How to apply for Alabama income tax: retirement income exclusion for age 65+ (and exempt Social Security and pensions)

Who it's for

Alabama does not tax Social Security benefits, and it does not tax payments from many public pensions (such as the Alabama Teachers and Employees Retirement Systems and federal civil service retirement) or from defined benefit retirement plans. If you are 65 or older and have other taxable retirement income (such as IRA or 401(k) withdrawals), you can exclude up to $6,000 of it from Alabama income tax. A spouse who is 65 or older can exclude up to $6,000 too. Claim the exclusion on Schedule RS with your Alabama Form 40 or 40NR return.

What you'll need

• Alabama Form 40 or 40NR with Schedule RS
• Forms 1099-R for retirement income

Where to apply

Step by step

1. Gather your Forms 1099-R for your retirement income.
2. Complete Alabama Form 40 or Form 40NR, based on your filing situation.
3. Fill out Schedule RS and claim the retirement income exclusion if you are age 65 or older.
4. Apply the exclusion only to retirement income that is taxable to Alabama and not already exempt.
5. If a spouse is also age 65 or older, claim a separate exclusion for that spouse on the return.
6. Submit your Alabama return online with Form 40 or 40NR and Schedule RS.

What to expect: After you submit your Alabama return, the Alabama Department of Revenue reviews it as part of normal tax filing. This exclusion only helps if you owe Alabama income tax on retirement income that is not already exempt. The exclusion is up to $6,000 per taxpayer and cannot be more than the retirement income taxable to Alabama. Claim it again each year on Schedule RS with your Alabama return. Amounts listed here are from the 2025 Schedule RS, so confirm the amount on the 2026 form when it is published.

Renewals

annual (claim on each year's return)