Taxation of Employee Compensation: Alabama

This item is part of Taxation of Employee Compensation.

The below content should be reviewed in conjunction with the in-depth federal coverage of this topic provided above.

Author: Vicki M. Lambert, The Payroll Advisor


  • Employer provided moving expense reimbursements are not taxable in Alabama provided the new job location is within the state. See Moving Expenses.
  • Educational expenses are only deductible if the education is required by law to keep a current position. See Educational Assistance.
  • In Alabama, up to $25,000 received as severance pay by an employee who, as a result of administrative downsizing only, is terminated, laid-off, fired, or displaced from his or her employment is exempt from Alabama income tax withholding. Employers must apply for approval to exempt the severance payments. See Severance Pay.