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What are my Alabama Military and Veterans State Tax Benefits?
Alabama Retired Military Pay Income Tax Exemption:
Military retired pay is exempt from Alabama income tax. (Ala. Code 40-18-20)
Who is eligible for the Alabama Retired Military Pay Income Tax Exemption?
Military retirees that are receiving retirement pay are eligible for the exemption.
Learn more about the Alabama Retired Military Pay Income Tax Exemption
Alabama Income Tax Exemption for Military Combat Pay:
Pay received in a designated combat zone is exempt from Alabama income tax.
Who is eligible for the Alabama Income Tax Exemption for Military Combat Pay?
Service members receiving pay in a combat zone that has been designated by the President of the United States are eligible for the exemption.
Learn more about the Alabama Income Tax Exemption for Military Combat Pay
Alabama Income Tax Exemption for Military Allowances:
Military allowances paid for quarters, subsistence, uniforms, and travel are exempt from Alabama income taxes.
Who is eligible for the Alabama Income Tax Exemption for Military Allowances?
Allowances paid to active duty, National Guard, and active Reserve Service members are exempt.
Learn more about the Alabama Income Tax Exemption for Military Allowances
Alabama State Taxes on U.S. Department of Veterans Affairs Military Disability Retirement Pay:
Military Disability Retirement Pay received as a pension, annuity or similar allowance for personal injury or sickness resulting from active service in the U.S. Armed Forces should not be included in taxable income. Some of the payments which are considered disability benefits include:
- Disability compensation and pension payments for disabilities paid to Veterans or their Families
- Grants for homes designed for wheelchair living
- Grants for motor vehicles for Veterans who lost their sight or the use of limbs, or
- Benefits under a dependent-care assistance program.
If you are a military retiree and receive disability benefits from the VA, see IRS Publication 525 for more information.
Alabama State Taxes on U.S. Department of Veterans Affairs Disability Dependency and Indemnity Compensation(DIC):
DIC is a tax-free monetary benefit paid to eligible young child hugging a tombstone in a veteran cemeterysurvivors of Service members who died in the line of duty or eligible survivors of Veterans whose death resulted from a service-related injury or disease.
U.S. Department of Veterans Affairs Disability Dependency and Indemnity Compensation Fact SheetDIC is exempt from Alabama Income tax.
Military Survivor Benefit Plan (SBP)/ Reserve Component Survivor Benefit Plan (RCSBP)/ Retired Serviceman’s Family Protection Plan (RSFPP) Alabama State Tax Benefits:
(Ala. Code 40-18-20) SBP, RCSBP and RSFPP are exempt from Alabama income tax.
Alabama Homestead Tax Exemption for Residents over age 65, Blind or Totally Disabled:
The homesteads of residents of Alabama who are over 65; retired due to permanent and total disability, regardless of age; or blind, regardless of age or whether they are retired; are exempt from all state, county and city property taxes. A homestead is defined as the single-Family owner-occupied home and the land it is on, not exceeding 160 acres. The property owner must own and occupy it as their primary residence on the first day of the tax year that they are applying for.
Alabama Homestead Exemption Chart
Alabama Department of Revenue, Memorandum Clarifying Exemption for Permanently and Totally Disabled
Homes of Veterans or Unremarried Surviving Spouses acquired under a Special Adapted Housing Grant are Exempt from Ad Valorem Taxes:
The home of a Veteran, or their Surviving Spouse, that is acquired through a VA Specially Adapted Housing Grant, regardless of its value, is exempt from all Alabama property taxes.
Who is eligible for Homes of Veterans or Unremarried Surviving Spouses, acquired under a Special Adapted Housing Grant Ad Valorem Tax Exemption?
The home is exempt if it is owned and occupied by the Veteran or their unremarried Surviving Spouse.
Vehicles Paid for by a U.S. Department of Veterans Affairs Grant is Exempt from all License Fees and Property Taxes:
Vehicles owned by a disabled Veteran that are all or partly paid for by the U.S. Department of Veterans Affairs (VA) are exempt from all license fees and property taxes. The vehicle must only be used for the private use of Veteran.
Who is eligible for License Fees and Property Tax Exemptions for Vehicles Paid for by VA Grant?
Any vehicle owned by a Veteran that was disabled in any U.S. war, conflict or hostilities against a foreign country, who owns a vehicle paid all or partly by the VA is exempt.
