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Tax exemption bill for retirees passes Alabama Senate

The bill would allow up to $6,000 in tax exemptions for taxable retirement income for Alabamians who are 65 years or older.

The Alabama Senate during a special session. JOHN H. GLENN/APR

A tax exemption bill has passed in the Alabama Senate, with the cuts aimed at retirees.

The bill, sponsored by state Sen. Arthur Orr, R-Decatur, would allow up to $6,000 in tax exemptions for taxable retirement income for Alabamians who are 65 years or older.

“With inflation being as high as it is today, most retirees on fixed pension incomes are seeing a substantial decrease in their purchasing power each month as inflation continues to deplete their earnings,” Orr said in a statement. “This bill would enable the government to send money back to hardworking Alabama taxpayers and provide immediate assistance to help these individuals in their everyday living.”

Existing Alabama tax policy classifies certain 401K and Individual Retirement Accounts’ distributions to be taxable as income. The $6,000 in maximum exemption under this bill would begin during the 2023 tax season and would apply to any retirement income currently taxable under Alabama law.

“All of Alabama’s neighboring states exempt some amount of 401K and IRA earnings from being taxed by their state government; now is the time for Alabama to do the same,” Orr said. “The Biden Administration has made no effort to provide support to Americans on fixed incomes while inflation is at a 40-year high. Our state budgets are currently in great shape, and this is an opportune time to deliver much-needed relief to retired Alabamians.”

The bill now moves to the House for consideration.

John is a reporter at the Alabama Political Reporter. You can contact him at [email protected] or via Twitter.

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