Alabama House Passes Bill to Increase Tax Exemption for Those 65 and Older

The Alabama House of Representatives has voted to increase an exemption on the state income tax for people 65 and older.

The exemption applies to withdrawals from 401(k)-type accounts and individual retirement accounts, known as defined contribution retirement plans.

Last year, the Legislature passed a bill to exempt the first $6,000 in income from those accounts from the state income tax. HB117, by Rep. Danny Garrett, R-Trussville, would increase that to $10,000. The state income tax rate carries a 5 percent rate, so the exemption could save taxpayers up to $500.

The fiscal note on the bill estimates it would reduce tax paid into the Education Trust Fund by $13.7 million a year.

Income from traditional pensions, called defined benefit plans, have been exempt from Alabama’s state income tax for decades, including those from both public and private employers.

The House passed HB117 by a vote of 101-0. It moves to the Senate. Sen. Arthur Orr, R-Decatur, is sponsoring the same bill in the Senate.

(AL.COM)