Alabama State Tax Credits

More ways to save your hard-earned money from the tax man!

Alabama has some great Tax credits for you.

Thank you so much for checking our resource out here for your state and congratulations for taking a proactive step to paying less in taxes. For your state, we have identified the tax credits that are currently being offered to help you pay less in state taxes.

We hope this resource is helpful to you, and if there is something you feel we have missed, please let us know!

It would be completely arrogant of us to think that we know all things and if we missed something we want to know so we can vet that and help you and our other friends in the entrepreneurial community pay less in taxes! And if you found this helpful, you should check out our DIY resources inside of our Tax Savings Communities (found at www.MakeTaxesFair.com/Our-Communities).

We're also ready to help you if you want to skip the line of the DIY process and get help directly from us. To learn more about how we help our clients check out www.MakeTaxesFair.com/Get-My-Roadmap
Alabama

Alabama Basic Skills Education Tax Credit

Overview:
The Alabama Basic Skills Education Tax Credit allows employers to receive a tax credit for providing or sponsoring state-approved basic skills education for their employees. These programs must help employees improve foundational skills up to the 12th-grade level and meet specific eligibility and compliance requirements.

Who It’s For:
Alabama-based employers—including individuals, corporations, and S-corporations—who want to invest in the foundational education of their employees and qualify for a state income tax credit.

Four Key Highlights:

  1. Program Approval Is Required
    The education program must be approved by the Alabama Department of Education to qualify for the tax credit.

  2. Eligible Employee Criteria
    Employees must be Alabama residents, work at least 24 hours/week, and be employed continuously for at least 16 weeks.

  3. Qualifying Expenses Include Direct Instruction Costs
    Employers can claim instructor fees, materials, supplies, equipment, and even employee wages during training.

  4. Two Program Types
    Programs can be employer-provided (on-site) or employer-sponsored (through a third party), but both must meet state approval standards.

CHECK IT OUT NOW

Alabama Employer Childcare Tax Credit

Overview:
This Alabama state tax credit rewards for-profit businesses that financially support childcare for their employees—especially those eligible for the Earned Income Tax Credit (EITC). The credit covers a range of expenses, from facility improvements to direct childcare reimbursements, with generous caps and tiered incentives for small businesses and rural employers.

Who It’s For:
For-profit employers in Alabama, including small businesses and those in rural areas, that offer childcare support to working families, particularly low- to moderate-income earners.

Four Key Highlights:

  1. Wide Range of Qualifying Expenses
    Eligible costs include constructing, renovating, and maintaining childcare facilities, direct payments to providers, employee reimbursements, and reserving childcare slots.

  2. Income and Provider Requirements
    Covered employees must earn $80,000 or less and use childcare facilities licensed by the Alabama Department of Human Resources that participate in Alabama Quality STARS.

  3. Tax Credit Tiers Based on Employer Size

    • Small businesses (<25 employees): 100% of qualified expenses, up to $600K/year.

    • Larger employers (25+): 75% of expenses, same cap.
      Annual statewide caps rise from $15M (2025) to $20M (2027), with 25% reserved for small and rural-based businesses.

  4. Time-Sensitive Application Process

    • Credit Reservation: Opens March 1 (via My Alabama Taxes). First-come, first-served.

    • Credit Claim: Due by March 1 following the tax year, with full documentation of expenses.
      Credits must be claimed in the same year expenses are incurred.

Check it Out Now

Full Employment Act of 2011 Tax Credit

Overview:
This one-time Alabama tax credit gives small businesses $1,000 for each new, qualifying full-time employee they hire. To qualify, the hire must increase the company’s headcount and remain employed for 12 months. Designed to encourage job creation, the credit can be used against income or financial institution excise taxes.

Who It’s For:
Small Alabama-based businesses (≤50 employees as of June 9, 2011) looking to expand their workforce with qualifying full-time hires.

Four Key Highlights:

  1. $1,000 One-Time Credit Per Qualifying Hire
    Employers receive a $1,000 tax credit for each eligible new full-time employee who works 12 consecutive months and earns at least $10/hour.

  2. Must Increase Net Headcount
    The business must show a net gain in full-time employees in Alabama compared to the previous year to qualify for the credit.

  3. Strict Eligibility and Pre-Certification
    Pre-certification through My Alabama Taxes is required before claiming the credit. The hire must occur after June 9, 2011.

  4. Non-Refundable, But Transferable for Pass-Throughs
    While the credit isn't refundable or transferable, owners of S corps or partnerships can claim their share pro rata on their individual returns.

Check It Out Now