs of selling the old house, costs of purchasing a new house, and costs incurred in settling an unexpired lease.

*** If you meet the requirements complete and attach Federal Form 3903 to figure the amount of moving expenses.




To locate "Adjustments to Income" within your Alabama state return, log into your TaxSlayer account and click State Section located on the left of your Welcome Back screen. Next, click on Edit>>>Enter Myself>>>Adjustments to Income.