The Alabama Department of Revenue issued preliminary guidance on Alabama’s conformity to the federal Tax Cuts and Jobs Act (TCJA). Alabama historically only conforms partially to most federal legislation. Alabama will conform to specific provisions of the new federal law automatically; other provisions require formal state legislation and adoption. Alabama statues are reliant on the structure of the federal income tax and follows the federal tax base definitions of income, deductions and exclusions as well as the treatment of various types of transactions. Unlike many state individual income taxes, Alabama individual income tax is not directly tied to the calculation of the federal income tax.
Highlights of the Conformity
Alabama does not conform to the federal tax reform that nearly doubled the standard deduction, eliminated the personal exemption and modified the personal income tax rates. However, Alabama is following the federal provisions in the TCJA that repeal the exclusion and deductions for qualified moving expense reimbursements and qualified transportation fringes inclusive of the employee commuting expense reimbursements through tax year 2025.
In addition, Alabama conforms to the following provision in the TCJA that limits the employer deduction for employee achievement rewards such as cash, gift cards and certain other property. The exclusion from the employees’ income for qualified transportation fringe benefits (parking and mass transit) received from an employer is retained.
For more information on the breakdown of individual portions Alabama is conforming or not conforming to the TCJA can be found here.
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This information is provided as a courtesy, may change and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney or Advisor.